Post-Claim Home Insurance Increases Explained

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Article Contents
Picture of By <span>Matthew Roberts</span>
By Matthew Roberts

Updated on November 13, 2024

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Picture of By <span>Matthew Roberts</span>
By Matthew Roberts

Updated November 13, 2024

Visit author page

5 minute read

Article Contents

Any homeowner knows that sometimes things just happen – from small nuisances like leaky faucets to large, near-catastrophic accidents like a roof collapse. In some of these cases, a quick call to the local handyman should suffice, but when the bills start to rack up, contacting an insurer to make claims on a homeowner’s policy is the better choice.

However, sometimes these claims can result in a higher monthly premium that can range from single digits to thousands of dollars – it really is extremely case to case, but important to know as rates continue to climb in Canada.

That said, there are some things that you can take into consideration to get a rough idea of any potential increases.

Post-Claim Home Insurance Increases at a Glance

  • Post-claim home insurance increases aren’t one-size-fits-all
  • Some home insurance plans allow policyholders to make multiple claims in a few years without an increase.
  • On the other hand, some claims may even lower your monthly premiums based on what they’re for

How Much Does My Home Insurance Go Up After a Claim in Canada?

The bottom line about home insurance premium calculations is that it varies widely from person-to-person, but most homeowners can expect a 5-7% increase on a big claim. Here’s a run-down of a few scenarios and how they would play out.

Scenario 1: Minor Water Damage

After spotting a small leak in the basement, you’re faced with a $2,000 repair. If it’s your first claim in years, the premium increase might be minimal. However, since water issues are often repeatable, you could see a small bump. It’s worth considering if the long-term premium impact is worth filing.

Scenario 2: Multiple Theft Claims

After two theft claims in three years, your provider might see a pattern, especially if the losses occurred at home. This could lead to a 10-20% premium hike, with the possibility of needing security upgrades for future coverage.

Scenario 3: Accidental Kitchen Fire

An accidental kitchen fire costs $10,000 in smoke damage. If it’s your first claim, claim forgiveness might keep your premiums stable, but if you’ve filed other recent claims, expect an increase as insurers begin viewing your home as higher-risk.

How Are Home Insurance Premium Increases Calculated?

Your History of Claims

Your claims history plays a big role in how your premiums are adjusted. The more claims you’ve made, the more your home insurance provider views you as a potential risk, which can lead to higher premiums. 

Insurance companies track your loss history, which includes the details of each claim you’ve filed – which typically stays on your record for 5-7 years. That said, some insurers may look at a shorter or longer period depending on their policies.

This means that even if a claim seems minor, it can still affect your future premiums. Here’s the logic: remember that each claim you make tells the home insurance company something about the likelihood of future incidents, which is why frequent claims can be a red flag for them.

The Reason For Making a Claim

Not all claims are created equal. If you’re filing a claim for something that could easily happen again, such as water damage, theft, or mold, your premium is likely to see a more significant jump. Insurance companies are all about managing risk, so if the claim is for an issue that’s easily repeatable, it could indicate an ongoing problem with the property.

Also, claims that are common in your neighborhood (like break-ins or flood damage in flood-prone areas) may lead to higher premiums because they signal a geographical risk. And here’s something even more important to note: making too many claims in a short period might even lead to your insurer deciding not to renew your policy at all (but this is the worst-case scenario.)

On the other hand, certain claims can even lower your home insurance premiums, like if you had to replace an old rickety roof with a new one that’s more stable and up-to-date. It may seem counterintuitive, but better roofs and structural features mean your home is more likely to run into issues – so there’s no one answer that suits everyone. 

Your Home’s History

If your home has been owned by others before you, their claim history could influence your premiums. For example, if the previous owner made multiple claims for water damage or break-ins, the insurer might assume the property is at higher risk for these issues.

But don’t worry – there are ways to safeguard against these increases. For example, if you’re living in a home that’s been burglarized in the past, upgrading your home with security features, such as installing CCTV cameras, alarm systems, or reinforced deadbolts, can help lower your risk. Taking proactive steps may reassure your insurer that the home is now better protected.

Local Laws

In Canada, certain provinces have laws that protect policyholders from having their premiums increased after making a claim. 

This is great news because it means you may not be penalized for filing a claim in some regions. However, these laws can vary from province to province, so it’s worth checking what protections are in place where you live. Understanding these regulations can give you peace of mind, knowing that a single claim might not affect your premium depending on where you are.

Insurance Company’s Policies

Each insurance company sets its own standards and policies, so premium increases can vary from one provider to another. Some insurers are more lenient, allowing a certain number of claims before they hike up your premiums, while others might increase your rates after the first claim.

It’s important to read the fine print and understand your specific insurer’s approach to claims and premium adjustments. Some companies offer perks like claim forgiveness, which we’ll talk about next, that can help prevent your premiums from going up after an initial claim.

Major Factors Affecting Home Insurance Premium Increases

What is Claim Forgiveness?

Claim forgiveness is a feature that some insurance companies offer as a way to protect you from premium increases after your first claim. Essentially, it’s a way for the insurer to “forgive” a single claim, so your premiums don’t automatically go up after you file it. However, this is usually an optional add-on to your policy, and while it can be a great safeguard, it’s worth checking how much extra you’ll be paying for this feature.

Think of it as a buffer—especially if you’re worried about needing to file a claim for something unexpected like storm damage or an accident. It won’t prevent your premium from increasing if you file multiple claims, but it can provide a little peace of mind.

How To Avoid Future Home Insurance Claims 

Consider Your Deductible

Your deductible is the amount you pay out of pocket before your home insurance kicks in. It’s crucial to weigh the cost of the deductible against the amount of the claim. A general rule of thumb is that if the cost of the claim is only slightly more than twice your deductible, it might not be worth filing the claim.

For example, if your deductible is $1,000 and the total damage is only $2,500, filing that claim could result in premium increases that outweigh the payout you receive. It’s important to run the numbers before making a decision.

Only File If You Really Need To

Insurance is there for the big, unexpected events—think major storms, fires, or significant liability issues. For smaller, manageable repairs, it might be better to pay out of pocket to avoid premium increases. For instance, if you have minor water damage or a small roof repair that you can afford, handling it yourself may save you more in the long run.

By only filing claims for truly catastrophic events, you’ll avoid unnecessary hits to your insurance record, keeping your premiums as low as possible over time.

Key Advice from MyChoice

  • If your premiums rise a large amount after making a claim, you can shop around for a new policy.
  • Pay attention to how your neighbors make claims on their home insurance policies, too.
  • Denied claims and policy inquiries will not result in home insurance premium increases.

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