Sometimes, making a home insurance claim is simply unavoidable. After all, that’s what your insurance policy is there for. But making a claim can take a toll on your annual premium.
When you make a home insurance claim, many providers see that as an indication that you’ll make more claims in the future. Because of that, you’ll likely see an increase in your rate. But for how long?
Each insurance provider in Canada has its own standard for dealing with claim-related rate increases. “How long a claim affects home insurance premiums depends on the insurance company,” says Anne Marie Thomas, director of consumer and industry relations at the Insurance Bureau of Canada. “Not all insurance companies have the same rules. Home insurance claims can affect insurance premiums for five to seven years.”
But it doesn’t have to make a permanent impact. By taking proper care of your home, you can avoid future claims and return to a more affordable home insurance rate once your premium increase has lifted.
The amount by which your home insurance premium may increase after a claim has to do with the type of property you own and the policy you hold. This is because the cost of servicing a claim can vary from one home to another.
"A small water claim on a property policy that is $700 yearly may increase the cost a small amount,” says Matthew Johnson, a customer care manager at Sonnet Insurance Company. “However, a small water claim on a $2,500 yearly policy on a home that is located closer to a river or at a lower elevation may increase the cost more since there is a higher risk of the claim occurring again and at a higher cost likely associated with that property.”
Fortunately, some home insurance companies offer first claim forgiveness on their policies. In this case, if you do happen to make a claim while you’re insured with that company, you would not see an increase in your premium — that is, until you make your second. Keep in mind, even if you manage to make only one claim with a company that offers this benefit, the forgiven claim will still follow you to your next provider and impact your premium with them — similar to how accident forgiveness works in the auto insurance space.
Some insurance providers don’t just look at the claims filed by you — they look at the entire claims history for your home. Meaning, even claims made at the insured property prior to your inhabitance can inform your current rate.
“The reason for this is because we want to accurately rate for the risk of both the person we are insuring and the property we are insuring,” says Johnson.
This is not necessarily the case at all insurance companies, as claims are rated differently when determining the premium within a given policy. However, in general, “having many claims at the property or on your own personal home insurance record may result in an increased premium, higher deductible, or denial of coverage from certain insurance companies,” says Johnson.
If you do make a home insurance claim, chances are your provider will want to eliminate the risk of the claim occurring again. And if you’d like to continue your coverage with them, they may require you to take actionable measures to prevent it. This could involve adding a new fixture to your home.
“For example, if there is a water claim for flooding in the basement, the cause would be determined, and the risk would be mitigated by adding something like a sump pump,” says Johnson. That way, water in the basement can be easily pumped outside and away from the home, preventing future water damage.
Ideally, taking additional measures to prevent claims of any kind can help you avoid them in the first place and maintain a lower home insurance rate.