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Judging by the title you would think I am a customer that got ripped off when he made a homeowners claim, right? Well, that is not the case. I work for a major international insurance company. Actually, I work in a sales office for this company. Prior to becoming a manager for this company I used to think insurance was meant to protect you in the event of a loss. I have learned differently.
This may not be the case in all states, although I think it is with my company, but if you make too many homeowners claims or one claim for a large amount of money you will most likely be cancelled. Yes, that is right. If you use your insurance for what it was intended for and for what you pay a premium for you will be cancelled after the claim is paid.
Most people want the insurance in the event of a big loss, like a fire burning the house to the ground. This makes sense. But, some people insist on carrying a low deductible such as $250 or $500. This increases the premium you pay for the policy but you really don't receive much added benefit because if you make too many claims for a couple hundred dollars you will still be cancelled in most cases.
Personally, I carry the largest deductible I can because it makes my premium as low as possible and I would only be making a claim if it were serious anyway. Where the situation gets even more difficult is when you are cancelled for too many claims or one big claim it is hard to get another company to accept you for insurance. If a new company does take on your “risk” you will pay and arm and a leg for the policy. Out of desperation some people will try to lie and say they had no losses. The companies combat this by running a loss report on you, where all companies report their losses to. If for some reason you slip through that step and they write the policy you can still be cancelled for misrepresentation if they find out later that you lied to secure the policy. That could be 5 or 10 years down the road after they have taken your money for all those years. And, if you get cancelled for misrepresentation it will happen before any claims are paid.
There is no way to beat the system. Your mortgage company requires you to have insurance. Even if they didn't, who wants to see their biggest investment burn to the ground and get nothing for it. My recommendation to anyone reading this article would be to raise your deductible as high as possible, make claims only when you absolutely need to, and very seriously consider any endorsements you are offered. What I mean by that is, make sure you completely understand what is covered. An example of this would be something like the Sump Pump/Water Back-up endorsement. This endorsement will provide coverage in the event your sump pump breaks during a storm and there is water damage in the basement as a result. This does not cover everything in the basement however. It will cover things such as the furnace, hot water heater, and some appliances that would “belong” in the basement. If you had a TV sitting down there and it got destroyed you are out of luck. What is even more interesting is the fact that when a major storm is headed toward the area where I work the company will not allow us to add this endorsement to a policy until the storm passes.
As a consumer you really need to be sure you listen to that famous saying, “Buyer Beware”. Make sure you are fully aware of what you are buying in all cases. If this example does not convince you of that I am not sure what will.