The importance of 'the home' cannot be overstated. It's where we go after a long day; where we host friends, grow families, and make memories. And it is the single largest acquisition of our lives.
So it's no surprise that we have to protect our homes, and there is an abundance of products we have to protect them against, including fire, water damage, falling trees, hail and theft. As with car insurance, making a home insurance claim will more often than not affect your premiums.
Here's a look at what homeowners can expect when making a claim:
Claims matter – but it is difficult to predict
It's safe to say that every property insurance claim includes a direct effect on your premium. However, the total amount your premium will increase carrying out a claim is not as straightforward as it was previously.
“Claims definitely affect rates,” says Matt Alston, Co-Founder of SurexDirect. “But it depends around the kind of claim and the claim amount payout. Some information mill being sophisticated now, where 5 years ago it was simpler: Was there claims filed? Good or bad? Description of how the genuinely wish to be aware of payout amount. Therefore if it was a $2,000 water claim just because a water heater blew out versus a $30,000 hail claim, that affects the premium.”
And due to the sophisticated algorithms that insurance companies are now using to find out rate changes, brokers have found it difficult to tell homeowners exactly what to expect.
“Some companies look at countless factors,” explains Alston. “Claims is certainly among those factors, but it's harder to guess how much it is going to affect since it is so personalized now. It's not only based on you like a person – and also the risk profile you've – however your location. If you reside in an area in Alberta that's prone to hail claims and also you file a hail claim, your rate may go up much more than living in Northern Alberta, where maybe forest fires are more of a peril score. Added in addition is credit scoring, which it seems now like some companies have a black box they do. So it's making brokers' jobs harder to state 'this is exactly how your price would go up the coming year.'”
Frequency matters – less is more
It's not just in line with the peril scores – e.g. home location, claim types – it's also about how exactly many claims you've made. The number of claims homeowners can without danger make differs according to who you're speaking with. Some experts say insurers expect homeowners to create less than one-to-two claims per decade, whereas others put the magic number at a number of claims inside a five-year period. Like with the peril scores, it's difficult to find out accurate numbers (and the numbers change by insurer), but the takeaway is clear: if you're labelled like a repeat claimant, you're seen as a risk, so if you feel seen as a risk, it's difficult to obtain renewed in a reasonable rate (or renewed whatsoever).
“If the insurer raises their rate too much, then we can obviously re-shop the customer and move them on renewal to save them money, but when you've a lot of claims, nobody will in fact love you,” says Alston. “In car insurance, it is a lot more regulated by the government. Whereas with property insurance, companies can simply say 'no, we do not want the business'. It's hard to find a carrier for somebody that's had two claims in the last 3 years.”
One way to avoid being seen as an serial claimer would be to purchase a home insurance claims protector. This works like accident forgiveness with auto insurance – a kind of mulligan that allows you to create a single claim without having affected your premium (or your reputation).
“The only way your rate won't increase after filing claims is that if you have claims protector coverage on your home,” says Alston. “Claims protector is one thing we definitely recommend. It's worth the $30 of $40 annually – it protects you.”