Many people assume that because they have paid their homeowners insurance policy every month for years, they are free to take advantage of it whenever they need to. The reality is that you need to think carefully when making an insurance claim, especially a low-value claim, since it can affect your insurance availability. Insurers sometimes refuse to renew policies on which there have been too many claims.
Deductibles and Claims
According to J.D. Howard, executive director of Insurance Consumer Advocate Network, in an article in MoneyWatch, making more than two claims over a three-year period is a red flag for underwriters that can result in your policy not being renewed. He suggests you should not make a claim unless the cost for the repair is at least three times the deductible. The deductible is stated on your policy. It is the amount that you need to pay for any repairs before your insurance kicks in. For example, if you have storm damage of $700 and your deductible is $1,000, it may not make sense for you to make an insurance claim.
Each time you make an insurance claim, information about the claim goes into a national database called the Comprehensive Loss Underwriting Exchange, or CLUE. Insurers use the information in the CLUE database, along with your credit rating, to determine your risk profile – how likely you are to file a claim. Insurers then use your risk profile to decide what your premiums should be and whether your insurance should be renewed. These reports also include claims against your car insurance, so you may find that making a car insurance claim can also affect your homeowners insurance. Information stays on a CLUE report for five years. Many states have enacted legislation regulating the use of CLUE. For information, contact your state insurance commissioner.
Some insurers, such as Allstate, offer a type of insurance for your insurance. For an additional fee on your homeowner's insurance, they will agree not to raise your premium or cancel your policy, as long as you make fewer than one claim every five years. The cost of this extra insurance varies from policy to policy. Some homeowner's insurance policies also offer a discount on your premium for each year that you go without a claim.
MoneyWatch suggests hiring an independent claims adjuster when you make a claim, rather than rely on the insurance company's adjuster. Using your own adjuster may help you to make a more effective claim. This is because the insurance company adjuster may be more likely to focus on reducing the insurance company's responsibility in the way that they fix blame for the loss. Some insurance policies will also cover the fee for hiring an independent adjuster. The information on independent adjusters can be found in your policy.
- Independent Insurance Agents & Brokers of America: Consumers can minimize homeowners insurance non-renewals, rate increases
- MoneyWatch: How to File a Homeowners Insurance Claim
- Allstate: Will My Homeowners Insurance Go Up If I Have a Claim?
- Privacy Rights Clearninghouse: Fact Sheet 26: CLUE and You: How Insurers Size You Up
- National Association of Insurance Commissioners: Map of NAIC States & Jurisdictions
- Martin Poole/Lifesize/Getty Images
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