Does Filing a Renters Insurance Claim Raise Your Rates?

Does Filing a Renters Insurance Claim Raise Your Rates?

Filing a renters insurance claim has the potential to raise your rates. To understand why, you need to know how premiums are calculated.

Insurance premiums are based on risk. The bigger the risk of loss or damage, the higher your likelihood of filing a claim. And when you're more likely to file a claim, your insurance company may charge a higher premium.

Insurance companies determine risk by assessing several different factors, such as where you live, the age of your property and your credit score. Claims history is another risk factor insurers consider. From an insurer's point of view, the more claims you've filed in the past, the more likely you are to file again. As a result, having prior insurance claims on your record may lead to a higher cost of renters insurance.

Learn more: How Much Does Renters Insurance Cost?

When Should You File a Renters Insurance Claim?

You purchase renters insurance for a reason: You want the financial protection it offers in case something goes wrong in your home. But you also want to avoid a history of frequent claims, which can cause your rates to increase.

Think carefully before filing a claim. If the cost of loss or damage is minor, you may be better off covering it out of pocket. However, consider filing a renters insurance claim when at least one of the following is true:

• The loss is significantly above your deductible. If your deductible is $500 and a loss will cost you several thousands of dollars, filing a claim could lead to significant savings. In cases like these, where your loss far outweighs your deductible, it may be worth filing.
• The loss is too large to cover with your savings. Despite your good intentions, emergencies can happen that you're not financially prepared for. If you can't cover a loss with your savings, filing a claim may be your only option.
• You rarely file claims. If you don't have a history of frequent claims, one incident may not make a big difference in your premiums.

Learn more: How to File a Renters Insurance Claim

Other Factors That Can Affect Renters Insurance Rates

Your claims history isn't the only factor that affects your renters insurance premiums. The following characteristics can also play a role.

• Location: If you live in a risk-prone area where crime or natural disasters are common, you'll likely pay more for renters insurance.
• Building age: Older homes are generally more likely to need repairs compared to newer homes. As a result, you may face higher premiums if you rent an older home or apartment.
• Credit history: Some states allow insurance companies to consider your credit when pricing your policy. Renters with good credit are statistically less likely to file a claim and may therefore qualify for lower premiums.
• Coverage limit: Your coverage limit, or policy limit, is the upper limit of what your insurer will pay out for a claim. The higher your coverage limit, the more you'll pay for renters insurance.
• Deductible: Your deductible is the amount you're obligated to pay when you file a claim. For example, if you have a $500 deductible, you have to pay the first $500 of a covered loss before your insurance company will cover the rest. Often, the lower your deductible, the higher your insurance premiums.

How to Save on Renters Insurance After Filing a Claim

If a renters insurance claim results in a higher rate, you have options. Here are some ways to lower your insurance premiums after filing a claim:

• Increase your deductible. Choosing a higher deductible can lead to lower premiums. Just make sure you can afford the deductible, and set that money aside in an accessible account in case you need it.
• Bundle your policies. Some insurers offer discounts for bundling insurance policies. Consider bundling your renters insurance with an auto insurance policy, for example.
• Shop around. Keep in mind that you aren't married to your current insurance company. If your rate increases dramatically, shop around and compare rates from a variety of providers.
• Improve your credit. In some states, poor credit can negatively impact your insurance rates. If you live in one of these states, focus on improving your credit score by making on-time payments and keeping your credit card balances low.
• Improve security measures. Home security and safety systems, like smoke alarms, security cameras and leak detectors, can help alert you to issues as soon as they arise. This ability to minimize damage is attractive to insurance companies, which may offer premium discounts for installing these features.

Learn more: Myths About Renters Insurance Debunked

The Bottom Line

Unfortunately, filing a renters insurance claim can raise your rates. Because of this reality, you should weigh the cost of a potential rate increase with the payout you'll get from a covered loss. If the loss is small, you may want to avoid filing a renters insurance claim.

If your rates do go up following a claim, look for other ways to save, such as bundling policies, shopping around or building your credit. You can start by checking your FICO^® Score^Θ for free with Experian to see where you stand and how you might improve your score.