Homeowners Insurance
Facing Litigation? Homeowners Insurance Costs Rise an Average of 21% After a Lawsuit
While homeowners insurance coverage replaces damaged or destroyed personal property, its personal liability provision protects policyholders against expenses if they’re the subject of a lawsuit. As with other forms of insurance, making a personal liability claim can significantly increase the cost of coverage.
ValuePenguin compared rates before and after a policyholder used their personal liability protection to see the changes in coverage costs after a claim. Across the 50 states and the District of Columbia, annual premiums rose by an average of 21%, but the increase could be as high as 38%, depending on the state.
While the cost of insurance can increase after a liability claim, premiums aren't greatly affected by owning an "aggressive" breed of dog — as dictated by your insurer — or a trampoline, two potential focuses of liability suits. In both cases, rates only increase by 1% on average.
Key findings
- Just one liability claim can raise the cost of homeowners insurance by an average of $354 a year. After homeowners are sued — regardless of whether they win the case or not — their rates increase by an average of 21% across the 50 states and the District of Columbia.
- Home insurance rate changes after a lawsuit are highest in North Carolina and lowest in California. In North Carolina, rates go up by an average of 38% after a liability claim, while they only increase by an average of 5% in California.
- It's generally affordable for policyholders to increase their personal liability insurance protection to a much higher amount. Consumers can increase their personal liability coverage from $100,000 to $500,000 by paying rates just 2% higher, on average.
- Unless the policyholder has a history of litigation, owning potentially risky property doesn't raise rates highly — except in Michigan. Owning certain dog breeds increases the average cost of coverage by 1%, and so does owning a trampoline.
Home insurance rates increase by an average of 21% — or $354 — after a liability claim by a policyholder
ValuePenguin tested how one personal liability claim — made after a policyholder is the subject of a property damage or injury suit — valued at $100,000 would change the cost of homeowners insurance. As personal property claims cause the cost of insurance to rise, so do personal liability claims — by an average of 21% a year compared to the cost before a claim.
The average cost of homeowners insurance before a history of claims is $1,697 a year. After a $100,000 personal liability claim, premiums increase to an average of $2,051 a year.
Depending on the state, rates can increase by far more than average after a personal liability claim, no matter if the policyholder wins the case or not. The most expensive state in which to get sued is North Carolina. In North Carolina, homeowners insurance costs rise by an average of 38% after a claim. This is five percentage points higher than in the states with the next-highest increase — Alaska and Maine.
Rank | State | Difference (%) | Difference ($) |
|---|---|---|---|
| 1 | North Carolina | 38% | $529 |
| 2 | Alaska | 33% | $432 |
| 3 | Maine | 33% | $327 |
| 4 | Wisconsin | 32% | $349 |
| 5 | Michigan | 32% | $490 |
| 6 | Idaho | 30% | $315 |
| 7 | Indiana | 30% | $335 |
| 8 | Illinois | 30% | $400 |
| 9 | Kentucky | 29% | $576 |
| 10 | New Mexico | 29% | $439 |
| 11 | Kansas | 29% | $748 |
| 12 | Mississippi | 29% | $449 |
States are ranked by percentage increases.
Home insurance rates, on average, increase after personal liability claims in every state. However, the amount premiums increase varies by location. The cost of coverage increases the least in California. Rates in the state go up by 5%, on average, after a personal liability claim, making it one of the four states (along with Arkansas, Florida and Arizona) where premiums increase by less than 10%.
Why do rates rise differently across U.S. states after a claim? Insurance providers set their rates according to risk. Companies may view one population as more litigious than others, or certain consumers' behaviors may suggest that repeated, expensive lawsuits commonly follow a single personal liability claim. In both cases, insurers respond to risk by setting higher premiums.
It costs just 2% more, on average, for policyholders to increase their liability limit by 400%
In part, personal liability claims result in more expensive home insurance rates because of the high ceiling for expenses. While homeowners insurance companies will cover the cost of a lawsuit whether their client loses or wins, including settlements, taxes, reasonable day-to-day expenses and loss of income (up to a set amount), the cost of a trial could outpace the amount of coverage a homeowner purchased.
Additionally, if a homeowner is sued for an amount greater than the value of their assets, they could suffer further financial loss. In both cases — when the expenses related to a suit are high and when the amount a defendant stands to lose as the result of a suit is a large sum — it's best to have a high limit of personal liability coverage ahead of time.
ValuePenguin assessed the cost of increasing the protection that comes with a home insurance policy's liability portion. For a policyholder to raise the amount of their protection fourfold (from $100,000 of coverage to $500,000), researchers found that it costs just 2% more, on average.
Rank | State | Difference | Premium - $100,000 | Premium - $500,000 |
|---|---|---|---|---|
| 1 | Pennsylvania | 5% | $899 | $942 |
| 2 | Hawaii | 4% | $1,086 | $1,133 |
| 3 | Illinois | 4% | $1,355 | $1,410 |
| 4 | Nevada | 4% | $1,094 | $1,134 |
| 5 | Utah | 3% | $1,136 | $1,175 |
| 6 | Maryland | 3% | $1,396 | $1,444 |
| 7 | New York | 3% | $1,500 | $1,550 |
| 8 | Arizona | 3% | $1,575 | $1,628 |
| 9 | Oregon | 3% | $1,198 | $1,237 |
| 10 | New Jersey | 3% | $1,194 | $1,233 |
| 11 | Louisiana | 3% | $1,760 | $1,815 |
| 12 | Vermont | 3% | $825 | $851 |
States ordered by the percentage difference in the cost of $100,000 and $500,000 of liability coverage.
The most expensive place to significantly raise the limit of one's liability coverage is Pennsylvania, but doing so only increases the average cost of homeowners insurance in the state by 5%. And, conversely, the state where it's least expensive to raise the limit is North Carolina. In that state, adding another $400,000 of liability coverage increases rates by less than 1%, or just $6 on average.
What is umbrella coverage and how does it work? High-net-worth individuals and homeowners looking for even more coverage after increasing their standard personal liability coverage should consider umbrella liability policies. An umbrella policy or extended liability coverage endorsement kicks in after a policyholder exhausts their regular personal liability coverage. It provides protection in increments of $1 million and costs only a few dollars more per year.
Insurance rates don't generally increase significantly for those owning certain dog breeds or a trampoline, though some insurers have been known to prohibit them
Homeowners insurance premiums can increase based on how risky it is to insure a policyholder. Homeowners with restricted types of dog breeds — such as pit bulls, Dobermans, German shepherds and Akitas — and those who own potential sources of injuries, like trampolines, can see higher rates or may even be denied coverage outright.
ValuePenguin analysts compared the cost of coverage for policyholders with and without dog breeds that may be riskier to insure, and with and without a trampoline. For both types of policyholders, the cost of coverage only increases by an average of 1% across all 50 states and the District of Columbia compared to those without one of these dogs or a trampoline. Moreover, there are 28 states where the average increase is 0% for both dog and trampoline owners.
The lower rate increases that accompany owners of a trampoline or certain dog breeds suggest that sources of liability may result in merely nominal increases, but only as long as they don't cause a lawsuit.
There are a few notable exceptions, though. The most expensive state to own restricted breeds is Michigan. On average, owning these dogs can raise rates by 25% — suggesting that in-state rating models have tied dog ownership to liability claims more frequently than in other states.
While Michigan is the most expensive state to own certain dog breeds, Ohio is the most expensive state to own a trampoline. In the Buckeye State, the average cost of homeowners insurance increases by 10% if a policyholder keeps a trampoline.
State | Average with ‘aggressive’ dog | Percentage change | Average with trampoline | Percentage change |
|---|---|---|---|---|
| Alabama | $1,827 | 0% | $1,827 | 0% |
| Alaska | $1,293 | 0% | $1,318 | 2% |
| Arizona | $1,575 | 0% | $1,575 | 0% |
| Arkansas | $2,144 | 1% | $2,144 | 1% |
| California | $2,143 | 0% | $2,139 | 0% |
| Colorado | $3,384 | 0% | $3,383 | 0% |
| Connecticut | $1,636 | 1% | $1,628 | 1% |
| Delaware | $781 | 0% | $781 | 0% |
| District of Columbia | $2,731 | 0% | $2,731 | 0% |
| Florida | $1,977 | 0% | $1,977 | 0% |
| Georgia | $1,750 | 0% | $1,752 | 0% |
| Hawaii | $1,086 | 0% | $1,086 | 0% |
Methodology
ValuePenguin gathered homeowners insurance quotes for sample profiles with different coverage levels and customer details from every ZIP code in the country. Using this data, researchers compared the cost of home insurance for policyholders who have made one $100,000 liability claim in the past year with those who haven't.
Additionally, researchers compared the cost of buying $500,000 of personal liability coverage to buying just $100,000 coverage.
ValuePenguin also checked how having an aggressive breed of dog (as dictated by insurers) or a trampoline — but not both — affects the cost of a homeowners insurance policy.
Analysts compared these findings with the average cost of homeowners insurance by state for consumers with no history of making claims and who are insured for $100,000 of personal liability coverage.
ValuePenguin's analysis used insurance rate data from Quadrant Information Services. These rates were publicly sourced from insurer filings and should be used for comparative purposes only, as your quotes may be different.