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Allstate Claim Rateguard: It’ll Cost You More Money Today to Avoid a Higher Rate Later

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Shuman Roy is an entrepreneur, business owner, and musician. He started RoysNoys, LLC in 2013 as a music production and education service company. He also offers small business consulting and advisory services to help businesses get from start-up mode to turn-key operations. Shuman earned his M.B.A from the Stern School of Business in 2001...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency...

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Reviewed byJoel Ohman
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UPDATED: Mar 13, 2020

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Another week, another new product from Allstate, an insurer that always seems to be “innovating” in one way or another.

And by innovating, we mean getting more of your money in exchange for more protection from higher insurance costs in the future. Wait, does that even make sense?

Let’s break down this new homeowner’s insurance coverage option to see if it’s all it’s cracked up to be, or just another marketing gimmick cooked up by the ever-inventive insurance industry.

How Does Claim Rateguard® Work?

They’ve run a few national spots on TV to advertise and somewhat explain “Claim Rateguard®,” which by the way is registered by Allstate.

In one commercial, they show a burglar jumping through the front window of a home after a barking dog scares the would-be thief out without much more than a duffel bag.

Obviously Dennis Haysbert is standing out in front of the house narrating while this all goes down, giving the mutt praise for being a good watchdog.

But he also mentions that each year 95% of homeowners won’t file a claim. However, if you do, your rate won’t go up because of it, so long as you have Claim Rateguard® from Allstate.

So to get this straight, you probably won’t file a claim. And by probably, we mean the chance of filing a claim is about five percent at best, each year, according to his statement. But if you do, your homeowner’s insurance rate won’t go up like it normally would.

In the meantime, you can pay for this optional coverage (listed in Allstate’s enhanced features) each year to avoid paying more in the event of a claim.

For the record, it only applies to one claim every five years, so if you file two claims, the protection is gone, at least until the clock is reset.

The upside here is that you won’t be “scared” to file a claim, and you can actually use your homeowner’s insurance!

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Does Claim Rateguard® Make Financial Sense?

That all depends on the numbers, but it’s certainly another case of insuring your insurance. That is, paying an insurance premium AND an additional cost to keep that premium from rising in the future.

It’s similar to accident forgiveness, which isn’t really free either.

First, you need to know how much this optional coverage costs. Is it an extra 5% or 10% a year?

Then determine how much a claim will actually increase your premium. Unfortunately, it’s hard to know how much it will go up, as it depends on your claims history and the type of claim filed. And also the state in which you reside.

If the claim would normally increase your annual premium by 15-20%, it could make sense to buy this added protection. However, if your premium will only rise 2-3% after a claim, or not at all, there’s no sense in paying extra upfront or ever.

And remember, 95% of homeowners won’t file a claim this year, or next year, or the year after. So even if there are potential savings, the chances are pretty slim that you’ll “win” here.

You might even be inclined to file a frivolous claim simply because you can without penalty, though you’ll need to consider the cost of your deductible first.

Additionally, you may feel invested with Allstate, and avoid shopping around, which could cost you even more in lost potential insurance savings.  For example, if another carrier is significantly cheaper, you might be able to file a claim and still pay a lower premium after the fact.

So starting with a higher premium at Allstate with assurances it won’t move any higher may be a losing endeavor.

That being said, tread cautiously with this one before paying an arm and a leg to avoid the repercussions of something that may never actually happen, just as Dennis Haysbert points out.

(photo: Duncan Harris)

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