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April 12, 2024

The Influence of Claims on the Increase of Insurance Rates 

white and black abstract illustration illustrating the increase of insurance rates

What brings into effect the increase of insurance rates?

Insurance is a crucial safety net, offering protection and peace of mind in times of crisis. Whether it’s auto, home, or health insurance, policyholders rely on these contracts to mitigate financial risks associated with unforeseen events. However, a common concern among policyholders is the fear that filing claims might lead to increased premiums. But why does this happen, and what factors contribute to this phenomenon?

What Do Insurance Companies Consider When Determining Premiums?

Firstly, it’s essential to comprehend how insurance premiums are determined. Insurers analyze various risk factors to calculate premiums accurately. These factors include an individual’s driving record, credit history, age, location and claim history. Insurers use complex algorithms to assess the likelihood of a policyholder filing a claim and adjust premiums accordingly. When you file a claim, you essentially trigger this evaluation process.

How Can Claims Lead to Higher Rates?

One of the primary reasons filing claims can lead to higher premiums is the increased perceived risk associated with the policyholder. Insurance companies view frequent claim filers as higher-risk clients, as they have demonstrated a propensity to utilize their coverage regularly. From the insurer’s perspective, this heightened risk warrants adjusting premiums to maintain profitability and cover potential future claims payouts.

Moreover, filing claims often indicates to insurers that the policyholder may be more prone to accidents or incidents. For instance, in the case of auto insurance, multiple claims may suggest a pattern of unsafe driving behavior, leading to a higher likelihood of future accidents. Consequently, insurers adjust premiums to reflect this increased risk exposure, thereby protecting their financial interests.

Furthermore, the type and severity of the claim play a significant role in determining premium adjustments. Insurance companies generally differentiate between minor claims, such as windshield damage or minor fender benders, and major claims, such as total vehicle losses or extensive property damage. Major claims typically have a more substantial impact on premiums due to their significant financial implications for insurers.

Should I Avoid Filing Claims to Limit Price Increases?

While the prospect of increased premiums may deter some policyholders from filing claims, it’s crucial to remember the primary purpose of insurance: to provide financial protection when needed. In many cases, the benefits of filing a claim far outweigh the potential increase in premiums. However, it’s essential to exercise discretion and avoid filing claims for minor incidents you can afford to handle out-of-pocket.

We’re Here to Help

Having served Columbia, Tennessee, and the surrounding areas for nearly 70 years, the dedicated staff at Mid State Insurance is well-positioned to help you understand your coverage, including claims and how they may impact the increase of insurance rates. Visit our website or call 931-388-8332 to learn more.


This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your insurance professional for further information. 

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