It doesn't sound fair, but a single claim against your homeowners insurance policy can cost you your insurance coverage. In some cases, even a claim that isn't paid because it's less than your deductible is enough to get you dropped. Your insurer's bottom line looks healthier when the company isn't paying out claims. If it looks like you might be a drain on its coffers, the axe may fall.
Not only can you lose your coverage if you make a claim, you may have a hard time finding a new policy. The Comprehensive Loss Underwriting Exchange service makes your claims history available to other insurers, who can decide to write you off as a bad risk. Even if you don't lose coverage, your insurance premiums may spike upward. The risks to your house may be exactly the same as before you filed a claim, but that doesn't protect you.
Without a Claim
Even if you haven't filed a claim, insurers may decide you're too risky to keep. After Hurricane Andrew hit south Florida in 1992, causing $26 billion in damage, homeowners around the state saw rates rise. Many insurers tried to cancel their Florida policies completely, only to have the state government prevent them. Another risk is that the CLUE database also tracks specific properties and their claims history. Even if you have not filed a claim, your house may have a history that your insurer objects to.
The insurance-advice group United Policyholders recommends you pay for damage yourself if you can afford it. Even asking about whether you're covered can set insurers panicking that you're going to cost them money. One option is to take out the biggest deductible you can afford. That reduces both your premiums and your need to file claims. You can ask your insurer about its cancellation policy, but the company may not have one, and doesn't have to tell you if it does.
If you believe you deserve better treatment, contact the insurance company or your agent and see if you can work things out. If not, you can file a complaint with your state department of insurance or take your case to court. This can take time and -- if you go to court -- money, and success is often a long shot. Looking for a new carrier may be a better bet. Contact your state insurance department for the names of companies licensed to do business in your area and start calling.
- CNN Money: Homeowners Insurance: Use It and Lose It
- MSN Money: 10 Things Home Insurers Won't Say
- CBS Miami: Hurricane Andrew's Costly Insurance Legacy
- Nolo: Homeowners Insurance: What You Need to Know
- United Policyholders: To Claim or Not to Claim ... That Is the Question
- Bankrate.com: Dumped by Home Insurer After a Disaster?
- California Department of Insurance: File a Complaint
A graduate of Oberlin College, Fraser Sherman began writing in 1981. Since then he's researched and written newspaper and magazine stories on city government, court cases, business, real estate and finance, the uses of new technologies and film history. Sherman has worked for more than a decade as a newspaper reporter, and his magazine articles have been published in "Newsweek," "Air & Space," "Backpacker" and "Boys' Life." Sherman is also the author of three film reference books, with a fourth currently under way.