Are You About To Get Dumped?

What do you mean it's me and not you?

Those words hurt, no matter who utters them. But they can be particularly painful when they come in a "Dear John" letter from your home insurer.

These days, it takes almost as much effort to not get dumped as it does to research and find the right policy in the first place.

Firms like Allstate (NYSE: ALL), Prudential (NYSE: PRU), Travelers (NYSE: TRV), and MetLife (NYSE: MET) have instituted much more stringent rules about which customers they'll keep and which they'll kick onto the street. Many are turning down new business to lessen exposure to risk. And existing customers face an ugly ultimatum: Pay huge premium increases, settle for less coverage, or part ways with us. Oh, and good luck getting coverage from any of our competitors.

Clearly, it pays to remain in your insurer's good graces. These days, that means avoiding even the most innocuous actions -- filing a single small claim, switching insurers to save a few bucks -- lest it lead to a swift parting of ways.

So here are tips on keeping your coverage intact and your relationship with your insurer solid.

Check your reputation file (yes, you have one)
The insurance industry acts a lot like the lending industry: It bases decisions on whether to do business with you by assessing your risk profile. You know about your credit file (and the free reports you can get from Equifax, Transunion, and Experian). The insurance industry equivalent is your claims history report, which is scrutinized for frequency, amount, and underlying reasons for each claim you filed during the past five years.

Maintaining a squeaky-clean insurance record is just as important as doing so on the credit side: Premiums and eligibility for coverage are based on what's on file. In some states, your credit history is also factored into the equation.

As with a credit file, consumers are allowed to pull their homeowners and auto records for free once a year. You want to check these for accuracy and contest anything that's not kosher. There are several companies that keep track, but the industry biggie is ChoiceTrust.com (hop to it!). Don't panic if you don't have a file -- that just means there's nothing to report, which is probably good news for you, as you'll see by reading on.

Keep a low profile
Where you live and what the AccuWeather forecast says is coming your way might be out of your control. But you can keep a lid on behavior that may raise red flags. In the insurance world, any attention is far from flattering -- in fact, even a sideways glance can damage your reputation.

In general, you can keep a low profile by doing two simple things:

Rate-shop with care
If your premiums have been rising a lot in recent years for no reason, that's a sign that your insurer may be trying to exit your market by driving you into the arms of another company. In that case, shopping around for savings is the right thing to do.

But playing the field just to shave a few bucks from your annual premiums may not actually save you as much money as you think. Loyalty has its rewards -- and moving your business may mean sacrificing good-customer discounts you've earned over the years. Making no claims over a three- or five-year period can qualify you for a 5% discount for each year thereafter (typically maxing out at 25% to 35%). Plus, insurers looking to trim their portfolios will often start with newer, more uncertain customers.