You can go years without making a home insurance claim, but sometimes it is simply unavoidable. And once the claim is filed you may wonder how it will affect your annual premium.
But, that is why you have an insurance policy to protect your home when unexpected events happen, right? True, but just be sure you are making a claim when necessary, as some damage is small enough to go without filing one and tarnishing your record.
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What is an Insurance Premium and how is it Calculated?
An insurance premium is the amount of money the policyholder agrees to pay the insurance company to keep the policy active for that term. Payments are typically paid annually or monthly, depending on the insurer.
There are some key factors that insurance companies take into consideration when calculating the premium amount, they include:
- Location (postal code)
- Proximity to a fire hydrant/fire hall
- Type of property
- The replacement cost of the home
- Age of electrical/plumbing fixtures
- Condition of roof
- Overall condition of the home
- Claims and insurance history
Many factors come into play when determining the premium amount, but even if you
haven’t filed a claim, there are still other reasons why your premium would increase.
Did you know that some home insurance providers rate the policyholder and the property? They take into account the entire claims history on your property, even before you moved in, as well as your own personal claims and credit history.
How Much Can My Premium Go Up After Filing a Claim?
It’s hard to say exactly how much your premium will go up because it has a lot to do with the type of property you own and your individual insurance policy.
A claim is “always a claim” and the policyholder would be responsible for the damage or deductible related to their loss. For example you may have a $1,000 deductible on the policy but windstorm and hail is a minimum $2,500 deductible or earthquake could be based on a percentage instead of a flat amount.
The amount of a claim payout does not determine the amount of the premium increase.
A deductible is the portion you agree to be responsible for and pay when you need to file a claim. The only time you may not be responsible for the deductible is if the cause of loss was because of a third party. Learn more about the average home insurance deductible price in Canada here.
Keep in mind if you had a claims free discount, you would lose that when you submit a claim. A claims free discount is given when a policyholder has no claims within three to five years.
What is Claim Forgiveness?
If this is your first claim, some insurance providers have claim forgiveness on their policies meaning your premium would not go up until your second claim.
Keep in mind that even though you switch providers, claim forgiveness is a one-time deal. If you used it with your last provider, it stays on your history so your new provider will not have that option.
Claim forgiveness is an endorsement available for purchase, meaning you would add that onto your policy for a fee. You can learn more about insurance endorsements and which ones you may want to add to your policy.
When Should You File a Claim?
Sometimes it doesn’t make sense to file a claim when the damage is minimal (and less than your deductible amount), and you have the money to cover the cost of repairs.
Consider all costs before filing because it may be less of a hassle, in the end, to not make a claim since any claim – big or small – can have an impact on your premium.
Brokers are responsible for reporting any loss they are aware of to the insurance company and then it is up to the policyholder and adjuster to decide whether they want to move forward with a claim, or fix it themselves.
How Long Does a Claim Affect Home Insurance Rates?
Home insurance claims can affect your premium for five to seven years, but insurers typically look at claims within the last three to five years. When a claim is filed, the insurance provider takes that as an indication that the policyholder is likely to make future claims.
Each insurance provider has their own standard when dealing with claim-related rate increases, so make sure you know the rules your specific provider goes by.
How Can You Avoid Future Home Insurance Claims?
If you have made a water claim, your insurance provider may suggest taking preventive measures to ensure it doesn’t happen again. For example, if there was flooding in your basement, adding a sub-pump would help alleviate the water damage by being able to pump the water outside.
By taking additional measures to prevent and avoid claims, it can potentially help you maintain a lower home insurance rate as well.
It’s important to note that not all claims are covered and are subject to exclusions or uninsurable losses.
How to File a Claim — What is the Process?
If you’re looking for some guidance before filing a claim, here is all you need to know about the home insurance claim process.
