My insurance company just dropped me!
“How can my insurance company, after all these years of never putting in a claim, now send me a notice that they are “nonrenewing” my policy. What the heck is that? They’ve taken my money, and I have nothing to show for it! I’ve never filed a claim! I’m really mad and feel betrayed!”
People purchase insurance for the peace of mind that comes from paying a relatively small premium to cover the risk of having to pay a devastating bill to replace/repair large, purchased items like cars, homes, and personal property. Insurance companies act to transfer insurance premiums from those who remain untouched by loss, to those who have the misfortune to have a loss.
Think about it; could you write a check, or get a loan for $400,000 to rebuild your house that you already have a mortgage on?
What if you cause an auto accident and end up injuring someone else to the tune of a $1,000,000. Are you good for that?
Could you easily write a check to replace your $45,000 SUV, and pay off the loan on the old one?
Most of us could not. We’d be ruined. Bankrupt. Homeless or living with family, never to recover financially.
Insurance companies act to transfer these risks from you to the Insurance company. Insurance premiums flow from those who remain untouched by loss, to those who have the misfortune to have a loss.
We begin to see where Insurance companies contribute greatly to our ability to live and maintain our modern economy and society.
There is a big difference between an insurance company canceling a policy and choosing not to renew it. Insurance companies cannot cancel a policy that has been in force for more than 60 days except when:
- You fail to pay the premium
- You have committed fraud or made serious misrepresentations on your application.
Non-renewal is a different matter. Either you or your insurance company can decide not to renew the policy when it expires. People shop all the time for Auto insurance. Depending on the State you live in, your insurance company must give you a certain number of days' notice and explain the reason for not renewing before it drops your policy. If you think the reason is unfair or want a further explanation, call the insurance company's consumer affairs division. If you don't get a satisfactory explanation, call your state insurance department.
The company may have decided to drop that particular line of insurance or to write fewer policies where you live, so the nonrenewal decision may not be because of anything you did. This is never a personal thing. On the other hand, if you did do something that raised the insurance company's risk considerably, like committing fraud, getting a speeding ticket, or deciding to start an in-home business, the premium may rise, or you may not have your policy renewed.
If your insurance company did not renew your policy, you will not necessarily be charged a higher premium at another insurance company.
Insurance companies make money by betting on risk - the risk that you won't have a need to be made whole. But if you do, you will be glad you had insurance.
The concept that drives the insurance company revenue model is a business arrangement with an individual, company, or organization where the insurer promises to pay a specific amount of money for a specific asset loss by the insured, usually by damage, illness, or in the case of life insurance, death. In return, the insurance company is paid regular (yearly, monthly, or some other combination) payments from its customer, for an insurance policy that covers specific assets. The insurance contract is a promise by the insurance company to pay out for any losses to the insured across a variety of asset spectrums, in exchange for regular, smaller payments made by the insured to the insurance company.
What you are buying is Peace of Mind. Peace of Mind and a pledge that if you do suffer a loss, you will be made whole again. So, all those years, you have been getting something in return. The only problem now is that the Insurance company has decided the risk of insuring you has become too great.
And they want out.