Buying Your First Home: That Claim Can Raise Your Homeowners Insurance Rates

When you’re buying your first home, lenders require you to get homeowners insurance to compensate for any damage, among other misfortunes. But you may want to hold off on filing a claim just because a baseball busted your kitchen window. According to a recent Quadrant Information Services study, a single claim in Colorado can increase annual premiums by 13 percent. At least it’s not as bad as in Wyoming where the average increase is 32 percent.

“There’s a significant statistical correlation between making a claim and the likelihood of making an additional claim in the future,” says Chris Hackett, a director at the Property Casualty Insurers Association of America. “Insurers need to adjust the cost of insurance to compensate for that increased risk.”

Average increases vary by the type of claim. Liability causes the highest increase at 14 percent. Fire, vandalism, and theft produce a 13 percent hike. Hail and wind show 6 percent and increases from medical or weather claims average only 2 percent.

The wisest thing to do is to ask your agent or your homeowners insurance rep, preferably before you have to file a claim. Question him about how much your rates would increase if you file a claim of specific type and dollar amount. Write down his answers and keep it with your policy so you have a reference.

If disaster does strike, ask your agent again, so you can decide if the compensation is worth the rate increase. If you decide against filing small claims, try raising your deductible to reduce overall rates.