Home insurance offers you financial protection in a variety of circumstances, including financial loss due to injury or damage of or on your property. What you might not know is that having high claims frequency, how often you report a claim on your home insurance, can have a negative impact on your ability to maintain your policy.
There’s no way to know how many claims it will take before any specific insurance company considers canceling your policy. Depending on the circumstances it can sometimes just take one claim.
What Factors Influence Home Insurance Cancellation
There are a number of factors that go into whether or not your insurance company will decide that your claims indicate that they should terminate your policy with them.
These factors include:
- How much each claim cost
- What kind of claims they were
- How each claim was related
- Where each claim occurred
- What aspects of your risk of filing a claim have changed
Your insurance policy may notify you of policy cancellation, but you still have options to keep your policy if you make sure to promptly respond.
Insurance companies make decisions about policies and premium based on risk and want to minimize their risk of payout as much as possible.
How to Persuade Insurers to Maintain Your Policy
If you want to fight to keep your insurance policy, you need to be able to convince them that your risk of filing a claim is not high based on the factors listed above.
If they assess your risk as too high, or relatively too high in comparison to when you opened your original policy, they may determine that keeping the policy contract they have with you as against their financial interests.
It’s important not to have your policy canceled by your insurer because a cancellation can have a substantial negative effect on your insurance credit score, which helps insurance companies assess their risk in insuring you.
Proving Your Risk of Claims Has Changed
If you can prove that anything that caused the previous risk of claims has changed or can provide proactive solutions to reduce your risk, you may be able to convince your insurer to maintain your policy.
For example, if you have had repeated thefts due to where you live:
- The fact that you have moved to a new area or a promise to quickly install an alarm system could demonstrate how your risk has changed or
- What you will do to change your risk.
These are good examples of how you could demonstrate to your insurer that your policy shouldn’t be canceled in that situation.
Reducing Your Insurer’s Risk of Financial Burden
Another way you can potentially convince your insurer to maintain your home insurance policy is to offer concessions that will reduce their financial losses in the event that you make a future claim.
This can include offering to pay a larger deductible in the event of a claim or asking them to modify your coverage to exclude areas where they have already paid out substantial and/or multiple monetary amounts for past claims.
For example, if you have repeated water damage in your basement, you could ask them to reduce or exclude any water damage related coverage in your policy.
Other potential arguments can include your history of payments or how long your policy has been with that particular company. If you can show that you have provided your insurance company with more income than they have paid out, that can influence their decision to cancel your policy.
What to Do if Your Policy is Canceled
Getting an insurance agent and/or broker to help you in your search can help you explore as many options as are available to you. If your policy is canceled, the time you spend uninsured is an enormous financial liability, which is why it’s important to look into your options at the first hint of potential cancellation.
Even if your insurer hasn’t indicated future cancellation, if you have multiple open claims, it’s important that you look into your options. That’s especially true because it can take longer than you expect for another insurance company to fully review your situation.
