How to Actually Not Worry About Your Awesome Home Insurance
Homeowners insurance in Minnesota is a little tricky. In terms of average cost, Minnesota is pretty normal; it’s only 8% above the national average. But Minnesota homeowners suffer from a unique problem: Minnesota is the worst place in the nation to file a homeowner’s claim. After filing one claim, a Minnesotan homeowner can expect a 21% increase in his/her premium. That’s over $200 more annually on average. For comparison, this figure is just 9% (about a $50 increase) more in neighboring Wisconsin.
So what’s responsible for these sky-high increases? Natural disasters are chiefly to blame for these increases. For the last twenty years or so, Minnesota has experienced an unprecedented increase in natural disasters. For example, there were 144 tornados in Minnesota in 2010; that’s over three times Minnesota’s national average. When natural disasters strike, insurance companies are forced to increase their premiums in order to compensate for their losses and also to anticipate future risk.
The other main reason for Minnesota’s huge premium increases after one claim is the Minnesota insurance law. In Minnesota, insurance companies cannot cancel someone’s policy after the policyholder makes one weather-related claim. In a lot of states, insurance companies are actually allowed to do this. While this might sound a little cruel, it actually makes business sense in a lot of cases. For example, if a policyholder files a claim for minor damage to their house, such as some broken windows (this is a bad idea), then their insurance company might drop them because the policyholder is simply taking advantage of the insurance company to get compensated for minor losses. In Minnesota, the insurance company would be obligated to continue covering the policyholder, even after an irresponsible claim had been filed. As a result, the only option that insurance companies have in order to stay afloat and be competitive in a certain area is to increase people’s premiums after they file a claim.
So what does this mean for you as a policyholder? As always, this highlights the importance of being careful about filing a claim. A claim should be filed to recover from a serious loss and shouldn’t be taken lightly. In Minnesota, this is treated more seriously than almost anywhere else. Before you make a claim, put yourself in the position of your insurance company for a minute. In a state with a whole lot of natural disasters, how much would you trust a policyholder who files a given claim? Is the loss serious enough to warrant such a claim? Remember, you won’t be able to drop someone if their claim is irresponsible, so you’d be forced to increase their premium. Try to keep this in mind when thinking about filing a claim.
“Average Cost of Homeowners Insurance (2010).” Value Penguin. Accessed 6/8/15. http://www.valuepenguin.com/average-cost-of-homeowners-insurance
Bjorhus, Jennifer. “Storms push insurance rates sky-high.” Star Tribune. Written 10/22/12, accessed 6/8/15. http://www.startribune.com/storms-push-home-insurance-rates-sky-high-in-minnesota/175089161/
“One home insurance claim may raise your premium by up to 21%.” Insurance Quotes. Written 10/9/13, accessed 6/8/15. http://www.insurancequotes.com/home/home-insurance-claim