Homeowners Insurance Claims Can Elevate Premiums by Up To 30% and Impact Future Policy Access

Homeowners are advised to carefully consider filing insurance claims, as such actions can significantly impact future policy eligibility and lead to substantial premium increases. According to a recent social media post by Rohin Dhar, making a homeowners insurance claim can "prevent you (or future buyers) from potentially getting a homeowners policy in the future once it’s on 'your permanent record'." This statement underscores a critical aspect of property insurance often overlooked by policyholders.

The "permanent record" referred to is typically the Comprehensive Loss Underwriting Exchange (CLUE) report, an industry database that tracks claims history for up to seven years. Insurers widely access this report when underwriting new policies or renewing existing ones. Even denied claims or those with zero payout can appear on a CLUE report, potentially influencing an insurer's risk assessment for a property and its current or prospective owners.

Filing a single homeowners insurance claim can result in premium increases ranging from 19% to nearly 30% upon renewal, depending on the insurer and the claim's severity. For instance, some analyses show average rates increasing by 20% for a claim, with this surcharge potentially lasting for three years. The type of claim, its cost, and the frequency of claims are key factors determining the extent of these premium adjustments.

Beyond increased costs, a history of frequent claims, particularly multiple claims within a three to five-year period, can lead to policy non-renewal or make it challenging to secure new coverage. Some insurance companies may decline to insure potential clients with two or more home claims in the last five years. This can leave homeowners with limited and often more expensive options, including "last resort" insurance plans in some states.

Given these implications, experts advise homeowners to weigh the cost of repairs against their deductible and the potential long-term financial impact of a claim. If the repair cost is only slightly higher than the deductible, paying out of pocket might be a more financially prudent decision to avoid a claim on record. Homeowners insurance is primarily intended for significant, catastrophic losses rather than minor incidents. It is recommended to consult with an insurance agent or broker before filing a claim to understand its specific impact on your policy and future insurability.