How Your Claims History Affects Your Home Insurance Costs

Intuitively, it would seem that people buy home insurance at all on the presupposition that eventually they will have to make a claim. That is the only way insurance makes sense at all. Aside from the fact that it’s often required by law, why pay the premiums if you don’t think you’ll ever need to collect?

Given this common-sense assumption, it can seem unfair that filing multiple claims with your home or auto insurance provider–especially certain types of claims–can make your rates go up. Certain kinds of claims cause your insurer to see you as a liability. After filing many claims, you might find that not only have your rates increased, but your coverage has diminished. What’s worse, other insurers might become more hesitant to offer you new coverage.

Whenever you file a claim, your insurance provider almost invariably reports the information to one of two large, privately owned, privately operated, nationwide databases. These databases are known as CLUE and A-PLUS. Their names are acronyms for “Claims Loss Underwriting Exchange” and “Automated Property Loss Underwriting System.” The two databases were initially put together to help insurance companies protect themselves against fraud. Nowadays, insurance companies use them to research the claims histories of insurance applicants, to determine the applicants’ level of risk.

The use of these databases by insurance companies to screen applicants for risk has been so widespread that government agencies have had to interfere more than once. Some insurance companies have gone so far as to report simple customer inquiries into the database, without the customer ever filing a claim. Many states’ Departments of Insurance have had to expressly forbid this. All states require insurance companies have to report their methods of determining a policyholder’s rates to the state regulatory bodies.

Nonetheless, your claims record, as recorded in the nationwide database, does have an impact on your rates to some extent in every state. With homeowners’ insurance, submitting multiple claims over the course of a few years is especially likely to raise your rates. However, some kinds of claims raise your rates more than others. If the dog that guards your home attacks an innocent bystander and you file a claim to cover your liability, for example, your rates are likely to go up–even if it’s the first time you’ve filed a claim.

Another claim likely to raise your premium is for flood damage or other situations where water has seeped into your home. Paying for getting rid of the mold that almost inevitably accompanies a flood is nightmarish for insurance providers, because it is expensive. An insurance provider can look at the claims statistics of a given house in the CLUE or A-PLUS database. If that house has a history of flood damage, the a company might refuse to provide insurance for the house.

The third most-likely claim to raise your homeowner’s insurance premium is if someone injures him or herself on your property. Injuries from falling can result in expensive life-or-death emergency situations, which insurers hate having to pay for.

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