The years from 2000 to 2003 were not kind to the insurance industry. 19 Billion Dollars in losses caused our home insurance premiums to skyrocket, and companies to change policy regarding cancellation of coverage. Let me tell you a cautionary tale to illustrate the problem. This happened to a client of mine.
Recently, I handled the sale and purchase of two homes for an Oklahoma homeowner. We had no problems on the sale of his residence, but three days before the closing of a new home he purchased, his long time insurance company told him that if he purchased another home, he would not be covered. The reason, he had five claims in the last two years. But were these really claims?
In the case of two "claims", the homeowner canceled them within days with no money paid out. To the insurance company this is still a claim, and it is legal for them to list it as such. Is that fair? No it isn't, but those are the new rules of insurance. Even an inquiry about whether to make a claim can be put down as a claim. In two other claims, the insurer paid twice for the same shower problem. The first time, the plumber recommended a new pan, but the insurer refused, and just fixed tile. The second time they admitted that the pan should have been replaced the first time around. Result, two separate claims, even though the insurer did not do the right thing. What should have been two claims in three years became five, and resulted in tripling his new home coverage.
A further complication was that water damage claims were made. Insurance companies are spooked about water claims that can create mold. In Oklahoma, we have a high mold spore count, so the type of claim is also weighted. Mold lawsuits are dramatically on the rise, so this is an insurance company's greatest fear.
What conclusions can we draw from this? First, if you have the typical $1000 deductible, you should probably not make a claim unless the amount is very high. At the least, it will raise your premium and possibly negate your gain. At the worst, it can cause cancellation of your existing coverage. Until the insurance companies return to profitability, think of your policy as catastrophe insurance. Second, be very careful about making water claims. With some companies, two water claims in three years can get you cancelled. Third, know your agent and question him about policy either before you insure or during the coverage, to avoid problems down the road. This especially goes for agents of large single company insurers. They are less prone to act independently, since these are the companies who have taken large losses, and are more likely to set strict guidelines for their agents. This doesn't mean that you should never make a claim again, but barring serious loss, being conservative with claims can ensure that your coverage will be in place when you really need it, and at a price that doesn't cause you sleepless nights.
