Find Out How Your Claims Affect Your Insurance

Find Out How Your Claims Affect Your Insurance

Written by Corrina Murdoch
Fact-checked by Caitlin Wood
Last Updated May 2, 2022

Life is full of risks. With best efforts, you can mitigate most unknowns — locking your door, slowing down at that yellow light, turning off the coffee pot — for the rest of the time, there’s insurance. Protecting you against possible dangers in a host of situations, insurance is a staple in all Canadian’s lives. Usually, it is an affordable necessity, letting you drive, protect, and secure your interests in the event of an issue at home. Whether you’re renegotiating your plan or getting new coverage, understanding how potential claims may affect your insurance can help you find an ideal provider. 

Can A Home Insurance Claim Affect Your Home Insurance Premiums? 

Any claim made on your insurance will impact the premiums, in order for the insurance company to recuperate their investment. Home insurance underwriting stipulates that the cost rises after you make a claim. The mathematical calculations used for determining your premium suggest that, if you make a claim once, you are likely to do so again. In order to adjust for this risk, the company adjusts your premiums upward. 

Your individual situation leading to the claim affects the adjustment amount. Environmental circumstances are taken into consideration, and this can work either against or in favour of the insured party. Those who live in low-crime areas and locations not prone to extreme weather are less likely to see drastic increases. However, if you meet these criteria, then a claim will likely have a more significant impact: 

Previous Claims

Especially if you’ve historically made a liability claim (as opposed to a damage claim), it is likely to result in a more noticeable upward adjustment. Liability claims are subject to legal action, making them much higher risk, and usually more expensive. To account for this cost, and the risk associated with a likely future claim, the insurance company gives you a higher spike in premiums. 

Your Property Is Associated With Claims

Whether due to being in a flood zone or fire-prone area, even if you didn’t make the claim, it sticks to your property. Your premium likely already reflect this reality, but as soon as you make another claim, you may see another spike. 

Multiple Claims In A Short Period

This shows that your cost, as the insured party, is high. Your premium reflects your expense as a client; so, if you make multiple claims (especially liability claims), then you are likely to see a substantial increase in your premiums. This is true whether you are with a new or existing insurer since the file information carries forward. 

Extreme Weather

Do you live in a tornado-prone area? Is your property within the range of hurricanes? If so, it’s likely that your insurance is already higher than if you were in a lower risk zone. However, when you make a claim to prove that fact, then your premiums will rise even more. The risk is not exclusive to those living in high-risk areas. Insurance providers are already adjusting their risk factors for climate change, meaning even higher premiums for at-risk areas.  

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Crime-Prone Area

If you live in a location that has a great deal of crime, the insurer relates that to higher risk – particularly in terms of property damage. So, if you make a claim associated with this type of crime in a ‘dangerous’ area, it is more likely that your premium will spike. Be sure to research your home and neighbourhood’s history before you make a purchase to avoid this type of issue.  

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How High Will Your Home Insurance Increase After A Claim? 

The specific changes in your home insurance after a claim is based on the situation. While the change is not permanent, it still adds to your regular costs. The entire purpose of a price adjustment is for the insurance provider to recuperate the cost of paying out your claim. Therefore, the actual amount your insurance will rise involves: 

  • Claim Type: First off, there is a major difference between property damage and a liability claim. If someone gets injured on your property, then the long-term costs are both unpredictable and high. This results in a higher spike in insurance. Conversely, if your claim is for property damage like a flooded basement, it is a one-time, fixed price. Though it still results in an increase, it will be much lower than a liability issue. 
  • Situational Severity: There is a major difference, cost-wise, between a twisted ankle and an actual slip and fall on your property. The ramifications of your liability claim will reflect this relativity. The same applies to property damage. Making a claim for a broken entertainment system is a far cry from damage to a valuable piece of artwork. 
  • Location: If you live in an area that is prone to issues, whether sociological or environmental, your premiums will likely increase more. As the landscape alters ecologically, the amount premiums increase is projected to rise. To find out how this impacts your situation, contact the insurer directly. 
  • History Of Claims: The final factor in determining the adjustment amount is the claim history itself. This applies both to the property and to the insured party. If it’s the first claim of its type, the increase won’t be as drastic. Conversely, if there is a pattern of claims, regardless of the type, you will end up with a higher increase after your claim. 

To estimate the expense, consider how much it will cost the insurer (including the price of offering the service). Next, think about how this impacts the risk factor of having you as an insured party. The amount your premium increases will be proportionate to those figures. 

How Long Will Your Home Insurance Claim Affect Your Home Insurance Premiums?

Rate increases are permanent, but the most drastic increase won’t last forever. Your insurance cost will never go back to normal, but it will go down over time. The duration varies based on the claim itself. However, keep in mind that the claim remains on file, even if your premium goes back down. Depending on the nature of the incident, your history as an insuree, and the insurance company’s policies, the duration varies. 

Some discharge the issue after only three years, while some follow the credit score policy and keep it on record for seven years. So long as that remains on your record, the premium will remain higher than it could be. Eventually, if you make no further claims, the cost will drop, but you won’t achieve the same rates as you had originally.

Can An Auto Insurance Claim Affect My Car Insurance Premiums? 

Making a claim on any type of insurance will impact your file, and car insurance is no exception. Though the actual effect will depend on the type of claim you make, there will always be a result on your insurance. When the insurance adjuster looks into your claim, they will take into account a variety of factors. These variables determine how much you end up paying after a claim. 

General Claims

If your car was stolen, or you make another claim not related to a motor vehicle collision, then you are unlikely to see a hike in your premium. Unless you have a history of claims, there is likely to be no extra charge. You will end up paying the deductible, but you won’t face increases in cost when dealing with most car insurance companies. 

Collision Claims

This type of claim is when there is an impact incident involving your vehicle. Every situation differs, and the actual ramifications will vary based on who was at fault for the incident.

  • Not At Fault: If you are found not at fault for an incident, such as getting rear-ended when stopped at a traffic light, you may not see an increase at all. Even if it does result in an increase, it will be far less than if you were found at fault. 
  • At Fault: If it’s determined that the collision was your fault, then you can expect a steeper increase in your costs. Fault is not necessarily unilateral either; the calculations are variable. You can be found partly at fault, where the monetary consequence will depend on the portion of the collision for which you are responsible. 

Second Collisions

A second incident highlights that you are a higher-risk insured party. While you can often retain your insurance, it will drastically increase your premiums. The second collision costs the insurance company in terms of payout, and it shows that they are likely to incur more expenses in the future. To accommodate that risk, the premium rises so the insurance company can recuperate that cost. 

Keep in mind that insurance providers consider your history when making decisions on your file. If you have a proven track record of safe driving and no claims, then you are likely to see little to no increase for minor incidences. The record usually remains on file for a period of three years, after which you can reapproach car insurance.  

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How To Lower Your Car Insurance?

The goal with insurance is to get the most coverage possible for the lowest cost. In order to reduce the price of your car insurance, whether or not you’ve made claims, there are a few key steps you can take. These include: 

  • Take A Driver’s Education Course: Insurers who know that you have specific training to drive safely on Canadian roads are likely to charge you less for insurance. The reasoning is that the instruction, and certification, show your driving skill and thus reduce your risk as an insured party.  
  • Clean Driving Record: Having a clean driver’s abstract is key to getting the lowest possible rate on your car insurance. Even if you make a claim, eventually it will be scrubbed from your record (somewhere between three to five years). Reapproach car insurance at that time and you can expect a more competitive price. 
  • Accident Forgiveness Insurance: If you are worried about the impact of an accident-related claim, consider a company that offers accident forgiveness. Take the time to understand the differences between coverage options. Though a low premium sounds great, if the features of another company offer more breathing room, it may be worth a higher price. 

Insurance FAQs

Will my insurance go up if my friend crashes my car?

Yes, if your friend crashes your vehicle then you will end up with higher car insurance premiums for several years. If they are not covered by your insurance, you are at an even higher risk of severe consequences. Your car is in your charge, and if it is involved in a crash, the responsibility is yours.  

Can no-fault insurance stop my premiums from increasing?

It depends on the situation, but if you are not at fault for the claim, and you have no-fault insurance, you won’t have a premium increase. This is only true if you adhere to all the terms of your insurance contract and if you are found entirely free of fault. 

Do all claims affect insurance or only recent ones? 

The history of your insurance claims is always considered by insurance companies. In order to assess your risk factor as a client, this information is essential. More recent claims carry more weight in the calculation, but even claims from decades past will be a factor. The higher your risk to the insurer, the higher your premium.

Is home insurance mandatory?

Home insurance is not mandatory, though most mortgages require fire insurance (at the very least). The same is true for rental properties, where the landlord mandates effective insurance.  Even though it isn’t mandatory, home insurance is usually priced reasonably and can offer security against the unknown.

Is car insurance mandatory?

Automotive insurance is a legal mandate to have a vehicle on the road.

Final Notes

Insurance is a necessary expense. Whether for your vehicle or home, its cost depends on your unique situation. Ideally, you’ll never need the insurance since there will be no incident to claim. However, should anything from fire to flood, collision to theft occur, insurance offers financial protection. Claims will always affect insurance, though how they impact premiums is variable. Investigate your options, including premiums and policies, to ensure that you get the best possible terms. 

Corrina Murdoch has been a dedicated freelance writer and editor for several years. With an academic background in the sciences and a penchant for mathematics, she seeks to provide readers with accurate, reliable information on important topics. Working as a print journalist for several years, Corrina expanded her reach into the digital sphere to help more people gain insight into the realm of finances. When she's not writing, you can find Corrina swimming and spending time with family.

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