Does the cost of home insurance go up after a claim?
We buy insurance so that when the time comes, we know repairs will be paid and we will be back in the position we were in before the claim occurred. It can feel like we’re being penalised for using the policy when the renewal arrives and the premium has gone up, but let us explain what happens;
Typically, after a claim at the next renewal, the underwriters of your policy will consider whether they want to continue to provide cover and, if so, whether they want to revise the terms of that agreement in any way.
So, does the cost of home insurance increase after a claim? The short answer is usually – yes. Any claim on your insurance is likely to impact the amount you pay for your future home insurance policy.
Many insurers build in a discount for clients who have not had recent claims and that discount is likely to disappear, regardless of what time or value of claim you might make.
There is a common misconception that following an insurance claim, insurers will make huge premium increases which are on a scale that might make you consider whether, in the long run, it’s even worthwhile proceeding with a claim, especially smaller losses, or that increases will reflect the size of the claim you make.
Some insurers even employ the tactic of making you listen to pre-recorded advice as your initial claim notification call is being put through, including a thinly veiled attempt at dissuading you to proceed with a claim for fear of encountering future issues with premiums or availability of cover. However, in our experience, premiums rarely increase more than the excess a policyholder pays on the claim they needed to make, and certainly not by anything close to the value of the claim settlement, thereby, making the claim itself a worthwhile exercise.
Will my insurance premium go up if I make a large claim?
Morgan Clark typically deals with larger and more complex claims where the effects of an increase in premium are unlikely to be prohibitive to proceeding with a claim, as the losses sustained have a value that far outstrips any policy excess or premium increases, so there is very little option other than to proceed with the claim and suffer the peripheral effects on future cover or increased premiums. However, our clients are often pleasantly surprised to find that the impact of a large claim on future coverage or cost is minimal.
Of course, if you suffer a flood, a vehicle impact, or a burglary to give some examples, then statistically your property will perhaps be more at risk of future similar incidents and underwriters will need to reflect that additional risk in the form of premium increases or cover restrictions, but if you suffer a major fire, the chances are that you will be far more vigilant and aware of the danger of fires in the future and will modify your use of the property accordingly. This could involve installing fire alarms, smoke detectors, removing naked flames or other possible sources of fires, not leaving unattended appliances, and ensuring battery chargers are switched off when not in use, among other precautions.
It’s also the case that when a property with major damage is repaired, there are local authority led improvements, often insurer funded, which will have to be designed in to the reinstatement project such as fire breaks, fire doors, hard wired (rather than battery powered) smoke detectors, new electrical wiring and circuit breakers, new plumbing and so on, which will mean that actually the reinstated property is a far less risky proposition for an underwriter than the one they agreed to insure prior to the claim, and so if anything you are less likely to suffer a second incident.
Fraudulent or exaggerated claims, misrepresenting material aspects of the original risk, or having a claim declined are all, by far, more likely to be a barrier to obtaining future cover at reasonable costs.
Can I challenge a premium increase after I’ve made a claim?
Yes, you could ask your insurer to explain their decision for the increase in premium, likewise, you could shop around for a new insurance provider, but you’d have to disclose details of all claims made to your new insurer.
To conclude, we know that the impact of future premiums is a concern, but it certainly shouldn’t prohibit you making an insurance claim, particularly if it’s likely to leave you financially disadvantaged. If you have suffered an incident at your property or business and would like to speak with an experienced professional about the likely impact of making a claim, you are welcome to call our free, no-obligation advice line on 0808 304 4190.