Dropped by Your Insurer?

I was paying about $600 for homeowners insurance and filed two claims, one for a water leak and the second for hail damage to the roof. Then my insurance company dropped me. I finally found insurance, but now I'm paying $1,248 per year. How long after you've been dropped can you get back to paying lower rates.

You could be on the hook for as long as five years. Insurance companies share claims information with each other through a database called the Comprehensive Loss Underwriting Exchange (CLUE). When you apply for coverage, an insurer reads your CLUE report to learn your claims history. And information remains on your report for five years (check your report at ChoiceTrust.com).

Insurers say that even small claims cost them a lot in administrative expenses, so they're quick to drop customers who file them. Companies are especially leery of water-related claims because they could lead to more damage in the future. "A water lean indicates poor maintenance," says Carolyn Gorman, of the Insurance Information Institute.

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In a study by the California Insurance Department, 25% of the companies surveyed had refused to renew the policies for customers who made one or two non-water-damage claims in the preceding three years; 32% refused to renew policies of customers who had made one or two water-related claims. Among the 13 biggest companies, 62% turned down new applicants who had filed one or two claims in the previous three years.

Now that you have coverage, you may be able to cut your premium. Many insurers offer customers a discount of about 5% for each year they don't file a claim, with a maximum discount of 25% to 35%.

If damages total just a few hundred dollars more than your deductible, it might be less expensive in the long run to pay for them yourself. Raise your deductible to at least $1,000, which can lower your premiums by up to 25% and discourage you from filing small claims.