The Difference Between Insurance and Gambling
I've mentioned this before: Insurance resembles gambling. The odds are always stacked in favor of the "house". This means that both your insurer and your favorite casino are not charitable institutions, but organizations looking to make money.
Here's where the analogy ends: Casinos will always welcome you back as long as you aren't ripping them off. Your money is always good. But that isn't so with insurance companies. In fact, you have to play very carefully with some insurance companies. Although they are supposed to determine a fair premium that actually "covers" you in case you need to make use of their service, in some cases, just when you need them, they can decide that they don't want you as a customer any more.
Let's look at an example: I know of an acquaintance who had insurance on his home. He'd been a good customer with his insurer for years, always paying his premiums on time. Then, the unthinkable happened, and his home was broken into. He called his agent.
His agent (straight shooting guy that he was) told him flat out that if he claimed on his insurance, he could lose his house. My associate was stunned. He asked how this was possible. The agent said that if he claimed, the claim would be honored. The insurer would pay out. Then they'd cancel his insurance, because he'd become a "significant risk". (Of course, insurance is supposed to cover you from risk, but let me finish the story...)
Once his insurance had been cancelled, he would find that other insurers would treat him as a significant risk as well because all insurers share a central information source on customers. So, no one else would insure him either. As soon as his insurance was cancelled, his lender would then require his mortgage to be paid in full, because -- after all -- he's now raised the risk to them. Without insurance, if anything happens to the house, the mortgage lender is going to be out of luck. He couldn't possibly afford to pay his mortgage off immediately. And so... he was told not to claim on his insurance.
It's not illegal for the insurance company to decide that you are "high risk". A lawyer couldn't necessarily help him. In the end, my acquaintance paid for his losses himself.
The moral of the story? Pick your insurance company carefully. If you can get insider information, so much the better. Try to find out their customer service history (including claims policies and risk rating approach) whenever you can. The lowest cost premium is not always the best buy. Check the web for complaints about insurers and take them seriously. Or otherwise, just when you need your insurer to be your advocate, they could become your worst adversary.