Can I Change Homeowners Insurance After a Claim?
People buy homeowners insurance to protect their homes from fire, storms and other hazards. Homeowners insurance can also provide protection from injury claims such as dog bites and falls. When policyholders report a claim, they may decide to change insurers. Alternatively, the insurance company may decide to cancel the customers' coverage, forcing them to seek another insurer. In either case, the customers should understand what factors may affect their ability to find new homeowners insurance.
Reasons Insurers Cancel Customers
Insurance companies seek to earn profits from writing insurance policies, collecting premiums from customers and then investing that income. Claims cost insurers money, so insurers may cancel policies for customers reporting a high frequency of claims. The average customer only files one homeowners claim every 10 years , so customers reporting a higher number of claims may find their policies canceled. At the very least, customers reporting two claims in a three-year period will likely experience a premium increase, according to Bankrate.com.
Insurers Sharing Claims Information
Customers should know that insurers share claims information in national databases, including the Comprehensive Loss Underwriting Exchange and A-PLUS. When a prospective customer files an application for homeowners insurance with a new insurer, the insurer can consult these databases and check the applicant's claims history. Insurers decide the applicant's risk profile in deciding whether to accept the new customer and what premiums to charge. Customers should not expect to be able to hide prior claims from a new insurer.
Accuracy of the CLUE Report
Since insurers frequently consult the CLUE database when considering new customers, applicants should obtain a copy of their CLUE report. Applicants should then investigate the accuracy of their CLUE reports. An applicant's CLUE risk profile is partially based on the applicant's credit history, so applicants should review their credit reports to make sure that information is accurate and up to date. Applicants are entitled to dispute in writing the accuracy of any information appearing on their CLUE reports.
Tips When Changing Insurers
Customers seeking lower premiums, either from their current insurer or a new insurer, might consider accepting higher deductibles. For a policy covering a more expensive home, accepting a $5,000 deductible instead of a $500 deductible can save the customer approximately $1,500 per year if no claims are made.
E.S. Martin is an attorney who has worked in civil litigation for more than eight years. He focuses his work in insurance, personal injury, subrogation and risk management.