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Tips for navigating the insurance labyrinth

By Marshall Loeb

MarketWatch

NEW YORK -- Just as with auto insurance, homeowners have to worry that making a claim will get them dropped by their insurer. And that can mean higher premiums with another insurance company or, if you're deemed troublesome, with your state's high-risk pool. It might even mean no coverage, at all. You'll also lose any loyalty or claims-free discounts you earned under your present coverage.

There's no firm rule for when or why an insurer will drop coverage, but even one or two small claims can do the trick. That's especially true if the claim is water-related, which could mean mold in the future, writes Kimberly Lankford, a Kiplinger's magazine columnist, in her recent book "The Insurance Maze."

"What an underwriter gets concerned about is claim frequency," says Chris Heidrick, vice president for personal insurance with Firemen's Fund. "It starts to raise questions."

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Consider raising your deductible as much as you can afford. You'll save money on premiums -- as much as 25 percent if you raise a $250 deductible to $1,000. You can use your savings to increase your coverage, and you'll be less tempted to make minor claims.

Even inquiring about whether to make a claim can hurt your reputation, Lankford says. Some companies will count such inquiries against you in a central database that other insurers can access.

You can check the industry's database, known as the Comprehensive Loss Underwriting Exchange, once a year for free, rather like getting a credit report for your home. The database will list your current and former addresses and any claims you've made. Go to www.choicetrust.com and enter your personal information to receive your free report instantly. But remember, you can get only one a year.

The longer you've been with an insurer, the more they'll want to retain your business. The money you save by not switching insurers could be well worth it.

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