- Joyce Insurance
Why Do I Have Insurance If They Raise My Rates After A Claim?

Getting insurance is a responsible thing to do. Making sure that you are managing your finances effectively without missing out on life essentials like a home, car, health, business, etc. is a big leap towards sustainable living.
In case of an accident, it is natural for people to resort to making a claim. It may seem like the best option; however, there is a catch. Making a claim may not be the best option in all cases (of course, there are instances where making a claim is better). Why – you might ask? Because when you file a claim, it may reduce your rate. So, having your rate reduced for a small manageable accident won’t be in your best interests.
What is an Insurance Claim?
Before understanding the claim-rate relation, you must understand what an insurance claim is? Insurance is basically a contract, which is your insurance policy, between a company and customer which states that the company will provide financial assistance in case of any emergency or accident. (How inclusive the coverage is, varies from company to company and insurance types). In exchange, you promise to pay an agreed amount to the company on monthly basis. In case you experience a loss or damage, you can file a claim which is a request for financial assistance to cover that loss.
The company will investigate your case and either accept or reject the claim. If accepted, they will release a check that covers the amount for the damage.
What is a Rate?
A rate is a unit that is multiplied by the exposure base to determine the insurance premium. It determined how much money is generally required to cover your losses and make up for the insurer's profit.
The Claim-Rate Relationship
Regardless of how large or small, the claim is, the number of claims will almost definitely impact your rate. If you file too many claims, the company may not renew your contract… policy. If the damage is your fault, then the rate will definitely rise, or not, insurance carriers sometimes offer accident or claim forgiveness. Or the carrier will let you purchase for an additional premium accident forgiveness. Yes are basically pre paying a rate increase in case you get into an accident for file a claim.
For instance, hitting a car. If it isn’t your fault then the rate rise is circumstantial. If your car was hit from behind while legally parked, you may think the rate will not rise and it might not in some cases; however, this is not always the case. But some carriers will count this in the total number of incidences you have when they look at incident frequencies. The total number of at fault and not at fault claims, glass claims, towing and labor claims and tickets.
Depending on your previous driving history, the number of tickets issued, the frequency of car accidents in your region, and even a bad credit history will all play a role in skyrocketing your rate.
Types of Claims and their Effect on Rate
NO two claims are alike. There is a difference between denting a car and completely disheveling the vehicle. The coverage cost severity of the damage and being the perpetrator or the victim, all play a role in differentiating between claims.
Least to Most Damaging ClaimTypes
It may seem like your rate will rise if you make big claims and small claims probably don’t matter. However, it is seen that rather common and minimal damages like slip and fall injuries, dog bites, water damages, piping issues tick the insurer a lot. These claims are likely to negatively impact your rate. Too many of such claims and your insurer might not even want to continue your policy.

How much can the Rate hike?
There is no concrete formula that can help you calculate the possible hike in your rate based on your claim. However, on average, the rate will hike up in a range of 20-40%. The applicable period for the rate hike also varies. You may have to pay a high premium for only two years, but sometimes, it may remain effective for three years or more.
When to file a Claim and when to pass?
Again, no one rule applies to all insurance policies. Where some companies may be lenient, others won’t. Since you now know that making a claim can be a disadvantage, it is best to know your policy well. Being informed is the best way to protect your wallet and make the most out of your insurance. If you know whether your first offense counts, a small claim is self-covered or not, you will be in a better position to decide if making a claim is in your best interest.
Discussing all possible situations and damages with your agent before filing the claim is very important. Know what will be your company’s potential response to a claim before filing it.
Nonetheless, filing too many claims is not a good option. Minimizing the number of claims is always best to maintain an affordable premium.
Will your policy be canceled due to Claims?
Usually, companies do not cancel policies after a claim. Instead, they will charge a higher premium. The possibility of a company canceling the policy altogether is greater if you have filed a large number of claims in a short time frame.
If it is this complicated, why should I get Insurance?
Insurance is not meant to cover minor losses and damages. Of course, facing a loss and being financially burdened is a hassle and you may think insurance ought to help you out. A damage worth $1000 is still a draining one. However, you can save this much amount regularly for maintenance. On the contrary, house damage of $25,000-$30,000 will be a huge financial setback, and is not possible to have this much saved. Insurance is there for you when you face a financial problem that could leave you in devastating credit and turn your financial situation upside down.
For small damages, it is best to open a saving account and set aside a reasonable amount on monthly basis to help you out in need.

The Bottom Line
When you are paying your premium on time every month, it is understandable that you would want your insurance company to take care of all financial situations arising from damage or loss. However, a little smart way, detailed knowledge about your policy, and a responsible saving account for minor damages is the best way to make the most out of your policy and be able to benefit from it in case of a major loss or damage.