Home Insurance question

jessica490 · January 2015

Ok, I was just talking with a co-worker about something and I just don't understand...so she was saying during a hurricane that hit a few years ago, a tree had landed on part of their fence and needed repairing. They put a claim into their home owners insurance for $2600 or so and they got the check a few weeks later....then they got a notice in the mail that the insurance company was terminating their policy due to the claim....so please explain this to me (stuff I need to know before I buy a house), unless I don't understand this correctly (which insurance sometimes confuses me), why would she pay all this money for home owners insurance per month, then when you need to make a claim for something, they shut you off....it doesn't make any sense to me??

vlagrl29 · January 2015

nope - does not make sense to me at all. I've only had 1 claim on our house and our premium was increased slightly, but we were never dropped. We go with State Farm, maybe she is not with a great company

brij2006 · January 2015

It really depends. There may be a lot other deciding factors in play, as to why they cancelled her. I write for multiple different companies and handle the personal lines policies. I've seen where a company has increased a deductible on a client who had a claim, because they also had terrible credit and would pay their premium late every month. In that case it had to do with everything altogether that caused their deductible to increase, but not to cancel their policy.

For the most part though, it is very odd for someone to have 1 claim and get cancelled. I would assume that there was more to this than just that 1 claim.

However, I've seen people get cancelled for a dog bite, trampoline, pool, and neglect claims. I see more policies get cancelled because people don't have railings to their steps or have a pile of tires sitting next to their house. Both of which are hazards and a claim just waiting to happen.

jessica490 · January 2015

Ohhh ok...but I still dont' get why they would increase rates for a natural disaster...do they expect you to pay out of pocket even though you have inasurance? Isn't that the point of having it? They want you to pay all this money to have a perfect house/yard with no issues and then screw you when you try to get $$ to pay for un-intentional damage? Is that why people don't normally report things like this? I understand people are SUPPOSED to have home insurance, but what is the real purpose of it?? Is the cheapest amount the best thing? I'm just so confused...and lost...and paranoid....

brij2006 · January 2015

The cheapest amount is definitely not the best option. Nowhere near it

The thing is, like all insurance, it was created more for catastrophic things. Think back to when life insurance was only for insuring your life itself. Not a policy that you can now have an investment in, pull cash out of, among many other things. It is no longer just life insurance.

Same goes for homeowners insurance. Unfortunately many people now view it as a maintenance policy. Let's take your co-workers' situation for example. Let's assume that 1 year ago 1/4th of the tree blew off in a wind storm, exposing the inside of the tree and showing that it was rotted. Yet maybe that person decided not to take the tree down because they view that they have insurance and the cost to remove the dead tree was expensive (it's usually a few thousand). So now they are being negligent to the upkeep of their property. This tree blows down on some of their insured property, they file a claim, and the claim pays out. Had they removed that tree when it was exposed as being a dead tree, then they would have avoided the claim and damage in the first place.
It's scenarios like that where insurance has become a maintenance policy to many people. So there are a lot of small claims.

The point of home insurance is to cover your asset of your home. If there's a fire or a tornado, then you would want to be able to rebuild the asset you had. That's what home insurance is for. Over the years it has evolved into covering many other things besides just catastrophic events, but unfortunately that has turned many people into the mentality of thinking that they have insurance and it will cover everything and anything that goes wrong, so they don't have to worry about it.

Because of this, there have been many changes to the home insurance industry. Many companies are pulling out of high risk areas (I.E hurricane prone areas, areas below sea level, tornado alley, etc), requiring higher deductibles to avoid small "maintenance" claims, and one of the biggest companies in the industry has moved to an Actual Cash Value policy only. That means all of those insureds claims are paid out after depreciation on whatever was damaged.

As far as amount of coverage, you want the amount needed to rebuild the home (also known as replacement cost coverage). This will ensure that you have enough coverage to fully replace/rebuild your entire home in a total loss situation, or get your kitchen back to how it was in the event of a fire that only damages 1 room in the home.

jessica490 · January 2015

Ok, that makes better sense...thank you for explaining that...I found a good article online all about insurance and how it works, I should better understand how it relates to a home...in condo living I really don't have to worry about anything outside of my walls, but when you actually own property I can see it gets tricky... thanks!

smerka · January 2015

My parents got dropped from Allstate for hail damage. They were pissed. They had been Allstate clients for a very long time with excellent credit. But one claim and they were dropped. I still have Allstate and our basement flooded due to sewer backup, which we had a rider for. Got our check, and no increase. It makes no sense sometimes.

Xstatic3333 · January 2015

This is scary stuff! Once you've been dropped, can you typically get coverage through another company or are you black listed?

brij2006 · January 2015

It really doesn't make sense @smerka. I work for an independent agency, so we write with companies that allow us to have multiple carriers under 1 roof. I've really found that the privatized insurance companies are dropping people for "acts of God" lately, or increasing their deductibles to insane amounts because of a claim that was out of their control. We've had a lot of people come to us from State Farm, Country Companies, and Allstate because of this.

brij2006 · January 2015

@xstatic3333 It really depends on the situation. If you were dropped because your dog bit someone and you refuse to get rid of your dog, then probably not.

If it's from hail/wind/fire, then there usually isn't an issue re-writing the policy.

Xstatic3333 · January 2015

brij2006 said:
@xstatic3333 It really depends on the situation. If you were dropped because your dog bit someone and you refuse to get rid of your dog, then probably not.

If it's from hail/wind/fire, then there usually isn't an issue re-writing the policy.

That's good to hear, at least. Thanks!

smerka · January 2015

My parents were able to get coverage with another company.

shakinros · January 2015

Our house was robbed this year only four months after we bought it and we made a claim. I'm petrified we're going to be cancelled when it comes up for renewal! My parents were cancelled after they made a claim on a robbery so that's fueling my fear. They were able to get coverage with another company.

We put in an alarm system and I made a point to call and tell the insurance company we had done that. Hoping that works in our favor...!

MommyLiberty5013 · January 2015

Also, it may have nothing to do with the fence or your friend and everything to do with the hurricane. Many insurance companies dropped or altered coverage in hurricane areas - the damage is just too massive for some companies to underwrite.

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