If I Make Another Claim, Will The Company Cancel My Policy?

Like any other business, insurance companies need to make a profit to stay in business. They make calculations and charge premiums based on an expectation of paying claims and making a reasonable profit. Statistics show that insureds who have had claims in the past are more likely to have claims in the future. Insurance companies use these statistics when making their underwriting rules. If you are cancelled after having too many claims, it is not because the insurance company is mad at you personally--it is because you no longer fit the statistical profile of a profitable insurance risk.

How many claims are too many? There are no hard and fast rules as there are many variables. For homeowners insurance, a single accidental loss such as a lightning strike does not generally count against you as much as a series of losses such as leaks from water pipes or backup of sewers that might indicate a lack of routine mantenance. A very general rule of thumb is as follows:

Homeowners Insurance Will allow two claims within a three year period but will cancel if there is a third.

Automobile Insurance Will allow one ticket or at-fault accident per driver but will cancel if there is a second ticket or accident.

It is not unusual for a policyholder to think that their situation is unique and deserving of an exception. While this may be the case, insurance companies are highly regulated and it is important to understand that they must adhere to their underwriting rules as filed with each state. There is sometimes a little leeway in interpreting a particular situation, but more often that not, cancellations are not open to negotiation.

While you may pay a premium with the expectation of every loss being covered, you have to take the long term view which often means assuming some degree of risk yourself. Insurance was originally developed for catastrophic losses and individuals were expected to pay for even fairly large claims themselves. Today, some people expect that every little loss should be covered by insurance. The best approach is somewhere in the middle.

We recommend you select a deductible you can comfortably afford and pay for small losses yourself. If you protect your good insurance record in this manner then over the long run, you will likely find that your insurance premium savings offsets the out-of-pocket claim expense.

Please feel free to contact us to further discuss this important topic.