What Causes Homeowners Insurance Premiums to go Up?

Greg Tidmore
Apr 24, 2018 4:24:00 PM

Dog Bite Claim

Most people have insurance policies to protect themselves should something go wrong, then when something does, they’re afraid to use it!

That sounds crazy at first. You have insurance. Something went wrong. Why not use it?

The fear is that by making a claim, rates will go up or you risk cancellation. But is that fear rational? Let’s explore what causes rates to go up and policies to be cancelled.

High risk claims

Typically, the claims that have the biggest impact on a rate increase are those related to liability such as a dog bite claims (which represent one third of all insurance claims), personal injury, water damage, burglary, or vandalism.

Naturally occurring incidents or “Acts of God” are not considered to be high risk as you have no control of their occurrence.

Other risky additions around the house can include a swimming pool, trampolines, tree houses, and zip lines. Tons of fun for the kids, but a major danger to younger children.

Geographic region

Severity and frequency of events in a geographical area can trigger an increase in rates, especially after a large storm or if there are frequent storms in your area. So, you could see an increase in your premiums if your geographic area is hit with severe or frequent storms – whether you personally make a claim or not (so you might as well make the claim).

This holds true for storm claims as well as any other type of mishap such as a string of fires or burglaries. All suggest that the surrounding area is not particularly secure and an increase in premiums could result.

Another location factor to consider is fluctuations in local building costs. If the value of your house goes up, it will likely cost more to replace. 

Accidental incidents

Driving your car through the back of your garage is a peril that insurance should cover. If your kids overflow the bathtub and flood the house, that should be covered too.

Unlike “Acts of God,” you have control over these events, so by making a claim your rates could be impacted – especially if you make too many claims. How many exactly is “too many”? That varies from carrier to carrier, but in general making more than one claim every 5-10 years can put you at risk of an increase or cancellation.

Every claim – or even an inquiry about possible claims – goes into your “CLUE” report. The Comprehensive Loss Underwriting Exchange, which is a database that insurers use to keep track of every insurance move you make. It stays with you for years and impacts the cost of your homeowners insurance premiums.

If you don’t know what’s in your CLUE report, order one free from Lexis-Nexis.

Storm Damage Policies: Don't Get Rocked By A Hurricane

If you have questions regarding the claims process, The Lane Law Firm can help. After years of defending big insurance companies and helping them squash the “little guy’s” insurance claims, Chip Lane decided to open his own firm to serve families and business owners needing help with insurance claims. With his years of experience and extensive knowledge of the insurance company’s tactics, he’s able to level the playing field and get claims approved.