If you have a home mortgage loan, then your lender is going to require you to carry homeowner’s insurance.
It may be the biggest purchase you’ve ever made, but the lender has a lot invested in that home too – and wants its investment protected.
But be warned. Insurance is not a maintenance plan – home insurance coverage is designed for sudden and unexpected large losses.
Homeowners who file more than one claim unrelated to weather in less than three years can expect to be “non-renewed.”
Non-renewal is not cancellation. Insurance companies cannot cancel a policy that has been in force for more than 60 days except for failure to pay the premium, fraud, or serious misrepresentation in the application.
But like any business, an insurer “reserves the right to refuse service to anyone,” so long as they provide you with ample written notice to allow you to shop for a new policy. Your insurer is free to non-renew your policy for almost any reason – but it’s usually for too many claims.
Most carriers have tightened their company claims’ restrictions in the last few decades. Some are a little looser with the number of claims, some may be tighter. It may or may not be spelled out in your policy.
To protect yourself, always consult with your agent before making a claim. If you make the claim directly with the insurance company, their adjuster is not likely to give you any warning about the possibility of non-renewal.
If you receive a notice of “non-renewal,” the first thing to do is try to get the insurer to reconsider, so the non-renewal does not go on your insurance record. Whether or not you knew about the claim limits ahead of time, a non-renewal will follow you.
Like credit events, all paid insurance claims are recorded on a national register. This register is called C.L.U.E., and all insurance companies see this information when looking at writing new policies. Events generally stay on the C.L.U.E. report for five years.
Like a credit report, the Fair Credit Act allows you to access the C.L.U.E. report once a year for free.
If your insurance company did not renew your policy, you will probably have to pay a higher premium at another insurance company.
If one or two insurers turn you down, don’t despair. Keep looking. If you are buying a new home, ask the real estate agent, mortgage lender or builder for names of companies that write in your area. If it’s an existing home, find out from the previous owners who insured the house.
You may want to consider carrying a higher deductible. This will save you money on your premium, as well as discourage you from filing small or “petty” claims that put you at greater risk.
If you think the reason for non-renewal is unfair or if you want a further explanation, call the insurance company’s consumer affairs division or your state’s insurance commission.