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Millions of homeowners are being punished by insurers who have suddenly and often arbitrarily raised rates, lowered coverage, denied claims and canceled policies. The insurers are losing money in this line of business, so you get the blunt end of their stick.
Are you defenseless? By no means. We'll explain 20 ways to protect yourself from this carnage and fight back if you do become the target of your insurer.
When you're shopping for insurance
Increase your deductible. "We're raising a lot of deductibles to $1,000 or $2,500," says Washington agent David Hargreaves. "If you aren't going to turn in smaller claims, why don't you at least save the money in premiums?" Raising the deductible from $250 to $2,500 could cut your premium by up to 30%.
Drop add-on coverage that encourages you to make small claims, such as riders for jewelry worth $1,000 or less.
Overlap policies. If you're voluntarily switching insurers, don't let go of the old policy until the end of the 60- to 90-day period when the insurer can drop you.
Fight errors on your CLUE and credit reports that can push up premiums.
Try to reverse a decision to cancel your policy. Ask if there's anything you can do to keep coverage, such as raising your deductible or, after a water-damage claim, proving there's no mold.
Don't switch carriers just to save a few bucks. A claim within six months might lead your new insurer to drop you and you could wind up with a more expensive policy.
Once you have a policy
Don't submit claims for less than $1,000. And consider how much any claim could cost you in the long run. Even if you don't get dropped, you could lose a claims-free discount.
Stay off the record. Under current conditions, you run the risk of building a rap sheet just by wondering aloud whether something is covered. Stress to the agent that you're only making an inquiry. Later, buy your CLUE report for $12.95 to see if your question has morphed into an unpaid claim.
Shop repair costs. If a repair will cost only a few hundred dollars more than your deductible, make the repair -- and don't get the insurance company involved.
Be your own advocate if you do file a claim: Take pictures, save receipts, document your contacts with your insurer and get your own estimates from contractors.
When you're buying a home
Ask about previous claims, damages and repairs. Ask to see any receipts for water-related damage.
Get a look at the CLUE report before you buy. Only owners -- and insurance agents -- can pull a report, so ask the seller or your agent.
Allow extra time. If you're in an especially tough market, such as California, Florida or Texas, you may need to get extra inspections -- for mold, perhaps -- or have to make repairs before you can get a policy.
When you're selling
Buy your own CLUE report. If innocent inquiries show up as claims, get the error fixed -- or buyers may pass by your "tainted" house. A CLUE report will cost you $12.95.
Make good repairs -- and keep receipts. Smart buyers and their home inspectors will be on the lookout for water problems.
Disclose problems. Many states require sellers to go through a long checklist of problems. Failing to disclose a water problem, for example, could land you a lawsuit from a disgruntled buyer who's forced to pay oversize insurance premiums.
When there's a dispute over a claim
Complain to your state regulator. Some states are more effective than others in resolving consumer complaints, but this is probably the best way to get an insurer's attention on a claim of less than $10,000 or so.
Hire an advocate. Hiring a public adjuster puts a pro on your side in interpreting the policy, estimating damages and negotiating a fair settlement. You'll probably pay 10% to 12% of the amount recovered. Make sure the adjuster is licensed with your state's insurance department. Referrals are available from the National Association of Public Insurance Adjusters.
Go to appraisal. Insurance policies usually include a clause that allows either you or the insurer to request "appraisal," which is an arbitration-like forum to resolve disputes over the amount of a loss. Each party chooses an appraiser, and the appraisers in turn agree on an umpire to hear the case and make a binding decision on the settlement.
Hire a lawyer. Egregious cases may warrant a lawsuit against the insurer. Lawyers usually take such cases on contingency and keep about one-third of any settlement. Be sure to seek out a trial lawyer who specializes in insurance cases.
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