If you want to ensure that you receive financial compensation should anything happen to your home or its belongings, then you absolutely need homeowners insurance. In fact, you probably won’t even be able to hold a mortgage if you don’t have a policy.
But once you take one out, it’s imperative that you understand all the ins and outs of your policy, including the number of claims that you’re allowed to make before you’re able to renew. Unfortunately, many homeowners are unaware that insurance providers have guidelines when it comes to this, and some have found themselves without coverage as a result of making too many claims.
Too Many Claims in a Certain Tie Frame Could Leave Your Home Uninsured
Every insurance company is different, and as such, they have their own guidelines in terms of the maximum number of claims before being able to renew the policy. Having said that, two claims is typically the standard limit of claims that can be made within a five-year time frame. That means insurance providers can actually deny your policy renewal if you go over that limit within that time period.
What’s the reason for insurance providers dropping you after too many claims? In the eyes of an insurance company, you would be considered high risk. At the end of the day, too many claims mean more money your provider would have to dish out to cover you. It’s simply bad business to agree to provide coverage for a home that’s just too risky – and too costly – to insure.
Even filing just one claim is complex, and the more claims you add, the trickier it gets. At the very least, a couple of claims means a hike in premiums; worst case scenario, you can get the boot altogether.
What Does the Law Say?
States have their own laws regarding the ability for insurance companies to deny renewal as a result of the number of claims that have been filed. In California, insurance providers are required to give homeowners at least one chance to renew their policy if their home is completely destroyed because of a major disaster (as opposed to destruction due to negligence).
That said, the National Association of Insurance Commissioners states that insurance providers can cancel a new policy for any reason within 60 days of issuance. Once this time period elapses, there has to be a good reason for the cancellation of a policy, such as nonpayment or fraudulent activity on your part.
You, on the other hand, have the right to cancel your homeowners insurance policy any time for any reason.
Is There Any Recourse For a Denied Policy Renewal?
If you’ve been denied coverage because of filing too many claims – or for any other reason – you should make an effort to call other insurance companies to try and get approved for a policy. Failing that, you may be able to seek coverage through state programs for insurance.
The Fair Access to Insurance Requirements (FAIR) plan provides insurance coverage to homeowners, but should only be used as a last resort after making an effort to get coverage in the private insurance sector. The type of coverage offered by a FAIR plan will be more limited compared to the average policy taken out with a private insurance provider.
Think Hard Before Filing a Claim
While some claims are absolutely necessary – especially if your home is completely destroyed along with everything in it – others might not be worth filing. For instance, if your $1,000 bicycle was stolen out of your garage, it wouldn’t be worth filing a claim. Let’s say your deductible is $500 – you’d be getting $500 back. But the fact that you now have a claim on record might not make that $500 worth it, especially if your premiums increase right after.
Before you file a claim, call your agent first, not the claims center. These professionals will be able to help you determine if filing a claim is the best idea in your particular situation.
Many times you may be better off paying to make repairs or substituting lost or stolen goods if the damages are not much more than your deductible. A general rule of thumb is not to file any small claims, but rather leave your claims for major catastrophes that cost in the tens of thousands of dollars or more in damages. You don’t want to use up your claims for minor situations and be left in the dust when it comes time for renewal.