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Homeowners insurance is designed to protect you in the event of storm damage, a fire, theft, vandalism or an accident on your property that results in injuries. If something happens, you may think that you should file a claim to cover repairs or medical bills, but you might be better off paying out of pocket.

How Filing a Claim Could Affect Your Premiums

Filing a homeowners insurance claim would probably raise your rates. The increase could be significant and could last for several years. The amount of the claim might not matter at all. Your insurance company could raise your rates simply because you submitted a claim. Filing a second claim within a relatively short period of time could raise your premiums even further.

Your premiums could rise skyrocket for certain types of claims. For example, if you filed a liability claim because someone was hurt on your property, the company would consider your home a higher-than-average risk. Claims for theft and vandalism could cause the insurance company to conclude that your neighborhood is dangerous and therefore a higher insurance risk.

Rate hikes can vary widely based on location. Some of that has to do with the risks associated with specific areas, and some of it has to do with whether state laws limit the amount by which insurance companies can raise premiums.

If you filed a homeowners insurance claim and the company raised your rates, you probably wouldn’t be able to get lower premiums by switching companies. Homeowners insurance claims are tracked in a database that all insurance companies use to assess risk and set premiums. If you filed a claim, all companies that accessed your records would consider you a higher risk and would charge you higher premiums than someone who had not filed a claim.

Your Premiums Could Rise Even If You Didn’t File a Claim

Sometimes an event causes major damage over a wide area. A natural disaster, such as a hurricane, can lead to billions of dollars in claims at once. In order to avoid going out of business, an insurance company could raise rates for all policyholders in the area, or even in the entire state, whether they submitted individual claims or not. The costs associated with that disaster would be incorporated into historical data that insurance companies use to set their rates, so premiums could remain high for years.

Should You File a Claim?

Before you file a homeowners insurance claim, think about how it could affect your premiums in the future. If your state doesn’t limit the amount by which insurance companies may raise rates after a claim, your premiums could skyrocket. You could be stuck with higher rates for years and could pay much more over time than you would receive as a payment for your claim. Gather as much information as you can to help you decide whether it makes more sense to file a claim or to pay out of pocket.