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How long does a homeowners insurance claim stay on your record?

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A fire destroys your kitchen. A storm damages your roof. A thief steals your electronics. It’s a good thing you have homeowners insurance to cover the loss. But as you pick up your phone to notify your insurer, you pause. Will this claim impact your home insurance rates? And how long does a homeowners insurance claim stay on your record?

Homeowners insurance claims can impact your rates. The good news is that you won’t always pay more because of a claim, and there are other ways of controlling your costs. 

The Home Insurance Claim Process

When you experience a loss, you should notify your insurance company and file a homeowners insurance claim as soon as possible. This way, your insurer can start the claims process and provide guidance without delay. If your home is uninhabitable, you may also have access to coverage for additional living expenses to cover things like hotel costs, pet boarding and other related expenses. It’s helpful to keep an inventory of your belongings so that you know what to report as stolen, damaged or destroyed after a loss.

During the claims process, the insurance adjuster will inspect the damage and determine coverage under the terms of your homeowners insurance policy. Based on this, the insurance company may offer a settlement amount for the claim. Depending on the situation, the funds may be payable to you, your mortgage lender or the contractor who will be conducting the repairs. You may also need to pay a portion of the costs, called the deductible, out of pocket. 

Once the claim has been settled, repairs have been finished and items have been replaced, you may believe that the claim is completely behind you. However, the claim can remain on your record for years. 

Your Home Insurance Claims History

When you apply for insurance coverage, the homeowners insurance company conducts an underwriting process to assess the associated risk. This is used to determine appropriate rates. It some cases, an insurer may decline to offer coverage. An applicant’s loss history can be part of this underwriting process.

According to the Insurance Information Institute (III), most homeowners and auto insurance companies contribute claims history information to the Comprehensive Loss Underwriting Exchange (CLUE). CLUE is a database available from LexisNexis, and insurers can use the information in CLUE during the underwriting process. 

The CLUE database usually contains up to seven years of personal auto and property claims history. Insurance companies will report information whenever they set up a file for a possible claim, pay out money or deny a claim. The information in this database includes your name, date of birth, policy number, date of loss, type of loss, description of the covered property, property address for homeowner claims, vehicle information for auto claims and the amount paid by the insurance company.

Home Insurance Rate Increases

According to a survey from Consumer Reports, 50 percent of respondents who had filed a claim in the last three years reported no subsequent increase in premium, and only 12 percent saw an increase of $200 or more per year. 

Experian says that different types of claims can impact your premium differently. Additionally, multiple claims will typically have more impact than a single claim. For example, the average premium increase for one fire claim is 29 percent, while the average premium increase for two fire claims is 60 percent. In comparison, the average premium increase for a weather-related loss is 16 percent, and the average premium increase for two weather-related losses is 29 percent.

Why do rates increase?

Insurance underwriters try to determine the risk level associated with each account. Many factors can impact the perceived risk, including the applicant’s history. This is true for auto insurance, where a person who has a history of DUIs and at-fault crashes may be deemed high risk. It can also be true for homeowners insurance. 

However, the type of claim can make a significant difference. According to Investopedia, certain types of claims are red flags to insurers. These include water damage, mold and dog bites. 

Working with Your Insurance Agent and Insurance Company

If you have a history of homeowners insurance claims, you may be worried about possible rate increases. It’s possible that you have already seen your rates increase, or that your insurer has decided not to renew your policy.

If you find yourself in this situation, you may be able to find coverage that meets your needs by working with your insurance agent. Different insurance companies may have different underwriting policies regarding past losses, so even if the rates from one insurer are unaffordable, another insurer might offer you better rates. 

Other Factors That Increase Your Home Insurance Premiums

Your loss history can impact your homeowners insurance rates, but it is not the only factor that insurance companies consider. If you’re facing increasing homeowners insurance rates because of a claim, you may be able to lower your insurance costs by addressing other issues.

For example, you may be able to lower your rates by raising your deductible. This means that you will need to pay more out of pocket if you have another claim, so it’s important to make sure you have the funds to cover this extra expense in case there’s an emergency. However, this tradeoff may be worthwhile if you’re able to secure more affordable premiums.

You may also be able to lower your rates by decreasing your risk with smart home devices. For example, maybe you have a history of theft losses. Installing a security system could help prevent future thefts, and your insurer may be willing to give you a discount because of the decreased risk. Likewise, installing a smart leak detector could lower the risk of water damage, and your insurer might give you a discount for this. Work with your insurance broker and insurance company to determine which investments could improve your rates.

Accessing CLUE Records

The CLUE database is primarily used by insurers, but homeowners and buyers might want to access it, as well.

For example, imagine that an insurer charges you higher premiums or declines to offer coverage because of your loss history – but you’ve never filed a claim. Although efforts are made to keep the CLUE records accurate, mistakes are possible. 

You are entitled to a free copy of your CLUE report under the Fair Credit Reporting Act. To request your free copy, contact LexisNexis. If you believe that the information on your report is incorrect, you should notify LexisNexis of the issue as soon as possible.

III also recommends requesting a copy of the relevant CLUE report if you are considering purchasing a home. The homeowner will have to request the report from LexisNexis, but you can ask the homeowner to do this so you can review the report for any losses you should know about. 

Protecting Your Home

Your home is a major investment, so it’s important to protect it with the right insurance coverage. You hope that you’ll never have to file a claim, but if you do, it’s good to know you have the coverage you need. If you need help securing coverage, or if you’re worried about how a past homeowners insurance claim will impact your rates, Higginbotham can help. Learn more.

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