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Is it legal for my home insurance company to drop my coverage or increase my rates after I filed a homeowners claim?

It's rare that a home insurance company would drop your coverage or increase your rates after only one claim, especially if it was for something caused by a disaster over which you had no control--an "act of God"--such as a hail storm that damaged the roof. Generally a single claim shouldn't boost your rates, unless it removed a discount you were receiving for maintaining a clean claims history.

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However, there is one exception--a dog-bite related claim. Insurers may increase your rates, refuse to renew your policy or choose to exclude your dog from coverage if your pet attacks someone. Why? Dog-bite claims are expensive. In 2009, they cost $412 million and accounted for more than one-third of all home insurance liability claims, according to the Insurance Information Institute. The number of claims rose 4.8 percent to 16,586 in 2009 from 15,823 in 2008, and the average cost of a dog-bite claim increased to $24,840 in 2009 from $24,461 in 2008. Since 2003, the cost of dog-bite claims has increased almost 30 percent.

Other than dog bites, insurance companies could increase your rates after noting a pattern of multiple claims stemming from neglect of maintenance. You're also at risk for a rate increase if you don't take proper steps to keep your home safe from fire, such as failing to clear brush around the perimeter of your home, and subsequently suffering major losses in a wildfire.

For more, see how claims affect home insurance rates, home insurance for dog owners and 4 ways to send your home insurance rates through the roof.

Last updated: Jan. 10, 2011
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