Why Not Reporting the “Little” Changes Can be a HUGE Mistake

People are required by all insurance policies, including their auto and homeowners policies, to report changes to their insurance companies or agents–usually within 30 days. Often, the failure to report a required change within a specific time period results in the denial of a claim.

Example:  Your son got his driver’s license 3 months before your policy renewed and you forgot to tell your agent and/or insurer. When the policy was ready to renew, you glanced at the renewal form you received in the mail and, because you still insured the same vehicles, tossed it away because you thought, Nothing has changed.

Unfortunately, something HAD changed: you had a new licensed, family member–something you are required to report. If your son drove your car and was involved in an accident after the policy renewed, your insurer could deny the claim for misrepresentation (i.e., lying).

Although you didn’t lie intentionally, the fact that you forgot to report the change, twice, might be interpreted as if you had lied because you didn’t comply with requirements of the policy (a requirement that would increase your premium) . Of course, your insurer may believe you and may simply charge you premium retroactively to the first day you son was licensed. But it doesn’t have to.

One of the changes on homeowners insurance policies that often go unreported involve different family members moving into and out of the home. Technically, a homeowners insurance policy is only intended to provide coverage for the resident owner(s) of the home–the people whose names appear on the deed AND who live there.

Example: Dad moved out of the home and into a nursing home permanently, and you moved from your apartment into his house. The homeowners policy wasn’t designed to provide coverage for this situation because you are NOT the owner. The change should be reported to the insurer and the company will cancel the policy and either issue a dwelling fire policy in Dad’s name or require coverage to be issued on some other type of policy that insures tenant-occupied buildings. Even if you are not paying rent, you need to buy a renter’s policy.

I know, I know, that’s more expensive for everyone and you and Dad don’t want to pay more money–things are already tight. But the reason it’s more expensive is because a loss is more likely to occur when a home is not occupied by the person who owns it.

If an insurance company learns someone other than the owner his living in a home (especially shortly after the policy is written), it will issue a cancellation notice for the homeowners policy. In the same way an auto insurer will deny a claim if a change isn’t reported on a renewal form, a homeowners carrier will refuse to provide insurance.

Please report all changes to your agent promptly. He or she will help you find the most cost-effective way of making sure your coverage does apply in the event of a loss. Think about it: if you save $100 a year by not reporting a change and the insurer doesn’t pay a claim afterwards, you not only didn’t save $100, you incurred a much higher cost.

Pardon the pun, but honesty IS the best policy!