Home Insurance Debacle

Factual Questions
1

So I bought a home about 5 years ago and ran into some problems. 3 years ago my kitchen drain clogged up because it was old and had collapsed somewhere under the concrete slab the home is built on. This fell partially under the homeowners insurance and I got a check to cover a small portion of the home that was damaged to make repairs (ie a hole in the kitchen floor). Fast forward to this past summer I get a hot water leak in the same area which causes even more damage. We make another claim, it finally gets paid just this month after them initially denying it. I get my insurance bill for the year, its now double what it used to be. I don’t feel that is fair at all, why have insurance if I’m going to wind up paying for the kitchen myself over time? So I get a quote from another company who basically told me they won’t cover my home because I’ve made two claims in a relatively short period of time. I’m required by law to have coverage, what happens if I make another claim and State Farm drops me? If I’m required to have coverage but no one will provide it what happens? Is there any recourse at all for someone in my situation? These are not frivolous claims, they are legit based on my policy. It does not feel right to me that just because I made use of the product I paid for (my policy) that they can now turn around and simply double my rates and recoup their losses. Insurance is a gamble for both parties, they happened to lose out in this situation and it feels like they are retaliating for something that I had every right to do in the first place.

I would greatly appreciate any suggestions the straight dope can offer for my situation, thanks!

2

I know the topic is kind of boring but no one has a comment? :frowning:

3

I here these types of stories all the time but, even though me and my family are the insurance companies worst nightmare, it has never affected any rates for any of my insurance. We put a claim in for over $300,000 due to tree damage alone and made our homeowners insurance pay for 3 months in a large hotel suite. It wasn’t fun dealing with them but they still did it.

I agree with your logic. That is why they call it insurance and not a savings account. They are supposed to lose money on some people and make it back from all the rest. That is the whole basis of the business. It might have a lot to do with state law. Massachusetts is pretty strict with insurance regulations. You state may not be so much. People have run into serious problems in not being able to get insurance at all. Flood and hurricane prone areas are notorious for that so the state and feds have to step in but, if it is an isolated case like yours, I am not sure what you can do except talk to them. They probably won’t budge because they are just looking at their own actuarial tables rather than judging you personally but it doesn’t hurt to try.

4

Insurance does not make payments. They will pass it along to you in greater premiums. They will get it all back and more. They are not gambling. Shit happens and the homeowner just pays for it and more.

5

Then why call it insurance, what you describe is a loan.

6

I can’t really offer you any help except to say that your experience is similar to my own. I now only consider using home insurance for liability or catastophic loss. I have a high deductible to reflect that.
It is my understanding that your mortgage holder requires you to have insurance on the house and if you fail to get it, they will get it for you (although it will likely be expensive). If you don’t have a mortgage holder, I don’t know what happens.

As far as your own situation is concerned, at least one of your claims appears to have been made due to a failure in maintenance (rather than, say, a high wind ripping off your roof). When an insurance company sees this sort of claim they might naturally assume that there are more of these claims to come (actually they don’t assume anything, I am sure that statistics supports this). Surely you don’t expect the insurance company to be bound by law to pay these claims in perpetuity without at least raising your rates? My advice is to get a high deductible and pay for the small stuff (and even the not so small stuff) yourself.

7

That is not completely true even though they may try to cut their losses. They will never get their 300K+ back from me no matter what they do. The premiums are less than $1500 a year and that was a one time event. They probably won’t even make it back even if my kids stuck with the same company for life when adjusted for today’s dollars. The might try to recoup the smaller stuff but there is no way they can for catastrophic events like a house burning down.

8

Find out which agency regulates insurance in your state. Start sending letters to them, governor and your state reps/senators. Copies to the pres of your insurance company.

9

Having never lived in an area where this was so, I’m curious. What sort of coverage is required. How is this law enforced?

10

Homeowner insurance is commonly regarded as a means of dealing with the unlikely possibility of catastrophic loss (e.g. a fire, or Shagnasty’s case of massive tree damage).

You seem to want to use it as a way to deal with more or less normal maintenance items like a clogged drain or weak piping. IMO, it’s not very surprising that these much higher probability events are treated differently.

11

They won’t get $300k from you alone. But they have a pretty good idea of the probability of a loss like you experienced, and their experience says that $1500/yr (from you and a whole lot of other homeowners) will amply cover it.

12

Its a requirement of the mortgage company and part of the contract I signed with them…I don’t think you can get a mortgage in PA without insurance. Once I own the house it might be a different story.

13

Not at all. The clogged drain was a catastrophic failure of the drain line…it literally collapsed somewhere near the area it hooks up to the main drain line feeding out to the sewer. It required destroying the kitchen and bathroom floors as the drain was under the concrete slab the house is built upon. The water leak that happened more recently was similar and also required drilling a hole in my floors across three rooms. I don’t consider either of those things “normal maintenance” as they both were well over $10,000 to repair the damage. Isn’t that why we have homeowners insurance?

14

Right, and my understanding is that in the big picture they make out ok because of the vast numbers of people who pay but never have to file a claim. Its a numbers game that implies a kind of gamble for both parties. Except its not much of a gamble when they can simply raise my rates. If they’re going to do that I’d be better off just saving the cash and paying out myself for claims under $10k.

15

Around here, homeowner’s insurance policies specifically do not cover sewer line damage. In some of the older neighborhoods it became such a problem that the sewer districts began offering their own insurance for replacing aged lines when they collapsed.

You might want to check with your sewer district or municipality to see if they have a similar program.

16

Right, that makes sense - it’s a contractual, not a legal requirement.

17

But they were failures that in some sense could reasonably be anticipated: drain lines and plumbing don’t necessarily last forever without attention. When work is needed and the lines are buried in a slab, repairs can be uncommonly expensive.

And the premium increase could represent the insurance company’s estimate that your house has issues and so the chance of a future problem is meaningfully higher than average.

18

It does suck. Sometimes these problems really are out of your control, but the insurance companies don’t bother worrying about that, they treat them all as raising your risk.

Our anecdote:In January 2000, I was at work one day when it was very windy. The kids were at home with the nanny. She phoned me about 4 PM and said “I think your chimney is in the back yard”.

I raced home and sure enough, it was. That was quite expensive.

Summer 2000, Typo Knig’s car was broken into at work and a whole bunch of CDs were stolen. The car repairs were covered under the auto policy, the CDs were covered under the homeowners’ policy.

IIRC, our rates didn’t take any sort of hit.

In August 2002, we were looking at moving to a new house and I called the insurance company to set up the coverage.

“ooooh. You’ve had two claims in 3 years. We have to send this to underwriting rather than just approving the new policy. They may not be willing to write you a policy” (never mind, we’d had our old policy renewed, twice, since the claims).

Well, phoning around to other companies and I got the same answer as you did: “you’ve had two claims, we wouldn’t touch you if you were made of solid gold, you scum”. We were looking at having to go through a high-risk insurer who would have covered only the house, not our belongings. At a substantial increase in cost, I suspect.

Fortunately our existing insurer was willing to write a policy after it went through underwriting. It helped a lot that we a) had our auto through them also, and b) I’d been with them for literally decades at that point.

Arguably, the car breakin was something that could have made us bad risks (stupid enough to leave something desirable visible in the car). The chimney, however… well, as far as we know, we don’t control that!

19

Anyone who’s ever crashed a car knows this to be true.