Past Credit Problems could Hurt Your Ability to Get Homeowner's Insurance Coverage

11/2/2012
By: Dave Heller
First Coast News

Did you know your credit history could prevent you from getting homeowner's insurance coverage when you need it most, even if you've been paying premiums for years?

Florida Insurance Consumer Advocate Robin Westcott calls that practice a troubling trend and wants it to stop.

Here's how it works: Say you've been regularly paying your property insurance premiums, but then you submit a claim. At that point, your insurance company may check your credit history. If it finds an unreported credit problem in your past, such as foreclosure or even a small claims judgment, the insurer cancels your policy and won't pay the claim.

That leaves homeowners with mess. They can't afford to fix the problem and other insurance companies won't offer coverage if you've been canceled for misrepresentation on an insurance application.

Westcott says insurers should not use credit information to decide whether they're going to pay a claim.

"To wait until a consumer is in need and needs the promise that the insurance contract brought to them, the peace of mind that was brought to them by insuring probably the largest asset they own, it is patently unfair."

She says Universal Property and Casualty Insurance, one of the largest property insurers in Florida, uses this practice. She wants the state to investigate.

"This voiding of coverage, this once you file a claim we're going to hand you your premium back and say this contract never existed, that needs to stop now."

Westcott also thinks state lawmakers may have to develop legislation against this practice.

She urges homeowners to take a close look at their property insurance application to make sure it includes any past credit problems.

If it does not, you put yourself at risk if you make a claim and could have trouble getting new coverage.