Which Insurance Policy is Likely to Get Canceled First?
I have another nosy question for you all.
My cousin and his wife purchased a $1.1 million house about seven months ago. Just two weeks after moving in, they faced an electrical fire triggered by a contractor inspecting for mold. Thankfully, everyone was safe, but it caused significant damage to a 5×5 ft area of their kitchen and required extensive repairs to the floorboards. Their insurance has already paid out $350,000. What was supposed to be a seven-week repair job extended to six months. To add to their misfortune, another contractor inadvertently left a door open, leading to frozen and burst pipes, which flooded their basement.
These poor folks have really drawn the short straw with their new home. Fortunately, the contractor’s insurance will cover the second mishap due to their negligence.
On the other hand, my brother-in-law has contacted his insurance three times regarding his $400,000 house. His claims included a replacement of a single roof shingle in March 2024 (he’s not exactly the most handy person, but that’s a different discussion), a demand for an entire water heater replacement in June 2024 because it wasn’t “hot enough,” and now, he’s claimed for his garage door after accidentally hitting it with his car just two weeks ago. Overall, they’ve accepted about $10,000 in claims.
Traditional wisdom on this forum suggests that my brother-in-law is at greater risk of being dropped for his three minor, somewhat trivial claims within a year. But with the recent flooding incident, that perspective might change.
So, I’m curious—if you were an insurance agent, who would you be more likely to drop: the couple with the unfortunate string of bad luck and their “haunted” house, or the brother-in-law who can’t seem to manage basic home repairs?
Feel free to share your thoughts and reasoning!
It’s an interesting situation you’ve laid out, and it really highlights how insurers assess risk.
From an insurance agent’s perspective, your brother-in-law (BIL) might be more likely to be dropped because he has filed multiple small claims within a short time frame. Insurance companies often see repeated minor claims as a sign of high risk or unwise maintenance habits, and they may worry that he will continue to file small claims, leading to higher payout costs. It’s the frequency of claims that can raise red flags.
On the other hand, your cousin and his wife have had a string of unfortunate events that are largely outside their control. The electrical fire and subsequent mishaps are significant, but they’re more likely to be viewed as “catastrophic events” rather than a pattern of poor risk behavior. Insurance companies understand that sometimes, bad luck strikes, and they might be more inclined to keep a client who has experienced major but isolated incidents.
Ultimately, it would come down to the insurer’s risk assessment and their policies on claims frequency and severity. BIL’s continuous claims might make him a liability in their eyes, while your cousin and his wife’s misfortune, despite the high costs, could be seen as a one-time situation. So, I’d lean towards saying BIL is more likely to be dropped if the patterns continue, but both cases are certainly nuanced. It’s a tough call!