Popular Misconceptions: If I make an insurance claim my rates will go up

Many people suffer from a special form of cognitive dissonance related to insurance. They are more than willing to pay monthly, quarterly or annual premiums for their homeowners and auto insurance but, when it comes time to enjoy the benefits of that insurance coverage, they are reluctant to make claims. The most common objection is that they believe their rates will go up. The second most common objection is that they will be cancelled.

Insurance rates are set based on a multitude of factors. Claims made constitute only one of many factors considered by insurance companies in determining the premiums charged. It does not necessarily follow that because a claim was made rates will go up. However, even if rates necessarily went up after a claim was made why buy insurance if you are not going to take the steps necessary to enjoy the benefits of the product you purchased?

In terms of the second objection, if your insurance company is going to cancel coverage because you have made a claim, it is unlikely that is the insurance company with which you really want to do business. Accidents happen. Sometimes they are our fault; other times they are the fault of other people. Particularly when a claim arises from the fault of a third party – for instance, a UIM claim (underinsured or uninsured motorist) there is no rational basis for an insurance company to either raise a premium or decline to extend coverage in the future just because a claim is made.