What homeowners should know about ‘use it and lose it’ – Part II

As we discussed last week, insurers have increasingly embraced “Use It and Lose It.” In this system, homeowners are unduly punished for taking otherwise reasonable actions. Indeed, a single claim — or claim inquiry — could see premium increases, surcharges, or non-renewals.

While the disdain for this legal practice is universal among consumers, different states treat the policy differently. In fact, a recent study by Rutgers Center for Risk and Responsibility highlights the legal patchwork across the nation.

What exactly did the study do?

The study ranked the 50 states on their approaches to Use It and Lose It.

How was it structured?

Individual states were awarded up to five stars based on how much they allow consumers to be penalized for the following:

• Filing a single claim within three years
• Filing a single claim stemming from losses relating to weather or natural disasters
• Filing a single claim that results in no payment by the insurer
• Inquiring as to whether coverage exists and nothing more

What did they find?

Texas and Rhode Island earned five-star ratings, meaning no rate increases, surcharges or non-renewals for homeowners. In other words, an absolute rejection of Use It and Lose It.

Conversely, 18 states had nothing on the books about Use It and Lose It.

What states performed well?

After Texas and Rhode Island was Oklahoma, which earned four-and-a-half stars. Six others earned four stars.

What states performed poorly?

21 states earned a dismal one-star rating.

How did California fare?

The Golden State was awarded only a two-star rating for its approach to Use It and Lose It.

Source: The Rutgers Center for Risk and Responsibility, “State-by-state rankings: ‘Use It and Lose It,” February 2017