Revealed: how much home and car insurance claims add to your premium

Accidents happen, but making a claim on your home insurance could result in your premium soaring when it comes up for renewal.

With the help of price comparison websites, we've analysed thousands of insurance quotes to find out how different types of claim affect car and home insurance premiums.

Read on to find out whether smaller claims are really worth pursuing, and the steps you should take before deciding whether to make a claim.

How claims affect your car insurance premium

We enlisted the help of the price comparison website GoCompare to find out how making a claim impacts on the cost of car insurance.

As you might expect, customers who'd made more claims generally saw their premium increase, albeit with one exception. GoCompare's data shows that drivers who'd make one claim were actually quoted £81 (9%) less than those who hadn't claimed at all.

This doesn't mean insurers favour those who've made claims. Instead, the more likely conclusion is that drivers who have made one claim were still able to shop around and find similar prices on comparison websites to those who hadn't claimed.

That aside, drivers who'd made more claims generally faced much higher costs. Two claims resulted in a £69 (8%) hike, while four claims saw quotes rise by £469 (53%).

_{Note:Figures supplied by GoCompare. They reflect the customers who used its service between January and August 2021.}

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Home insurance claims more harshly treated

It might be cheaper to insure your home than your car, but the effect of making a claim on your home insurance appears to be more significant.

Home insurance customers with one recent claim paid an average of £91 (57%) more than those with no claims. Two recent claims bumped the average quote up from £161 to £359 - an increase of 123%.

One possible explanation for the disparity is that home insurance claims tend to be more complicated than car insurance claims.

Those claiming on home insurance most commonly reported accidental damage or a loss at home (30%), but substantial numbers claimed for 'escape of water' (25%) and thefts from the home (9%). Both of these claims can require complex repairs, costly replacements and raise potential concerns about the security of the property.

_{Note:Figures supplied by GoCompare. They reflect the customers who used its service between January and August 2021.}

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Is it worth making a small claim?

In some cases, the costs of making a claim can outweigh the savings. We asked the comparison website Confused.com to run a selection of test quotes on behalf of five fictional customers.

First, it looked at the effects of a car insurance claim for £500 made in 2021 after a single vehicle accident. This claim raised the average of the cheapest three quotes by £129 to £169.

After taking into account your excess (usually at least £100), setbacks to your no-claims discount, and the possible effects on subsequent premiums, such a small claim may not be worth pursuing.

A Confused.com spokesperson said: 'In some cases, where the claim is lower, this could see your premium increase by quite a significant amount. Knowing this, some people may opt to cover the costs themselves to prevent their insurance from going up.

'It's important to remember that any accidents or damage to a car, or damage to a home, must be reported to your insurer. And doing this won't impact your no-claims bonus if you have one.'

When we ran similar quotes for home insurance, we found that a small claim for accidental damage to a laptop made little difference to quotes (3%-10%), but that burglary claims added an average of 41%.

How historic claims affect your premuim

The type of claim you make has a significant effect on your long-term home insurance premiums.

To approximate the effect that claims can have over time, we shifted the date of the burglary claim back by a few years. When we stated that the claim had been made in 2017, it still added £41 (21%) to the average of our best three quotes.

We ran the same exercise for a storm damage claim. This brought a similar premium increase for a claim made in 2021 (40%), but the impact was far lower over time, with a 2017 claim adding just 4%.

_{Note: based on a 37-year old living in south London with an annual home insurance premium of £197.}

What to do before making a claim

1. Check your excess

Your excess bites into any benefit you stand to gain, and so might eliminate claiming as an option or call into question the value of doing so.

For example, if your excess is £300, and your losses total £350, that £50 could easily be clawed back in a slightly raised renewal premium, especially if this isn't the first recent claim you've made.

2. Consider the impact on your no-claims discount

Suppose your current no-claims discount (NCD) is 60% and you're paying £400, but the claim you're about to make knocks the discount down to 40%.

If the underlying premium (in this example, £1,000) stayed the same, you'd pay £200 more at your renewal, then maybe £100 more the following year with 50% NCD. This means that recovering your discount would cost you an extra £300 in all.

If your NCD is protected, then this type of calculation doesn't apply. Some types of claims also often won't affect your NCD, depending on the insurer. These can include glass damage claims, no-fault claims and vandalism claims.

• Find out more:no-claim bonuses explained

3. Run some quotes

For a general idea of how your risk is affected, you can try running a quote online to see what happens with the claim added.

As with checking the NCD, this only gives you a rough indication of the future impact of your claim and isn't definitive.

4. Tell your insurer

Whether or not you end up making a claim, you do have to be honest with your insurer, and can expect to be asked to disclose any recent 'incidents' that have occurred, not just events where you've claimed.

The bad news is this means that even if you don't make a claim, your premium can still be affected by something that you could have claimed for - be it a cracked windscreen or a burglary - because of your changed level of risk.

In reality, insurers know we don't always report every minor scrape and mishap, but the fact remains that if an insurer learns you've failed to disclose a fact, it could at worst consider this 'non-disclosure' and use it as a basis to decline a claim or cancel a policy.

• Find out more: car and home insurance loyalty penalty ends

The full version of this article appeared in the December 2021 edition of Which? Money magazine. 

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