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How Past Claims Can Affect Your Home Insurance Rates

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If you feel like you are paying too much for your home insurance, it might be wise to seek out insurance coverage from another company. When you do this, insurance companies will ask you a variety of questions, and one question will be whether you have filed any claims on your home insurance policy in the past. Here are a few things to understand about the answer you give to this question.

Why they want to know

An insurance company is in the business of providing insurance coverage for assets. In this case, the asset is a house, and the rates that you pay are based on your risk level to the insurance company. A person that has never filed a claim before will often be considered a lower risk than a person that has filed claims or multiple claims.

While your claim history in the past is a big factor in risk level, it is not the only factor. Insurance companies base their rates on different things, including the age of your house, its location, the proximity of the house to a fire department, and the condition of the house.

Why you should be honest

Insurance companies ask this question even though they have access to the answer to it before they even ask. When home insurance claims are filed, they end up in a database that insurance companies can access. While there may be some insurance companies that do not use this database, there are many that do.

The database is called the Comprehensive Loss Underwriting Exchange (CLUE). When an insurance company receives a claim, they may post it in this database under your name and personal information. When people apply for home insurance quotes, the insurance companies will often run their names to find out if they have any claims listed in the database.

How this might affect your rates

Filing a claim can result in paying higher rates for your insurance, but it will depend on when the claim was filed, the reason for the claim, and the amount the insurance company paid for the claim. Because of this, you should avoid filing claims on your home insurance policy unless they are really necessary. If you do not have any claims in your history, you are likely to pay less for your insurance.

Home insurance is a monthly expense that all homeowners have, but it is also an expense that you might be able to decrease by shopping around. If you would like a quote, contact a home insurance company like Reinhardt's Insurance Agency today.