I was reminded this week how much certain types of home insurance claims can impact your rate. I was working with a prospective client’s insurance quotes for a new home a couple is buying. In order to confirm which company would provide the best rate, I ran the CLUE report which shows me claims the sellers may have filed on the home being purchased, as well as the buyer’s previous claims.
There were two claims the sellers filed, one for hail and another for something that wasn’t paid. Neither of these impact the rate for the buyers, but one of their prior claims did. It turns out, the buyers had filed a claim for damages from a water leak earlier this summer. This one impacted the buyers in two ways; some carriers will not write a new policy for someone who’s filed a water claim at all or, if they do, the rate increases substantially.
In this instance, one carrier declined to write the policy due to the amount of the claim (it was over $5,000 which was their threshold). The carriers who would write a home insurance policy increased the annual premium between $500 and $1,000 a year. Prior claims do count, however, not all claims count the same. Weather related claims such as wind or hail may not impact your home insurance rate at all, or very little.
There are however, 4 home insurance claim types that tend to have a significant impact on your rate. They are:
- Water claims
- Fire claims
- Theft or mysterious disappearance
- Liability claims
Water claims, as we’ve already mentioned, can have a significant impact on your home insurance. The level of impact varies by carrier and may depend on the type of water claim such as did the water claim result from severe cold weather, there may be very little impact, or was it due to an appliance or plumbing failure, which may be much more expensive.
All insurance companies tend to get nervous about fire claims. Their concern revolves around whether the fire resulted from arson, deliberately setting fire to the home, or an act of negligence such as a fire caused by an unattended lit candle or cigarette. In these cases, the increase in home rate is usually significant. If however, the fire was due to wildfire as is happening in Bastrop County in Texas, the resulting increase is much less.
Theft or mysterious disappearance of a scheduled item such as jewelry, usually has a significant impact on a person’s home insurance rate depending on how certain questions are answered. Did the home owner take steps to prevent a break in such as locking all windows and doors when they left home, and did they have a centrally monitored burglar alarm? Were items kept in a safe when not worn? Is fraud indicated?
Liability claims can occur for many reasons including dog bite, a person falls and is hurt, a guest leaves your home after a party and is driving impaired, or a child climbs a fence to use your pool and is hurt or drowns. Whether they are the result of negligence, or simply a horrible accident, they do tend to be expensive, as they may be tied to a lawsuit.
One of the reasons we have home insurance is to protect home owners financially when a claim occurs. The home owner pays a little to share the risk with the home insurance company when something like this occurs. If and when one of these four types of claims do happen, the impact can result in home insurance policies not being renewed or rates increasing 50% to over 100% per year. Do you think that’s fair? Share your thoughts, questions, and experiences with me on my Google +, Facebook, and LinkedIn pages. I’d love to hear from you!
