Homeowners’ Insurance and Increasing Claims

	What events will increase my homeowners’ rates? The short answer—the only answer—is claims. If you make too many claims, even small ones, your rates will likely go up. How many is too many? That really depends upon the insurer, but more than two claims in four years is probably a deluge to an insurer. If the claim results from some deficiency you could have taken care of (e.g., termite damage collapsed your front steps) your rates will surely go up. Big claims. Of course if your claim is a big one—your house burned down, for example—the effect on your rate may depend upon how the big event happened. Were you or a family member or other resident smoking and caught the curtains on fire? Did you neglect to put a grate around the fireplace and went to bed with the fire still burning? If the misfortune is your fault, or even partially your fault, your rates will surely increase. As a matter of fact, your policy may even be cancelled. Huge claims. And of course the huge, widespread claims increase homeowners’ rates in kind. When an insurance company gets hit with many big claims, it has to replenish the capital reserves it used to paid out those claims, and then stash away more reserves to pay future claims. Therefore, after a catastrophe, such as hurricane Katrina, homeowners rates will climb in the areas hit. This year, the drain on insurance catastrophe reserves was enormous. Though the total losses are still being tallied, 2005 will go on the record books as the worst year ever for insured catastrophic losses, according to the Insurance Information Institute. For information about insurance law, check out the FreeAdvice Insurance Law FAQs.
	Back

What events will increase my homeowners’ rates?