It does not sound fair, but not only can an insurer drop you after a single claim, it can also drop when you have not made any claims. The insurance companies are more worried about future risks and can cancel your policy, especially if you live in areas prone to mudslides or hurricanes. In addition, filling more than one home insurance claim within a period of five years or having a claim that is not paid because it is less than your deductible, can also make you lose your insurance.
All insurance companies are there to make a profit. If these companies have any reason they will not make as much cash as they need, the insurer may cancel the high-risk policies that may cost them. Each insurance company sets guidelines on the maximum number of claims an insurance policyholder can claim before renewing the policy. The industry experts say that more often, the magic number is two. This means that most insurers will decline to renew your policy after you exceed two claims in a period of three years. According to many insurance agents; insurance policyholders with more than one claim in ten years is considered high risk.
Making more than one claim may not only subject you to lose your insurance coverage but could make it more expensive and more difficult when looking for replacement coverage. Your claims are also recorded in the comprehensive loss underwriting exchange database (CLUE) that makes your claims history available to other insurers making it hard for you to find an insurance company. Filing a claim can also make an insurer to raise your premium rates instead of canceling the policy.
An insurance policyholder should get the largest affordable deductible from your insurer. For instance, if your deductible is $5000, you should only contact your insurance provider when you are rebuilding cost are at least 5,000 USD. This is because if you incur some losses, let’s say around $3,000 and you contact your insurance, your rates are likely to go up forcing you to spend more in the coming years.
Since the lenders require proof of insurance while you hold a mortgage, when an insurer drops you, you will need to get a new policy quickly. Remember, your house is the lender’s security and if you do not have an insurance policy the lender is forced to place insurance for you- as agreed in your mortgage contract. Since the lender is not worried about the premiums or the coverage’s, the other insurer may offer high rates that can end up costing you a lot of money.
Coastal Insurance Solutions specialize in homeowners insurance on Long Island and New York State. If you would like more information about homeowners insurance, give us a call at 631-782-3175
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Can Your Insurance Drop You?