Will they cancel my homeowners policy if I make this claim?

As insurance agents, we are often asked this question. In truth, there is no way of knowing at the time of claim whether the insurer will cancel your policy at renewal or increase your rates. Generally claims lead to cancelation in one of two circumstances; frequency or severity.

If you have frequent claims, say three or more in a three year period, there is a good chance that your policy will be canceled by the insurer. Insurers see frequency as a sign that there will be further claims down the road.

If you have a severe claim, meaning a large claim such as a house fire, this could also lead to policy cancelation.

Of course this always brings up a second question "Isn't paying claims what insurance is for?" The answer is "Yes." The purpose of insurance is to make you whole again after a loss. This is done by pooling monies of individuals with like risk. The claims are paid out of that pool of money.

However, if an individual has frequent claims or a severe claim, that person no longer fits the  risk characteristics of the other people in the pool and that leads to policy cancelation.

Usually there is no way, other than proper maintenance, to avoid a severe claim. If a lightning bolt sets your house on fire, there really nothing you could have done to avoid that.

Frequency, on the other hand, can be avoided by self insuring small losses. Now everyone has their own definition of small, but I recommend a minimum homeowners policy deductible of $1,000. This will help keep your premiums down (the higher the deductible, the lower the premium) and reduce frequency by self insuring losses below $1,000. If you can afford to self insure to a higher amount, there are higher policy deductibles available.

In conclusion, if you have a covered claim, your insurance is there to protect you. In the unlikely event that the claim leads to policy cancelation, don't stress to much about it. There is a secondary market ready and willing to write you a new policy. Insurers typically look at a three year loss history, so in no time you will be back in standard market.

The Russell Agency is located in Southport, Connecticut. We serve Fairfield, Westport and all surrounding towns.

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