When Filing a CLAIM on Homeowners Insurance RAISES your Rates!

Even though the purpose of insurance is to pay for CLAIMS there are certain circumstances when filing a claim will raise the rate, some of them are:

·        A claim has exceeded a specific threshold amount

·        Claims have increased in a particular region

·        An individual's claim history

There are some instances where filing a claim will raise the rate an individual pays for their homeowners insurance premium. Normally an insurance company will not raise a person's insurance rate after only one claim has been filed. Usually, a person's insurance rates will rise depending on how many claims have been filed in a specific time period or threshold. When insurers pay out for individual claims they may need to increase rates to make up for the amount they have already paid out. As a result a policyholder may see increased rates at their renewal.
If claims for a particular region have increased as the result of a storm such as a tornado an insurer can take a variety of actions. These actions can come in the form of rate increases. A rate increase not only affects individual's filing a claim but an entire state depending on an insurer's loss history. In order for an insurer to raise the rate on an insurance policy they are required to notify the state in which the rate increase will take effect. They can do this by using a specific provision which is either "file and use" or "use and file". The difference between the two is that under a file and use provision an individual state can deny the rate increase request.
An insurer has a few options available to them as the result of the amount of claims that have been paid out on a specific type of policy. If the amount of claims exceeds their threshold amount they can either non-renew individual policies, charge a higher premium or withdraw from a particular market. When an insurer withdraws from a particular market they stop selling new policies and non-renew existing policies as they expire.