To file or not to file?

  • Article by: AIMEE BLANCHETTE , Star Tribune
  • Updated: August 25, 2007 - 4:26 PM

Pity the homeowner who makes too many of the wrong kind of policy claims and winds up in the state's high-risk insurance pool.

If August's stormy weather caused you to file a claim on your homeowner's insurance, you can rest assured knowing that losses caused by natural events such as lightning, wind or hail legally aren't grounds for nonrenewal of your policy.

However, if your garage door is broken, your $1,500 racing bike is stolen, and it's the second or third nonweather related claim on your home insurance in three years, your insurance company can refuse to renew the policy on its renewal date.

If that happens, you could end up paying a higher premium with another insurer, or worse, be restricted to coverage through the state's high-risk insurance pool.

"Every year, there are people who get nonrenewed," said Dan Johnson, executive director of the Minnesota FAIR Plan, the state-run program that serves as a last-resort insurer. "FAIR coverage is seriously restricted compared to what you get from a private company. You definitely don't want to be my customer if you have a choice."

Sometimes the answer is obvious -- your house catches fire and there is substantial damage -- you'll want to file an insurance claim. But if someone steals a patio set off your deck and the claim is $700, and the deductible is $500, perhaps you want to think twice.

Grounds for nonrenewal include filing two or more claims within three year -- unless the losses were storm-related, did not result in payment by the insurance company, or 80 percent of the costs were recovered through another party. You can also lose your coverage if you fail to eliminate conditions that increase claims risk after being notified by the insurance company. This could include a deteriorated house or owning a dog that's on the dangerous breeds list.

The good news is that nonrenewal rates are less than in years past. The number of people losing coverage has increased by 500,000 since 2003, compared with 2.5 million homeowners who lost coverage between 2001 and 2003, according to a June survey by the Independent Insurance Agents & Brokers of America.

After 9/11, poor investment returns at insurance companies and an increase in hurricane-related claims, nonrenewal rates skyrocketed. Average costs are up, too. Five years ago, homeowners paid an average of $593. This year, the Insurance Information Institute projects that the average homeowner's insurance expenditure will be $868.

Recently, "things have been tapering back down to a new equilibrium, Johnson said of the number of homeowners with FAIR plan policies. "Most of the FAIR plans remain larger than they were ... but I don't think there are any that are as big as they were at their peak."

There are now about 9,000 FAIR policyholders in Minnesota. At its peak after 2001, the plan covered about 13,000.

If you were forced to take out FAIR coverage, Johnson suggests trying to get back into the independent market as soon as possible. On average, most people have FAIR plans for three to five years.

Getting back on better terms

As soon as your insurance company informs you that it won't be renewing your policy, contact it and find out why. Ask what you can do to get back on better terms. Offer to replace the leaky roof or the aging furnace that caused the claim.

"We had a customer with several claims, and by going back to their insurance company and negotiating a higher deductible and allowing the company to inspect the house to confirm the issues causing the claims were resolved, we were able to keep the policy from being [nonrenewed]," said Stephanie Gruver, a personal insurance consultant for Rosenbloom & Rosenbloom Inc., an independent insurance company in Minneapolis.

If your insurance company refuses to renew your policy, shop around. Insurance is a competitive business and a lot of companies want your business.

As a last resort, contact the Minnesota FAIR Plan for coverage, but expect to pay higher premiums with less coverage. Just how expensive? Generally, FAIR coverage costs about one-fourth more than private insurance, Johnson said.

Aimee Blanchette • 612-673-1712


    Some general things you can do to lessen the risk of not being renewed:

    Monitor your claim activity. Insurance companies share claims information with one another through the Comprehensive Loss Underwriting Exchange (CLUE) database. Claims made by you or previous homeowners show up in the report for five years. Get your free CLUE report once a year at

    Stick with one insurance company. If you're a long-term customer rather than a new one, workers at the company may be more inclined to look past an item on your claims record, especially if you have more than one policy with them.

    Make improvements to your home. If your home is up-to-date, problems are less likely to develop. You also need to be aware of prior claims made on a house you're considering buying. If the home has a history of several claims within the last few years, you might find it difficult to get insurance and could end up paying a higher rate.

    Raise your deductible. You'll save money on your premiums and it will preclude you from filing small claims, said Jeanne Salvatore, a spokeswoman for the Insurance Information Institute.

    Source: Independent Insurance Agents & Brokers of America

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