Understanding Fire Insurance Claims and Their Impact on Your Homeowners Insurance Premiums

Experiencing a house fire, regardless of its size, is a terrifying ordeal. Beyond the immediate damage and disruption, homeowners often face another challenge: rising home insurance premiums after filing a fire claim. At O1ne Mortgage, we understand the complexities of insurance and are here to help you navigate these challenges. If you need any mortgage services, don’t hesitate to call us at 213-732-3074.

What Is an Insurance Claim for Fire?

A standard homeowners insurance policy typically covers the costs to repair, rebuild, or replace your home’s structure and contents after a fire, excluding cases of arson. Additionally, it often covers the expenses of living elsewhere if your home becomes uninhabitable during repairs.

To receive payment, you must file a homeowners insurance claim. This process generally involves contacting your insurance provider, completing a claim form, and documenting the damage with photos, videos, or lists of belongings affected by the fire. An insurance adjuster may visit your home to assess the damage.

If your claim is approved, the insurance company will pay it, minus any deductible. A deductible is the amount you are required to pay out of pocket before the insurance company covers the rest. This can be a flat amount (e.g., $1,000) or a percentage of your home’s insured value (e.g., 2%).

Why Does Your Insurance Premium Go Up After a Fire?

Homeowners insurance premiums generally increase after filing any claim, but fire-related claims tend to have the most significant impact due to their typically higher payouts. For instance, the average home insurance claim for fire and lightning-related damages was $83,519 in 2021, compared to $12,913 for wind and hail damage.

Once you’ve filed a claim for a specific type of loss, insurance carriers may consider your home more susceptible to similar future losses. For example, if you live in a wildfire-prone area and your home catches fire, the insurance company may reasonably expect a similar event to occur again.

Other Reasons Your Homeowners Insurance Premium May Increase

Filing a claim isn’t the only factor that can cause an increase in your homeowners insurance premiums. Other reasons include:

Adding New Risks

Installing features like a swimming pool, trampoline, treehouse, or wood-burning stove can increase your insurance premiums due to the added risk of injury. Owning certain dog breeds considered dangerous might also boost your home insurance costs.

Widespread Natural Disasters

Average insurance losses due to natural disasters have soared almost 700% since the 1980s. Even if your home has never been affected by a wildfire, hurricane, or flood, insurance carriers may raise your rates to offset their escalating costs.

An Aging Home

Older homes are more prone to problems, making them more expensive to insure. Outdated electrical systems, aging pipes, or deteriorating roofs can all pose risks for your home and your insurer.

Rising Construction Costs

The price of construction materials has increased an average of 19% since 2020. Ongoing labor shortages also make rebuilding or repairing homes more expensive, contributing to higher insurance premiums.

Look for Ways to Lower Your Home Insurance Rate

After filing a fire claim, there are steps you can take to prevent rising home insurance premiums from straining your budget. Regularly shopping around and comparing prices from different insurance carriers can help keep your costs down.

Maintaining a good credit score can also help minimize your home insurance expenses. In most states, insurance companies can check your credit-based insurance score when pricing your policy. These scores differ from your regular credit score but are calculated using many of the same factors. Checking your credit score can give you an estimate of where your credit-based insurance score stands.

At O1ne Mortgage, we are committed to helping you find the best solutions for your mortgage and insurance needs. If you have any questions or need assistance, please call us at 213-732-3074. Our team of experts is here to provide you with the support and guidance you need to make informed decisions about your home and financial future.

By understanding the factors that influence your homeowners insurance premiums and taking proactive steps to manage them, you can protect your home and your budget. Remember, O1ne Mortgage is here to help you every step of the way. Contact us today for all your mortgage service needs.