Question:

Can a homeowner's insurance be cancelled because of a "soft" claim?

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A few years ago, I had my homeowner's insurance canceled because a thunderstorm caused significant damage to my home. They cited the reason being that the insurance should only be used for a "catastrophic" loss. I attempted to obtain another policy with a different underwriter, but was turned down by all agents because of the claim on my record. I finally found an agent willing to take me as a client. He said couldn't understand why my former policy was canceled or why nobody else would take me since it was a "soft" claim. Then what's the purpose of having insurance? What is a "soft" claim? I just wanted to know some guidelines about filing claims like what should be the diving line in dollar loss between not filing and filing (i.e. what constitutes "catastrophic?") Any advice? Thanks in advance.

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  1. Oh, I'm sure that's not the cited reason - it was probably "underwriting reasons" or "filing 2 or more claims within a 3 year period" or some other such.

    Most states will allow an insurance company to cancel a homeowners policy if more than one claim is filed within a three year period.  

    "Soft" claim in this case, is a "cat loss", a catastrophic loss like a storm, that hits a lot of houses at once.  Many states won't let an insurance company count a cat loss, when  counting claims.  Catastrophic is defined after the loss, which doesn't help you out at all.  Cat losses can include wildfires, tornados, floods, hurricanes, that sort of thing.

    Here's my guideline - don't file a claim for under $2,000.  That also means, increase your deductible to $1,000.  Assuming your house is worth between $100,000 and $200,000.  

    But go by that 1% and 2% if it's outside that range - deductible at 1% of the house value, and don't file a claim unless it's at least twice your deductible.


  2. I have never heard the term "soft" claim before.  Without knowing exactly what you claimed on your home before they cancelled you, i can't tell you why it was cancelled.

  3. Check your CLUE report.

  4. That agent - of course - was trying to make himself sound "special" for writing your coverage...by putting down the other agents

    It's very normal to not be able to cover someone with prior claims with the major companies...ie: State Farm, Nationwide & Allstate.

    I've never heard the term "soft claim" but maybe he's describing that you put in claims, but weren't paid anything? Maybe they were below your deductible..many people make that mistake & it gives them a big claims file....

    Insurance is designed for MAJOR and catatrophic occurences - such as a house fire or hurricane...

    Catastrophic = house fire or something causing a total loss

    Some people attempt to use it to for maintenance - like replacing an old roof after several small wind claims

  5. Understand something here.  Insurance carriers are in the business for the purpose of making bottom line profits. THEY ARE NOT IN THE BUSINESS TO PAY CLAIMS. What is so hard to understand about this basic concept.  Policies are canceled for many reasons, all related to the dollar sign. I have seen policies canceled due to the low deductibles homeowners have.  Then the person right next door gets a policy from the exact same carrier only with a higher deductible.  Why?  Less likely to file a claim due to a higher deductible.  You do not need to file a claim to be canceled or non-renewed.  Insurance carriers are in the business of looking out for the "shareholders" not the policy holders.

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