So your house suffered some damage and you are wondering if you are covered by your homeowners’ insurance policy. If you ever tried to read the policy you probably said to yourself “I think it’s easier to call the insurance company and find out if I’m covered.” But what may sound like a simple inquiry could lead to another problem. Could that phone call be held against you?
Before we answer the question, let’s give a little perspective. If you have health insurance you know how expensive that coverage can be. One of the reasons it’s so high is people use this coverage quite often. So it stands to reason that you pay a lot less money for your homeowners’ insurance because you rarely use it.
Due to state regulations, homeowners’ insurance carriers do not have much flexibility to raise their rates. So when a customer files multiple claims chances are the insurance carrier is paying out more money in claims than they receive in premiums, even if they have insured that home for a long time. The result is the homeowner with multiple claims is viewed as being “unprofitable” and most likely their policy will be non-renewed.
Insurance carriers may view inquiries about claims against homeowners’ insurance as “potential” claims that could create a negative perception about their customer. One of the comments we heard from insurance company personnel is that it could be a sign of a maintenance issue especially in an older home. Therefore, the insurance policy is now being used to pay for routine maintenance instead of coverage for an unforeseen event.
But, on the other hand, people sometimes inquire to see if they have coverage and yet decide to perform the repairs themselves. So why should they be punished?
In 1999 the State of New Jersey made changes to the law that prevent homeowners’ insurance carriers from using inquires about claims against policyholders. Insurance carriers who break the law are subject to financial penalties.
If you do receive a notice from your insurance carrier that you were non-renewed due to claims you can remind them of the law (Here is a link to it. Full text of the law is below.)
Insurance consumers can file a formal complaint to the NJ Department of Insurance via the Department’s web site. Make sure you have a copy of your notice of non-renewal and information about your inquiry on hand.
If you have any questions about homeowners insurance in New Jersey feel free to drop us a line or give us a call at 800-272-4RUE.
Here is the text of the New Jersey Law:
17: 29B-4.1 Certain homeowners’ insurance inquiries not deemed as claim; violations, penalties.
1. a. No inquiry by an insured for information regarding the insured’s homeowners’ insurance policy, or coverage for a particular loss under that policy, shall be categorized as a claim for the purpose of determining adverse claims experience.
b. An insurer who violates this act shall be subject to a penalty of up to $5,000 for each violation unless the insurer knew or reasonably should have known he was in violation of this act, in which case the penalty shall not be more than $25,000 for each violation. The penalty shall be collected in a summary proceeding in accordance with the “Penalty Enforcement Law of 1999,” P.L.1999, C.274 (C.2A:58-10 et seq.).