Insurance companies don't like paying claims. After all, they make their profits on premiums paid by the overwhelming majority of customers who don’t make claims in a given year.
Once you make a claim, you're no longer one of their best customers. There’s a possibility that your claim could raise your premium for many years.
If that increase is significant, over the long term you may end up paying more for insurance than you receive as a payout for your claim.
This is more likely to happen with homeowner’s insurance. Because unless your neighbor’s tree falls on your roof, you generally can’t pursue restitution from anyone else. The flood, fire, hailstorm or earthquake that damaged your home isn't insured.
So, what factors should you consider when determining whether to make a claim?
Let’s take a hypothetical example. Last winter, water damage from melting ice dams ruined some of your ceilings. A contractor estimated that it will cost $3,000 to fully repair the damage and remove any mold.
Assuming your policy covers this kind of damage (and some may not), should you file? Here are some issues to consider.
The actual repair cost
The contractor says the repair will cost $3,000. But the last word will be that of an appraiser sent by the insurance company to inspect the damage. The estimate may be a lot lower, which could make it harder to convince your contractor (or any other contractor) to take on the job.
Your deductible
You’ll have to pay your deductible before the insurer kicks in the rest. If it’s relatively low, like $500, your share of the $3,000 water damage repair bill may not be too bad. But if it’s $1,000, you could be paying a big portion of the bill out of pocket.
Potential premium increases
When you make a claim, there’s a good chance that your insurer will raise your annual premium, because now your house has been added to its “risky asset” list. This increase may occur even if you decide to withdraw the claim (more on this later). A number of factors can determine if and how much the increase may be.
The size of your claim
Larger claims generally result in higher premium increases than smaller claims.
The reason for the claim
An insurer will look at the reason for your claim and estimate the likelihood of you needing to file future claims.
For example, according to The Zebra, claims to fix earthquake or lightning damage often result in annual increases of under 10% or less. Why? Because unless you live on a fault line or in a known tornado zone there’s a statistically lower likelihood that your home will be damaged that way again.
Conversely, flood or water damage can occur year after year. And when it does, it often results in rot and mold damage that may require remediation. That’s why water damage claims often trigger annual premium increases of 19% or more.
Neighborhood factors
If many of your neighbors have filed claims for water damage, your insurer may use this information to declare your area a high-risk area. This allows them to charge higher premiums than they might charge homeowners in lower-risk areas.
Frequency of claims
The more claims you make, the higher your premiums are likely to rise. At some point, your insurer may even choose to terminate your policy if they believe you’re costing them too much.
How long will the increases last?
Generally, claims stay on your record anywhere from five to seven years. After that time, your premium may revert to what it was before you filed that claim (adjusted for inflation).
Switching insurers may not result in lower premiums
You might think that switching homeowner’s insurance providers after a claim could save you money. But that’s not necessarily true.
All auto and home insurance claims are tracked on a database called the Comprehensive Loss Underwriting Exchange Report (CLUE). Any insurer you’re considering can request a CLUE report on you to view your claims history and use that information to calculate your insurance risk and premiums.
If you are thinking about changing insurers, you may want to look at your personal CLUE report to see your claims history. You can request one free report every year at https://consumer.risk.lexisnexis.com/.
Withdrawing the claim may not prevent premium increases
Unfortunately, once you take the first step to file a claim, you’re revealing to your insurer that your home is an insurance risk. They can remove your “claims-free” status on your CLUE report.
Even if you withdraw the claim without taking a payout, your insurer may label it as a “zero-pay claim,” which, depending on your state, they may use to justify an increase in your premium because they now believe that you’re likely to file future claims. Some states don’t allow insurers to do this, but they can find other ways to raise your rates. For example, they can eliminate discounts you’ve received in the past for being a claims-free customer.
The trade off
That’s why filing a homeowner’s insurance claim isn’t necessarily a no-brainer. You have to weigh the immediate financial benefit (receiving money to fix a problem) against the long-term impact of higher premiums.
That’s why, unless it’s going to cost a fortune to fix a problem covered by your insurance, you may want to consider paying for the repair costs on your own and avoid filing a claim altogether. That way you can save that first-time claim for a time when you’re really need it. Hopefully that will never happen!
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This article was authored by Martin Baker and Jeffrey Briskin. Martin is a financial advisor and Director of Financial Planning with Canby Financial Advisors, LLC, an Investment Adviser registered with the U.S. Securities & Exchange Commission. SEC registration does not constitute an endorsement by the SEC nor a statement about any skill or ability. Martin can be reached at 508.598.1082 or mbaker@canbyfinancial.com. Jeffrey Briskin is Director of Marketing at Canby Financial Advisors.
©2026 Canby Financial Advisors, LLC.