Dwelling Policy Practice Test

Prior claims can significantly influence future premiums on a Dwelling Policy because insurers assess the risk associated with homeowners who have a history of making claims. When a policyholder files frequent claims, it signals to the insurer that there is an increased likelihood of future claims, which can lead to higher premiums to compensate for that higher risk. In some cases, if a policyholder has an excessive number of claims, the insurer may even choose not to renew the policy altogether due to the perceived elevated risk.

Underwriting guidelines typically consider the frequency and severity of prior claims, leading to potential adjustments in premium rates for the insured. This aspect highlights the importance of maintaining a low claim ratio to help secure more favorable insurance rates in the future.