5 Surprising Homeowners Insurance Facts and Savings Tips

Money Girl details 5 surprising facts about what affects homeowner insurance quotes, and reveals tips on how to save money, and how to prevent your premium from ballooning over time.

Laura Adams, MBA
7-minute read
Episode #386

Fact #2: Making a Claim Affects Your Rate

Insurance is one of the only products you buy that you hope you’ll never have to use. Not only is repairing damage to your home a real hassle, but you may not realize that simply making an insurance claim can cause your rate to skyrocket for years!

Insurance companies have statistics showing that after making one home insurance claim, you’re more likely to make a second and third one. So the company typically adjusts the cost of your coverage to compensate for that future potential risk.

Depending on where you live and type of claim you make (such as property damage or liability), your annual premium could increase 9% on average nationwide after making just one claim. Texas is the only state that prohibits a rate hike after making just one home claim' to see how your state stacks up, check out a national map.

To save money, carefully weigh whether making a claim is in your best financial interest over the long run - then only make one when it’s absolutely necessary.

Any prior owners’ insurance claims made over the previous 7 years can affect the homeowner insurance rate that you have to pay.

See also: How Making a Claim Affects Homeowners Insurance Rates (Video)

Fact #3: A Previous Owner’s Claims Can Affect Your Rate

One of the ways different insurers track your claims history is a little-known database called the Comprehensive Loss Underwriting Exchange (CLUE). It maintains all insurance claims you’ve made for your home and vehicle for up to 7 years.

What’s interesting about claims history on a home is that even any prior owners’ insurance claims made over the previous 7 years can affect the homeowner insurance rate that you have to pay. While that may seem unfair, an insurer views a property with multiple claims as a higher risk for having more claims in the future, and may charge you more based on that.

But what’s even more surprising to many is that simply talking to an insurance company or agent about specific damage to your home can result in higher rates. In most states, insurers can make a notation in your CLUE report if you simply inquire about a loss.

Insurers say that the fact that you inquired about a loss is an indication that a loss occurred, and that makes your property riskier. They can raise your rate at renewal even if you never filed a claim, or if you filed one that was denied.

So when speaking to your insurer, be clear about whether you’re making a formal claim for damage, or simply inquiring about whether a type of damage is covered by your policy.

You can view your auto and home CLUE reports at LexisNexis for free every 12 months. Just like with your credit report, you should review it carefully and dispute any errors right away.

Here’s a quick and dirty tip: When you’re buying a home, always request a copy of the CLUE report from the seller, so you can see what insurance claims have been made on the property in the past. Aside from insurers and lenders, only the property owner can access a home’s CLUE report, so you need to ask the owner to obtain a copy for you.

See also: How Your CLUE Report Affects Insurance Quotes (Video)


About the Author

Laura Adams, MBA

Laura Adams received an MBA from the University of Florida. She's an award-winning personal finance author, speaker, and consumer advocate who is a frequent, trusted source for the national media. Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers is her newest title. Laura's previous book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show.