About Homeowners Insurance

admin — Wed, 30 Jul 2008 13:11:45 +0000

You’d think that when you buy homeowners insurance, you could submit claims for any damages covered under your policy. After all, that is the point of having insurance, right?
Not anymore.
Even though insurers must pay claims that are covered by your policy, the small claims could end up costing you a lot more money over the long run. At the least, you could lose a claim free discount. Even worse, your insurer could drop you and make it tough to buy an affordable policy anywhere. Making a claim for a few hundred dollars could end up costing you thousands of dollars in extra premiums.
Most insurers offer claim free discounts, generally shaving about 5 percent off your premium for every year you’ve gone without a claim, with a maximum claim-free discount of 25 to 35 percent after seven to ten years without a claim. If you pay $ 1,000 per year in premiums, for example, submitting a claim for $300 could actually end up costing you more in premium increases for the lost claims-free discount than you received from the insurance company to pay for the claim and that’s just in one year.
Even worse than that, submitting a few small claims could get you dropped the next time your policy is up for renewal. That’s because insurance companies have been looking for any opportunity to improve their financial situations over the past few years. Paying small claims became very expensive, so they started dropping customers who were frequent claims filers. They’re afraid that those people will be more likely to continue filing claims in the future, and are particularly worried about any claims for waterrelated damage, which could eventually lead to very expensive mold issues. In a study by the California Insurance Department, 25 percent of the companies refused to renew the policies of customers who made one or two nonwater damage claims in the past three years. And 32 percent refused to renew policies for people who made one or two water loss claims in the past three years.

Why Home Insurance?

admin — Wed, 30 Jul 2008 13:07:55 +0000

Most people spent little time thinking about homeowners insurance until recently. Because premiums are much lower than they are for health and auto insurance - less than $700 per year, on average - they tend to get a policy when they buy their homes, then make few changes through the years. That can be a very expensive mistake.
The importance of having the right homeowners insurance coverage became painfully obvious after four hurricanes battered Florida in 2004 and Katrina destroyed the Gulf Coast in 2005 - the costliest catastrophe in American history. People who skimped on coverage to save a few hundred dollars ended up with tens of thousands of dollars in damages that insurance didn’t cover. Many fought with their insurance companies over their claims for months, while neighbors who chose insurers with better customer service records started rebuilding soon after the disaster. Some who thought they had good insurance suffered from hundreds of thousands of dollars in uninsured losses because they hadn’t updated their coverage through the years or hadn’t bought the right types of insurance. Making small errors in your homeowners insurance can cause giant financial problems.
Even before the storms, insurers were already making it more difficult to get and keep your coverage. After suffering from financial troubles in the early 2000s, homeowners insurance companies started raising rates at a double-digit pace, dropping customers because they made just a few small claims, even if they were legitimately covered under their policies, and leaving some parts of the country entirely.
They started relying more heavily on a semisecret claims database that makes it tough to find any insurer to cover you in the future - and can even make it difficult to sell your home. Insurance regulators received a record number of complaints from people who made just two or three claims for a few hundred dollars within a few years, then were dropped by their insurance company and ended up having to pay three times the premium with a new insurer, costing them much more in extra premiums than they ever received for the claims. That all started before the two costliest years for insurers in history - with seven out of the ten most-expensive hurricanes occurring between August 2004 and October 2005, and damages surpassing $83 billion over that time period.

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About Homeowners Insurance

Why Home Insurance?