In most cases, if you're dropped by an insurer, your homeowners insurance will cost more. The alternative can be even worse. You may have trouble finding another company to issue a homeowners policy at any price. Insurance companies can become "nervous" about you as a customer for a variety of reasons. The frequency and type of claims you've had will influence the price increase you face.
Originally, the term "redlining" became popular to identify lenders who would not approve mortgage loans in certain areas or ZIP codes. Although it is now illegal for mortgage lenders to deny loans for such reasons, insurance companies sometimes will not write homeowners coverage in certain areas, regardless of the quality of the home or applicant. Although insurers cannot refuse to write a policy for that reason alone, they'll typically state more palatable reasons.
Credit Report Strength
Property and casualty companies usually pull your credit report before issuing a policy. Individual insurance companies use this report to "slot" insureds into different premium rate categories. You might find this annoying, since you're not applying for credit, but an insurance inquiry does not lower your credit score. However, if you were dropped by another insurance company for nonpayment, a new company likely will slot you for higher premium rates or refuse to issue a homeowners policy.
Change in Conditions
If you've filed one or more homeowners insurance claims in a relatively short period, your company may issue a "change in conditions of coverage," instead of dropping you. This "change" comes with a premium increase. While your insurer may prefer to drop you, they believe that if enough people agree to pay the higher premiums, the company will generate strong profits. Unfortunately, since insurance companies share information with each other, you'll have difficulty finding another insurer who will not increase your rates.
Historically, you'd need to file multiple insurance claims for a company to consider dropping you as long as you paid your premiums on time. However, similar to credit card companies that reduce your limit or revoke your card, even if you've never missed a payment, insurance companies sometimes drop policyholders, even for filing only one claim. According to MSN Money, some companies are even dropping people if they've filed no claims. Even in these illogical situations, you'll pay more simply because you were dropped for no apparent reason.
Sometimes, although your claims experience is reasonable, possibly negligible, you can be dropped and pay more for the same coverage with another insurer. For example, dog bite claims, accounting for more than one-third of homeowners claims, make insurance companies overly concerned. If you're dropped because of one or more dog bite claims, you'll likely pay more for homeowners insurance, be unable to find a company offering a policy or face having your dog excluded from coverage.
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