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Rough PBP for homeowner's insurance claims?

30,261 3,904 January 9, 2020 at 06:17 AM
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Sorry for the cryptic title but I am wondering if anyone has a rule of thumb or anecdotes about how much a homeowner's insurance claim impacts premiums?

What this boils down to is, at what point in home damage would it make sense to file a claim vs. just eating it. Yes this will depend on your deductible, but I'd think there would be some sort of guideline about how much a claim (say per $5k cost) impacts premiums (go up a certain $$).

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Well I don't know if my coworker is super lucky or what, but he had 2 claims within the last 5 years. First one was for a pipe burst and flooded the main level and basement. Probably $30k+ total in new floors, lumber, drywall, cabinets, and plumbing fixes. He claims his premium did not go up at all. Then he had another claim last year for a new roof due to windstorm. Probably close to $20k. His premiums went up a whopping $50 a year (~8-10%).

I think he has Farmers insurance. Here in northern utah a typical 3,000 sq ft home costs about $500-600 a year to insure. I don't know if he's super lucky or if that's the norm? I've never had to file a claim in my 12 years of home ownership.
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There is no set formula. It will vary by company. And with technology and big data, insurers now have an increasing number of attributes to determine premium.

The greater risk is non-renewal. Many companies are skittish and will non-renew after one claim, particularly if the claim involved negligence on the part of the insured. After a non-renewal/cancellation, it may be much more expensive to get coverage elsewhere.

For these reasons, you might as well carry a larger deductible ($1,000+). Even though I have a $1,000 deductible, I probably would not file a claim under $2,500. Guess I should raise my deductible Smilie
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Quote from jordanz12
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Well I don't know if my coworker is super lucky or what, but he had 2 claims within the last 5 years. First one was for a pipe burst and flooded the main level and basement. Probably $30k+ total in new floors, lumber, drywall, cabinets, and plumbing fixes. He claims his premium did not go up at all. Then he had another claim last year for a new roof due to windstorm. Probably close to $20k. His premiums went up a whopping $50 a year (~8-10%).

I think he has Farmers insurance. Here in northern utah a typical 3,000 sq ft home costs about $500-600 a year to insure. I don't know if he's super lucky or if that's the norm? I've never had to file a claim in my 12 years of home ownership.
I've always been under the impression that a homeowner's claim is a big deal with repercussions (e.g. premium increases)?
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Quote from Dannon35
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There is no set formula. It will vary by company. And with technology and big data, insurers now have an increasing number of attributes to determine premium.

The greater risk is non-renewal. Many companies are skittish and will non-renew after one claim, particularly if the claim involved negligence on the part of the insured. After a non-renewal/cancellation, it may be much more expensive to get coverage elsewhere.

For these reasons, you might as well carry a larger deductible ($1,000+). Even though I have a $1,000 deductible, I probably would not file a claim under $2,500. Guess I should raise my deductible Smilie

That's the other half of the thought here - why bother paying for a $1000 deductible (higher premiums) when you'd never put in a claim for something like $2500 due to the risk of increased premiums.

You can make the same argument about auto insurance but I think that market is quite a bit different - mentally home and auto don't seem on the same level to me, auto seems more of a commodity where there's more competition and you're more apt to make claims.
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Quote from Dr. J
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I've always been under the impression that a homeowner's claim is a big deal with repercussions (e.g. premium increases)?
Exactly, that's what I would have thought...but it barely affected him. Neither of his claims were due to their fault...just a broken pipe in their 1960's home, and a wind storm. I'll have to verify the details with him, but I remember my jaw dropped when he told me about it.
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I chatted with him to verify...yes he had the two large claims with no increase on the first and the ~$5 a month increase on the second claim. Company was American National Insurance. But he did lose his cash back for being claim free obviously. So he made out pretty darn well...going on his third year since his last claim without any premium raise.
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At the company I work for, having a claim increases your premium by $300-$400 for 3 years and if you have 2 claims in 5 years they would require a higher deductible (like $5000+) or just cancel your policy. The stats show 90% of people have 2 or less home claims in 20 years.
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Quote from InsuranceDad
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At the company I work for, having a claim increases your premium by $300-$400 for 3 years and if you have 2 claims in 5 years they would require a higher deductible (like $5000+) or just cancel your policy. The stats show 90% of people have 2 or less home claims in 20 years.

Is that per year? Does your deductible/claim amount affect that?
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Quote from Dr. J
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Is that per year? Does your deductible/claim amount affect that?
Not per year, but your premium is likely to increase $300-$400 the first year and another $100-$200 the next year. All and all, you are likely to pay an additional $1500 or more over the 3 year timeframe from filing a claim. You should always pay smaller claims out of pocket.

Some companies do vary that amount by the claim amount, but not all. Many are more concerned about the frequency of the claim than the size of it.
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