Does a Renter's Insurance Claim Affect Your Rates?

Not all renter's insurance claims cause premium increases.

Many insurance policyholders wonder how filing a claim will affect their premium rates, and renter's insurance customers are no different. However, because renter's insurance does not protect the structure of your home, and therefore the potential settlement may be smaller than with standard homeowner's insurance, you may wonder if the size of the settlement is worth the increased premiums. Unfortunately, there is no easy answer to this question.

Modified Homeowner's Insurance

While it performs slightly differently than standard homeowner's insurance, it is important to realize that renter's insurance is a modified homeowner's policy. Essentially, it is a homeowner's policy without dwelling or other structures coverages. In all other regards, it is the same policy, and claims affect both products in the same way. If your insurance company raises premiums because of homeowner's insurance claims, it will do the same for renter's policies. It will consider nonrenewals according to the same claims standards as well.

No Universal Standard

Each state has its own laws that govern homeowner's insurance, including renter's policies, and therefore the way that a claim may affect a policy in one state may not be the same as in another, even if the policies are written by the same insurance company. Also, insurers are generally permitted to set their own rules regarding the impact of claims on premiums, as long as the rules don't violate state law. Therefore, there is no rule about claims and premiums that applies to all policies in all states.

Disaster Forgiveness

Regardless of their general rules regarding claims and premium increases, many insurers do not raise rates for losses caused by unavoidable natural disasters, according to State Farm spokesperson Phil Supple. While this may not be a universal rule, the chances of you experiencing a rate increase due to a claim of this type are smaller than with routine claims due to negligence. Also, if your items are severely damaged by a natural disaster, your renter's insurance benefit may outweigh any potential premium increase.

Insurer Policy

State Farm reports that its policy on premium increases due to homeowner's and renter's insurance claims varies according to the length of time you have held a policy with the company. If you are a customer of more than nine years, the first claim will have no impact on your rates, but you will lose a valuable discount with the second claim. Policyholders of less than nine years lose the discount with the first claim. Allstate customers lose their "claim free" discount after their first claim, may see a claims surcharge if they file "one or more" property claims and may lose coverage entirely by filing multiple claims in a given time period, according to Allstate's website. Insurers often drop discounts for customers with a history of claims, but speak with your agent to determine the specifics of your company's policies.

References

• Insure: How Claims Affect Home Insurance Rates; December 2009
• RentersInsurance.net: New Orleans Renters Insurance
• Insure: The Basics of Renters Insurance; December 2009
• RentersInsurance.org: Getting Renters Insurance for the Dorm; November 2009
• Lone Star Insurance Agency: Your Credit and Your Claims History
• Allstate Insurance: Common Property Insurance Claim Questions