HOMEOWNER’S INSURANCE SHOULD BE CALLED DISASTER INSURANCE.
Then we would have a better idea of what homeowner’s insurance is designed to do. And why after a homeowner makes a few relatively small claims on homeowner’s coverage, the insurance company drops them and cancels the policy.
Insurance companies make their decisions based on evidence. The evidence may or may not always be accurate, or the best available for that matter, but insurance companies base their decisions on evidence regardless. Actuarial results predict that homeowners who make a certain number of claims, however small, within a given timeframe are statistically likely to make a big claim or claims in the future. That is why insurance companies often drop the risk at that point, after the policyholder has made a certain number of claims, however small, within a given timeframe.
A good, concise explanation of the concept behind homeowner’s insurance was also provided by Mr. Burl Daniel, described as “an insurance expert witness used by both defense and plaintiffs’ lawyers,” who was quoted by David Segal, “The Haggler / Spurned by an Insurer After Filing Small Claims,” p. 3, col. 1 (New York Times Nat’l ed., “SundayBusiness” Section, Sunday, April 26, 2015):
“Homeowner’s insurance isn’t designed for small claims,” he said. “It’s for the big stuff…. It’s not a maintenance contract. The insurance mechanism is designed to protect you from larger losses.”
To sum it all up in two sentences: “Homeowner’s insurance is for disasters. Which means that if you’re lucky, you’ll spend money on it for years and years and never get a dime back.” David Segal, New York Times, supra.
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