Unfortunately, the answer is yes.
Technically, your insurance carrier can cancel your homeowner's policy at any time and for any reason. Unlike Medicare, in most jurisdictions, home insurance companies are not legally required to provide insurance coverage to all who apply. This is because one of the key tasks that ensure the profitability of insurance companies is risk selection. In other words, part of an insurer's job is to insure the risks that would be least likely to result in a claim. After all, that's how they make money and can continue to offer more affordable policies to their customers (find out How an Insurance Company Decides to Insure You).
That said, while it depends on a few things, it is unlikely that they will cancel your policy after only three claims. They will also look at other factors to determine whether you are too high risk to insure any further.
- The first thing they might look at is the size of the claims. If your three claims were huge and out of proportion with your property values or the premiums you were paying, this might count against you. In other words, you are skewing their distributions and are not a profitable customer for the insurance company.
- Second, they might also consider your loyalty as a customer. If you've been with them for a long time – say, 30 years – they might turn a blind eye to situations that might be borderline.
- Third, they'll look at the frequency of your claims. If you have three claims over the course of 30 years, then you should not have any issues. If, however, you have three claims back to back over the course of a single year, then the insurance company might be prompted to re-evaluate their relationship with you.
- They will also look at the reason for the claim or for any other circumstances that surround the claim. Mainly, they'll assess whether there was any negligence, dishonesty, or carelessness on the part of the insured. All of these would indicate that you are not a good risk and they might decline to continuing insuring you.
However, in all likelihood, even in the worst case scenario, they would just increase your premiums or decline to renew your insurance next year instead of just cancelling your policy mid-term.