What Happens to Your Policy After a Claim

Those consequences fall into three areas: your premium, your ability to obtain cover elsewhere, and in some cases the terms on which cover continues.

The premium effect

Claims are recorded on shared industry databases and are visible to other insurers when you seek quotes. The record typically persists for around five years.

The effect on price varies by claim type. Fault motor claims have the largest effect. Non-fault claims, where another party's insurer pays, still appear on the record and can affect pricing, which surprises people who assume a non-fault claim is neutral.

Home claims for escape of water are treated cautiously by many insurers because they correlate with further claims from the same property. Subsidence claims are the most serious of all and can make a property difficult to insure with anyone other than the existing insurer for years.

Enquiries can count too

Contacting an insurer to ask whether something is covered can be logged as a notification even if no claim follows. Several such entries can affect your record.

When exploring whether something is worth claiming, it is reasonable to ask general questions about how the policy treats a category of loss without reporting the specific incident. Better still, read the policy or ask an independent broker.

Doing the arithmetic before claiming

Work out the net recovery: the repair cost minus your excess, including any voluntary excess.

Then estimate the cost of claiming: the likely premium increase multiplied by the years it persists, plus any lost no-claims discount.

For losses close to the excess, the arithmetic frequently favours paying yourself. For substantial losses, it obviously does not. The awkward middle is where the calculation earns its keep, and it is worth doing rather than claiming reflexively.

Protected no-claims discount

Protecting the discount prevents it being reduced after a claim, for an additional premium. It is worth understanding what it does not do.

It protects the discount percentage; it does not prevent the underlying base premium rising because you now have a claim on record. Policyholders are sometimes surprised to find their protected discount intact and their price higher anyway.

Whether it is worth buying depends on the size of your discount and the cost of protection. At high discount levels it usually is.

Disclosure at renewal and when switching

You must disclose claims when asked, and the question is generally asked. Insurers verify against the shared databases, so undisclosed claims are found and can void the policy.

The obligation usually extends to incidents that did not result in a claim, and to claims on policies in other people's names where you were the driver. Read the question carefully; it is broader than most people assume.

After a large claim

Expect the renewal to be higher, and expect some insurers to decline. This is a poor moment to accept the renewal without shopping, because the spread between insurers widens considerably for non-standard risks.