Homeowners, Be Aware: Don’t Get Dropped by Your Home Insurance Provider
Now that you’ve been approved for a Florida home mortgage loan, have found the house of your dreams and agreed on a purchase price, you’re gonna have to sign up for a home insurance policy at some point.
It’s not a difficult process, but it can be similar to car insurance: homeowners must worry that making a claim could cause them to be dropped by their insurer.
If this takes place, it can mean higher premiums with another insurance company or, if you’re deemed troublesome, with your state’s high-risk pool. It might even mean no coverage at all. You’ll also lose any loyalty or claims-free discounts you earned under your present coverage.
Understanding your home insurance
It would be easy to know whether or not a claim will get you in trouble if there were a firm rule for when or why an insurer will drop coverage. But there isn’t. Even one or two small claims can sometimes do the trick. That’s especially true if the claim is water-related, which could mean mold in the future, writes Kimberly Lankford, a Kiplinger’s magazine columnist, in her recent book “The Insurance Maze.”
As you’d expect, mold is a major issue in regions around the state. Those with a Florida mortgage loan need to be careful about using their insurance on the issue.
“What an underwriter gets concerned about is claim frequency,” says Chris Heidrick, vice president for personal insurance with Firemen’s Fund. “It starts to raise questions.”
Even inquiring about whether to make a claim can hurt your reputation, threatening the costs of your premium or policy in general, says Lankford. Some companies will count such inquiries against you in a central database that other insurers can access.
You can check the industry’s database, known as the Comprehensive Loss Underwriting Exchange, once a year for free, similar to receiving a getting a credit report for your home. The database will list your current and former addresses and any claims you’ve made.
If you are dropped, there are some steps you can take.
The longer you’ve been with an insurer, the more they’ll want to retain your business. Start by asking your agent or the insurance company what you can do to get back in their good graces, by replacing a leaky roof or aging boiler or by raising the deductible substantially. The money you save by not switching insurers could be well worth it.
If they refuse, shop around or try an independent insurance agent who can tell you your options. A last resort may be your state’s high-risk insurance pool, usually called a FAIR plan, but you could face high premiums and low damage caps. You should try to avoid tacking on any high costs to your Florida mortgage loan as much as possible.
