Can my policy be cancelled for filing a home insurance claim?

An insurance company has the right to cancel a homeowner's policy at their own discretion, whether you have filed any claims or not. However, dropping customers on a whim is not a good business model, so insurance companies have developed standard practices to determine when a policy is no longer feasible.

One tool used by insurers to determine whether to cancel an insurance policy is your CLUE report. Short for Comprehensive Loss Underwriting Exchange, your CLUE report contains information about every casualty or liability claim you have filed in the past 7 years. If the company determines that you have filed too many claims, or received an unusually high amount of settlements, your insurance can choose to cancel your policy or simply not renew it. This report is the most important reason why you should take care in using your insurance policies, paying for damages yourself when it is within your budget to do so.

If the claim involved a dispute with the insurance company, you may not be eligible for renewal when your current policy expires. This may work in your favor, since continuing to pay for coverage from a company which you are having problems with may not be the best economic path. In this situation, it may even be a good idea to start shopping for new coverage as soon as the dispute shows up, so that you are prepared to change insurance companies when the time comes.

In general, insurance companies are not going to randomly drop customers, especially not based on filing a single claim. Occasional claims against a homeowner's policy are to be expected, and paying for those claims is why the policy exists. Sometimes a company does drop an entire group of homeowners, such as Allstate pulling out of the Florida home insurance market a few years ago. This is based on statistical averages, and happens when a company determines that the risks exceed to the ability of the insurer to compensate for.