When you take out home insurance, you hope to never have to make a claim on it. But life does not always go as planned.
So, what impact could making a home insurance claim have on your premium? When is it worth making a home insurance claim and when is it not? Read on to find out.
Is home insurance required by law?
In a word, no. Unlike car insurance, home insurance is not a legal requirement.
However, it’s certainly a very wise move to have a policy. It can provide both peace of mind and financial security if something unexpected happens to your home, such as a fire, flooding or theft.
If you are taking out a mortgage, most lenders will require you to have at least a buildings insurance policy.
How could a claim affect your home insurance premium?
Although home insurance is typically cheaper than car insurance, a new study by consumer website Which? has revealed that the cost of making a claim on home insurance is significantly higher.
Which? found that home insurance customers with one recent claim paid an average of £91 (57%) more than those with no claim. Those without any claims pay £161 per year on average, with those who have made a claim paying £252.
Meanwhile, having two recent claims was found to bump up the average home insurance quote to £359, an increase of £198.
In comparison, drivers with two recent car insurance claims only saw their premiums increase by an average of £69.
Why the steep increase in premiums after a claim?
One reason customers face much steeper increases in home insurance premiums after a claim could be the cost of fixing the issues at hand.
According to the Which? study, the most common reasons for claims among home insurance customers are accidental damage or loss (30%), escape of water (25%) and theft (9%).
All of these claims can require complex repairs and costly replacements, or can raise potential concerns about a property’s security. In many cases, the result is insurers raising premiums upon the expiry of the existing policy.
To claim or not to claim on your home insurance?
Whether you should claim or not depends on what you want to claim for and your current financial circumstances.
For example, if it’s a low-cost issue, you may want to avoid filing a claim. That’s because if you do, your insurer could bump up your premium by as much, if not more than you actually claim.
Also, think about the excess you have to pay. According to the Which? study, the closer the excess amount is to the value of your claim, the less significant the benefit of making a claim.
That being said, the point of home insurance is to provide financial protection. So don’t be deterred from making a claim when there is a legitimate reason to do so. For example, if you are looking at thousands of pounds in building damage or theft, there’s a pretty strong case for making a claim.
Ultimately, you will have to crunch the numbers and assess the situation to determine whether making a claim or paying for costs out of pocket is the best course of action.
The post This is how much your home insurance premium could increase after making a claim appeared first on The Motley Fool UK.
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