How Filing an Insurance Claim Can Raise Your Returning Rates

Updated • Apr 12th '25

Introduction

An insurance claim is a formal request to your insurance company to pay for a loss covered under your policy. This could include car accidents, home damage, theft, liability issues, or personal injuries. Once the claim is submitted, the insurance company investigates, verifies the facts, and either pays the compensation or denies the claim.

Even though this is how the system is designed to work, every claim you file goes on your insurance record, often via centralized databases like CLUE (Comprehensive Loss Underwriting Exchange). Insurers use this data to assess your risk profile—and if you appear riskier due to frequent or expensive claims, your premiums are likely to increase.

Why Do Insurance Companies Raise Your Rates?

Insurance is fundamentally a risk-based business. The more claims you file, the more risk you appear to pose to the insurer. To protect their own financial stability, insurance companies adjust your premium based on this perceived risk. Here's how:

1. Risk Assessment

Every claim filed is viewed as a sign that future claims are likely. If you’ve had a fender bender today, statistics say you’re more likely to have another incident in the next few years.

2. Frequency of Claims

It’s not just the amount of the claim—it’s the number. Multiple claims in a short span can trigger red flags, especially with auto or homeowners insurance.

3. Type of Claim

Some claims, such as those involving water damage, dog bites, or personal injuries, are seen as more serious because they can lead to larger or recurring losses.

4. Location and Surrounding Risk

If your area has a high frequency of natural disasters or theft, insurers may raise premiums even if the events weren’t your fault.

Claims That Commonly Raise Insurance Rates

Not all claims carry equal weight. Some are more damaging to your premium than others. Let’s take a closer look at which types are most likely to raise red flags.

1. At-Fault Auto Accidents

These are among the most common reasons for premium hikes. If you are found to be at fault, your rate can increase by 20% to 50%, depending on severity and location.

2. Homeowner Water Damage Claims

Insurers fear recurring water damage. It could be a leaky roof, burst pipe, or flooding. These claims often result in premium increases and sometimes even non-renewal.

3. Dog Bites or Personal Injury Liability

If someone gets injured on your property or is bitten by your pet, this becomes a liability claim. Insurers often raise premiums or cancel policies after such incidents.

4. Theft or Vandalism

While usually not your fault, filing for theft or vandalism repeatedly suggests you live in a high-risk area. Rates may increase, especially with renters or homeowners insurance.

Real-Life Examples: How Claims Impact Premiums

Let’s consider a few examples to illustrate the long-term financial impact of filing a claim.

Example 1: Minor Auto Accident

Anna gets into a small accident that causes $1,200 in damage. Her deductible is $500. She files the claim and gets $700 in reimbursement.

Her premium increases by $250 per year for the next 3 years—a total of $750.

Result: The increase is more than what she received from the insurer.

Example 2: Water Leak in Kitchen

John files a homeowners insurance claim for a $6,000 water leak. The insurer pays the amount, but raises his annual premium by $400 for 5 years.

Total extra cost: $2,000. The claim was worth it—but only because it was a high-cost issue.

How Long Do Rate Increases Last?

Rate hikes after filing a claim typically last 3 to 5 years. However, the exact duration depends on your insurer’s policies and the nature of the claim.

Auto Insurance: 3–5 years is standard.
Homeowners Insurance: 5 years in many cases.
Multiple Claims: May result in policy cancellation or higher "high-risk" policy rates.

Should You File That Insurance Claim?

The key question every policyholder must ask is: Is it worth filing this claim? If the potential premium increase outweighs the benefit, it may be better to pay for the loss out of pocket.

Here are some factors to consider:

Size of the Loss

If the claim amount is just slightly higher than your deductible, it may not be worth it.

Your Claims History

If you’ve already filed a claim recently, another one could trigger a large rate hike or cancellation.

Type of Claim

Some claims—like liability or severe structural damage—must be filed, regardless of impact on rates.

Your Financial Ability to Self-Insure

Can you afford to cover the loss yourself without going into debt? If so, consider skipping the claim.

How to Prevent Premium Increases After a Claim

While you can’t completely avoid the risk of a premium increase, there are smart ways to minimize the impact:

1. Understand Your Policy

Before filing, read the fine print. Understand which claims are likely to raise your premium.

2. Increase Your Deductible

A higher deductible means you pay more out of pocket—but it also lowers your monthly premium and discourages minor claims.

3. Use Claim-Free Discounts

Many insurers offer discounts if you stay claim-free for several years.

4. Install Safety Features

Security systems, dash cams, smoke detectors, and water leak sensors can prevent claims—and earn you discounts.

5. Ask About Forgiveness Programs

Some companies offer accident forgiveness, which can prevent a rate increase after your first claim.

Key Takeaways

Filing an insurance claim can significantly raise your premiums.
The more claims you file, the greater your perceived risk.
Claims for at-fault accidents, water damage, and personal injury are particularly impactful.
Minor incidents should often be paid out-of-pocket to protect your future premiums.
Raising your deductible and maintaining a clean record can lower your insurance costs over time.

Frequently Asked Questions (FAQs)

Q1: Will my rates go up if the accident wasn’t my fault?

A: Sometimes. Not all insurers raise rates for not-at-fault incidents, but some do—especially if you have multiple recent claims.

Q2: Can my insurance be canceled after a claim?

A: Yes, especially after multiple or high-cost claims. Insurance companies may choose not to renew your policy.

Q3: What’s the CLUE database?

A: The Comprehensive Loss Underwriting Exchange (CLUE) tracks your claims history for up to 7 years and is used by most insurers to assess risk.

Q4: How many claims are too many?

A: Two or more claims within three years is often considered high-risk and may result in a rate hike or non-renewal.

Q5: Is it better to raise my deductible to lower my premiums?

A: Yes, especially if you’re financially able to cover small damages. A higher deductible lowers your monthly premiums and discourages unnecessary claims.

Final Thoughts

Insurance is essential, but it’s important to use it wisely. While it’s there to protect you from major financial losses, using it for minor issues can backfire. Filing too many claims or the wrong type of claim can result in higher premiums, policy cancellation, and even trouble finding affordable coverage in the future.

Being strategic about when to file—and when to pay out-of-pocket—can save you hundreds or even thousands of dollars over time. Stay informed, know your policy, and always weigh the long-term consequences before submitting a claim.

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