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I JUST LEARNED a hard lesson about insurance companies: They have the upper hand.
Water leaked into my ground-floor condo’s bathroom and laundry room from a unit two floors above. The unit owner offered to report the damage to his insurance company, but I decided I should call mine for advice. A rep told me that I could file claims with my insurer and it would then seek compensation from the other unit’s insurance through subrogation, a term I had to look up.
According to Investopedia, “Subrogation is a term describing a right held by most insurance carriers to legally pursue a third party that caused an insurance loss to the insured. This is done in order to recover the amount of the claim paid by the insurance carrier to the insured for the loss.”
I decided it was safer to file with my insurance company, Security First, where I had been a customer for many years. The result of this decision: It canceled my policy and I was forced to obtain a new policy from a different company that’ll cost me $120 more per year.
When I asked why I was being canceled, Security First said it couldn’t prove negligence by the other unit’s owner, so it had to pay my claims. On top of that, my claims counted as two instances—and two water damage claims made in a year result in cancellation. I just wish the company had stated this possibility more explicitly before I filed my claims.
If I’d known two claims would cancel my policy, I wouldn’t have filed the claim on my laundry room leak because the ceiling was just wet. By contrast, the bathroom leak damaged the drywall above and behind the shower spigot.
The adjuster said the damage in the laundry room was less than my policy’s $500 deductible, so I received nothing on that claim—and yet it cost me my insurance. Perhaps this is disclosed in the fine print of my policy, but has anyone ever actually read an entire insurance policy?
I called my state insurance commissioner’s office, and a worker there explained that insurance companies have this right. The worker also offered this depressing scenario: She said I could have several car accidents that weren’t my fault, and I could then have my auto policy canceled. I never thought about that possibility before. I guess I need to drive even more defensively—and maybe move to a top floor.
The exact same thing happened to me with State Farm. I was customer for 25 years. Had water damage from a unit above mine. State Farm actually did get the upstairs units insurance company to pay for the damage and still cancelled my policy. They had the nerve to tell me that as a curtesy they would allow me to continue my auto policy. When I talked to my agent she was very apologetic but said she could not do anything about it. BIG BUYER BEWARE as we are inundated with commercials saying how nice insurance companies are!
I had a positive outcome on a situation where a person turned in front of me at an intersection where we were at signal lights. She nipped the front of my F150, we both pulled over and exchanged names and insurance. She admitted it was her fault. I thought the damage was extremely minimal and told her I would take $75 cash and forget about it. She agreed and said she’d send me a check.
Several weeks went by and no check arrived. I decided to contact Allstate(her company) and told them the scenario. They did show her as a current up to date customer and told me to get an estimate which turned out to be $2500. Shocking what a person thinks damage comes to when assessing yourself. I got the repairs done and AllState paid. I’m sure it didn’t help her to ignore my initial low cost offer.
When the Lord created the dirt bag, they were all grouped together in a unit known as Insurance Carrier that henceforth was guaranteed it would only collect money from the trusting and unwary, but seldom distribute it unless in major sums to lobbyists in DC and 50 state capitals.
I’m surprised this wasn’t known.
Ouch! Sorry you are having to deal with this sudden reality. As a profit-driven venture, most auto and home insurance carriers typically rely on statistical modeling for projecting future claim frequency and severity, then bake that into their rate filings with each state. These models typically forecast that customers with a recent loss have a higher likelihood of incurring a second (or third) loss in the not-so-distant future…likely from a similar cause (in your case, water leak from an inside-the-dwelling source). It’s worth mentioning that not every state permits cancelation of a home insurance policy based on the frequency of claims submitted (your state is clearly an exception). With that said, these “no cancelation” states will typically permit a carrier to raise premiums at renewal for customers with recent (non-catastrophe/non weather related) losses.
This underscores the importance of having an experienced agent to discuss the pro’s and con’s of turning in a relatively small loss with you, ideally BEFORE the claim is submitted. Sadly, many insurers now use call centers for handling all claims, and the rep taking your call has one purpose – take your claim report and submit it. Likewise, with internet-based insurance being so common, many major carriers have removed agent interactions with customers completely from their claims-handling process. If you are paying for the services of an agent (yes, it’s baked into your annual premium), then it’s best best leverage their expertise in this area, particularly if your claim is relatively small in dollar terms.
“Self-insuring” for small amounts of damage – amounts that will likely be just above (or even below) you home insurance deductible – may well make sense, particularly if your particular state permits carriers to cancel a customer for submitting multiple claims over a relatively short period of time. FWIW – most home insurance customers typically incur a loss about once every 20 or so years, not accounting for those living in more catastrophe-prone and/or coastal areas. Those outside this average will likely pay more or find themselves in search of a new carrier. It’s a harsh reality, indeed.
Footnote: The insurance department staffer commenting that your car insurer can drop you for accidents that are “not your fault” is anecdotal at best, and likely not wholly accurate. The number of claims submitted, amount of elapsed time between claims, and specific circumstances of each loss do matter in most states. Best to leave this topic for an auto-insurance focused article in the future.
Sadly even this advice can backfire. Reports I’ve read include this