Homeowners, Skip Small Damage Claims
Filing just one homeowners insurance claim boosts annual premiums by a national average of 9%.


A pipe burst in my house and caused water damage in my living room. I know that insurance companies sometimes increase premiums after a water-damage claim. What should I do? --S.H., Washington, D.C.
The answer depends on how big the claim is and where you live. A study by InsuranceQuotes.com found that filing just one homeowners insurance claim boosts annual premiums by a national average of 9%; in Washington, D.C., the average boost is 15.2%. If the claim is small, you could end up paying more in higher premiums than the amount you received, says Derek Ross, an independent agent in Tarzana, Calif.
Before filing a claim, estimate how much your potential settlement would exceed your deductible. Then compare that to the potential rate increase. (See the study at www.insurancequotes.com/home for the average increases by state, which range from 32% in Wyoming to 0% in Texas.) The increase can last as long as seven years, says Laura Adams, senior insurance analyst for InsuranceQuotes.com. You can’t escape your record by switching insurers, either. Insurance companies share up to seven years’ worth of claims data through a database called the Comprehensive Loss Underwriting Exchange (CLUE).

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As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.
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