Q: We have owned our home for over ten years, and until recently, have never filed a claim against our insurance company. Recently, however, we had a serious sewer backup which has caused thousands of dollars of damage to our house. We reported the incident to our insurance carrier, and have reached an amicable reimbursement arrangement with the company. However, we have just received a letter advising us that our policy will not be renewed at the end of this year.

Why is this happening, and what can we do?

A: It will not be a consolation to you, but this has become a nationwide problem. Insurance premiums – especially home and automobile coverage – are like roller coasters. For some years, the premiums go down (or at least stay steady) and then they spike upwards. Even before the tragedies of September 11 – where the insurance industry suffered tremendous financial losses – insurance premiums have been on the rise. And September 11th was the “icing on the cake', when it came to insurance premiums.

What is homeowner’s insurance? According to the Insurance Information Institute (III), “homeowners insurance is a package policy. This means that it covers both damage to your property and your liability or legal responsibility for any injuries and property damage you or members of your family cause to other people. This includes damage caused by household pets.' III further points out that:

Damage caused by most disasters is covered but there are exceptions. The most significant are damage caused by floods, earthquake and poor maintenance. You must buy two separate policies for flood and earthquake coverage. Maintenance-related problems are the homeowner’s responsibility.

In recent years, the insurance industry has been losing money. Bad weather, such as hurricanes, and lawsuits involving mold have been expensive for all insurance companies. It has been predicted that based only on the damage caused on September 11th, over 100 insurers around the globe are expected to pay an estimated $40 billion or more dollars in the course of settling tens of thousands of claims.

Thus, the insurance industry – like many other American companies – are regrouping, downsizing and minimizing (or eliminating) their losses. One common thread is that insurance companies are refusing to renew policies where the homeowner has made even one claim in a year.

It should be noted that there is a major distinction between “cancellation' and “non- renewal'. According to III, Insurance companies “cannot cancel a policy that has been in force for more than 60 days except:

• if you fail to pay the premium,
• if you have committed fraud or made serious misrepresentations on your application.

On the other hand, non-renewal is an option available to both the insurance carrier and the homeowner. In many states, the carrier – which has the absolute right not to renew your policy – must give you advance written notice (usually 30 days) that your policy will not be renewed, and give you the reason for that renewal. If you believe the carrier is in error, you can file a complaint with your local State (or D.C) insurance commission.

There are, however, many steps which you can and should take, and here are some suggestions: