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Is your insurance policy your maintenance policy?

Some homeowners view their insurance policy as a sort of maintenance policy that they can rely on for making major home repairs. When their roof begins to age, they hope for a hailstorm to strike their Minnesota home and allow them to make a claim on their insurance policy.

This may not be wise. All insurance companies factor the number of claims made into their underwriting of your policy. There are numerous factors that go into pricing your homeowner's policy, from the value of your home, where you live, the type claims that typically occur in your area and the number of claims made. This means when you make an entirely valid claim that is undisputedly within your policy coverage, you may be inviting the nonrenewal of your policy.

Unsurprisingly, insurance companies like policyholders who never make claims. They receive a 30- or 40-year stream of policy premiums and never have to pay out anything. With insurance, much is measured by "averages" and a rough rule of thumb is that the average policy will have a claim made every 10 years.

So, if you have never made a claim on your policy and a vicious windstorm blows a tree onto your roof and causes $4,000 damage, you should be able to safely file a claim. But if two years later, a hail storm damages your roof again, another claim could put your policy at risk for nonrenewal.

This can lead to outraged homeowners frustrated by these hidden policies about their policy. If your insurer does renew your policy, you are still likely to experience a very substantial increase in the cost.

Your best defense is carefully weighing the cost of your policy over the long run, and lower that cost by increasing your deductible. Setting a higher deductible should lower your yearly premium, which could allow you to set aside the savings for use to repair damage amounts that are below your deductible amount.

Not renewing a policy may seem unfair, but Minnesota is better than some states, which allow policies to be canceled for these types of claims. The state also has a high-risk pool that enables homeowners who have made multiple claims the ability to obtain insurance.

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