Credit based insurance

[Struggling]

A little background first.
After much prayer and searching My family, My 75 year old mother, my 3 year old daughter and myself were able to obtain our dream of our own home last year.

I did a lot of careful searching and was sure to get a loan that had a fixed rate so I wouldn't have any surprises. I shopped for houses to not spend more than I could afford. I cut expenses to the bone to make sure that we would be secure through what would promise to be a difficult time in the houseing market and I wanted to be able to ride it through. I am not rich by any means, I usually have nothing at the end of the week, but I have met my bills. On occasion I have to put back the big pack or toliet paper in order to be able to also get the laundry detergent but we make it.

My problems began, apparently, three months after taking possession of our home built in 1935. Though the house itself had just been replumbed, the main water line from the meter to the house was old if not the original. It broke one Saturday morning flooding our basement. Being stupid I contacted my insurance company on what to do. I though you buy insurance, they are experienced, they are the experts, they know what to do.

My flood, which American Family Insurance did decide to help with after my deductible turned out to be minor. After $1,000 out of pocket for the deductible, and another $750 for the water line repair. The insurance issued a check for $1012 towards the restoration of the carpets.

Fast forward to last Thursday, I received a letter from my insurance carrier stating that due to my claim they were able to now use the credit based risk analysis on my renewal. Because I had a recent increase in debts,( I bought a house) and a collection (caused when the insurance company didn't pay a medical bill after a car wreck four years ago) my credit score indicated that I could face financial troubles they are now going to double my homeowner's insurance. As an added bonus to this since I have my cars with the same company/agent, they are doubling their rates as well.

With them using their credit based model to assess me my house payment will go up $100 per month, and my car insurance will increase by $86 per month. The homeowner's insurance is paid through escrow.

I contacted my state insurance commissioner and was told in a nutshell, "too bad, you should take better care of your credit and never file a homeowner's claim under $20,000." "American Family is within their rights to raise my rates and there is nothing their office could do."

Now before I ask for advice, I want to ask others. Does it really make sense, or is it more preditory of the insurance company to say "I see you are having difficulties--here let me charge you more so you are sure to fail."

I have been shopping insurance for the last week, but most all carriers not only use this practice, but are going to charge even more becasue I am not established with their company. Does anyone have any suggestions?

I know I can reduce coverage, but this leaves me more exposed if I have a loss. I was told to increase my deductibles, but the $1,000 was hard to manage when I had to do that, if I had a big loss and a larger deductible I could be homeless. If I have to pay these higher rates I could be homeless as well. Does anyone know of any relief?

[Moe Bedard]

Hello and thank you for sharing your story with the community!

Now before I ask for advice, I want to ask others. Does it really make sense, or is it more predatory of the insurance company to say "I see you are having difficulties--here let me charge you more so you are sure to fail."

From HUD


RESPA and Escrow Accounts in General Section 10 of the Real Estate Settlement Procedures Act (RESPA) limits the amount of money a lender may require the borrower to hold in an escrow account for payment of taxes, insurance, etc. RESPA also requires the lender to provide initial and annual escrow account statements. The newest escrow account regulations became effective in October 1997.

got a notice that my hazard insurance has been canceled. My lender force-placed hazard insurance with a different company and it costs a lot more. Can a lender do this?

As long as your mortgage payment is not more than 30 days late, Section 6 of RESPA requires the lender to make escrow payments, for taxes, insurance, etc., in a timely manner. You should write to your lender and complain. If your lender does not refund the difference or otherwise resolve your complaint satisfactorily, you may wish to file a complaint with HUD or the Consumer Protection Office of your State Attorney General's Office. You may also wish to consult an attorney.

What steps should I take if I think the lender is requiring too much money in my escrow account?

First, figure out the maximum amount RESPA allows to be required in your escrow account from the example. If you still believe your lender is requiring too much money, you should contact your lender for an explanation.
Section 6 of RESPA provides that borrowers may make a "qualified written request" to the lender concerning the servicing of their loan account. The request should not be included with the monthly mortgage payment. The lender must acknowledge the complaint within 20 business days and must resolve the complaint within 60 business days by correcting the account or giving a statement of the reasons for its position. If you do not get a satisfactory answer from the lender, you may wish to file a complaint with HUD. You should continue to make your mortgage payment during this time.

I have been shopping insurance for the last week, but most all carriers not only use this practice, but are going to charge even more becasue I am not established with their company. Does anyone have any suggestions?

I am no expert in this arena on insurance etc. I only can stae what facts I find for you.

Hazard Insurance Disclosure & RESPA

Hazard Insurance Disclosure & RESPA
by Mary Beth Guard, BOL Guru

Question: Is it true that you are required to disclose hazard insurance on the HUD-1 or HUD-1A form in order to be in compliance with RESPA, even when you are not requiring the establishment and maintenance of an escrow account for payment of that insurance?

Answer: Yes. The Chicago Federal Reserve Bank put out a great explanation of how it works a couple of years ago. They said that on hazard insurance premiums, you should follow these four steps;

1. Look to the legal obligation (generally the note) to determine whether hazard insurance is required or truly optional.
2. If the note (or other legal obligation) is silent on hazard insurance and the insurance is truly optional, an annual premium would not be disclosed on the GFE or HUD-1.
3. If the note (or other legal obligation) includes terms that require hazard insurance or that allow the creditor to force place the hazard insurance, the annual premium must be disclosed on the GFE and HUD-1.

The way you actually disclose it will depend upon whether your bank escrows these premiums:

If your bank escrows,

• Disclose the annual premium (if the premium cannot be determined, it must be disclosed as an estimate) on line 903 of the GFE and Section L line 903 of the HUD-1, and
• Disclose the escrow reserves on line 1001 of the HUD-1.

If your bank does not escrow,

• Disclose the annual premium (if the premium cannot be determined, it must be disclosed as an estimate) on line 903 of the GFE and Section L line 903 of the HUD-1.
• If no payment is required at closing, disclose the annual premium as "Paid Outside of Closing" (P.O.C.).

Note that the same analysis applies to disclosure of property taxes.

If your bank escrows,

• Disclose the annual amount of the taxes (if the amount cannot be determined, it must be disclosed as an estimate) on lines 808-811 (as needed) of the GFE and Section L lines 808-811 (as needed) of the HUD-1, and
• Disclose the escrow reserves on Section L lines 1003 and 1004 (as appropriate) of the HUD-1.

If your bank does not escrow,

• Disclose the annual amount on lines 808-811 (as needed) on the GFE and Section L lines 808811 of the HUD-1.
• If no payment of taxes is required at closing, the annual tax liability would be disclosed as "Paid Outside of Closing" (P.O.C.). If the amount cannot be determined, it must be disclosed as an estimate.

If taxes are assessed on a period other than 12 months,

• The creditor must estimate the annual amount, and
• The annual amount must be marked as an estimate.

I hope that helps you!

[Sold8/06]

Studies have shown that people with low credit scores file more insurance claims than people with good credit scores. It is legal and perfectly logical for insurance companies to evaluate clients in this manner. Loss prevention holds down costs for those who are more responsible in their daily lives.

Your credit score is one of the most important assets you will ever own. Those with the very best scores have shown an ability to plan ahead, act responsibly and not become involved in situations that will adverse affects.

Cash is King

[Struggling]

Originally Posted by Sold8/06

Studies have shown that people with low credit scores file more insurance claims than people with good credit scores. It is legal and perfectly logical for insurance companies to evaluate clients in this manner. Loss prevention holds down costs for those who are more responsible in their daily lives.

Your credit score is one of the most important assets you will ever own. Those with the very best scores have shown an ability to plan ahead, act responsibly and not become involved in situations that will adverse affects.

Cash is King

Thank you,
You must work for the Insurance commissioner's office. I owned up to my mistakes, but I also said that the collection was caused by American Family Insurance in the first place. I was in a car wreck and they failed/refused to pay the medical bill. I had to sue them and it took three years to settle this. By the way the wreck wasn't my fault it was the drunk that crossed the center line. I guess he had ran a credit check and felt I was the best one to hit.

[nitag]

Hello Struggling,

I work for an independent Insurance agent in Nevada and most all companies do base the premiums on credit, do I think it is unfair, yes but they are all pretty much doing it. We are also told that people with a weaker credit score are more likely to file a claim, do I see that to be the case, no not at all. Our agency policy when a person calls to submit a claim is to 1. have them get an estimate for repair 2. discuss what will happen if they file the claim and how it will affect them. A claim especially a water claim will haunt your for 5 to 7 years!! It wouldn't hurt for you to shop around, I always suggust my clients do that.

Good luck!!!

nitag
______________________
Avelo Mortgage modified my loan!

[Sold8/06]

No I do not work for any insurance related industry. Nor am I trying to be cruel with you over your plight. You act as if none of the problem was caused by you but in reality you had control over it, not someone else.

Good credit scores require a pro-active approach. It is not enough to assume that a bill is paid. One should, and must, follow up on any outstanding bills to insure proper credit has been given.

Again not to bash you but in the future you need a failsafe system to insure that your bills are paid on time. I follow up every credit card payment with a phone call to make sure that my payments have been recorded. I maintain sufficient liquid savings to cover all my bills for 6 months to a year...in short I don't buy things I can't afford and I use extreme diligence to protect my credit scores.

Good luck to you in any case!

Cash

[nitag]

Cash,

On this forum we do not judge or make our members feel judged. Everyone's situation is so different.... So with that said its ok to give advise but in a tactful manner and please take into consideration like I said earlier that everyone's situation is so different.

nitag
____________________
Avelo Mortgage modified my loan!

[Sold8/06]

Sorry wasn't trying to judge or offend anyone. The point I was trying to make is good credit scores are rewarded and poor ones penalized in a fair manner by insurance companies and others. That is why it is so important for everyone to take a proactive stance on credit scores.

cash

[schwefls]

Sold8/06 so glad you live in the perferct world.......

[schwefls]

Struggling I am sorry you are having this problem, so am I. I just called my agent and asked them to put me with a homeowners company that was not credit driven. They did Cumberland Insurance, keep shopping you will, yes you will find a company I did and I reside in NJ

[jennifer]

SCHWEFLS
Wow this is new to me. Please could you explain how to do this step by step.
Cheaper insurance would be great !!!
jennifer

[Struggling]

Thank most of you for your help and advice.

Sold,
When someone is so much above the others with such a fine upstanding attitude, it leaves one to wonder why you are on this board as you don't appear to be in need of help. I have heard that there are some vultures that lurk trying to take advantage of the unfortunate. I would hope you aren't one that is attempting to prey on those of us that are already down.

You know there are a lot of people that feel they can crap on others, but when they start kicking them for stinking I think it is just plain cruel. May your life continue to be all roses and not thorns.

[nitag]

Struggling,

sold/cash was banned yesterday! The moderators here do not put up with someone who has a holier than now attitude so he got the boot from ***

nitag
__________________________
Avelo Mortgage modified my mortgage!

[Struggling]

Originally Posted by nitag

Struggling,

sold/cash was banned yesterday! The moderators here do not put up with someone who has a holier than now attitude so he got the boot from ***

nitag
__________________________
Avelo Mortgage modified my mortgage!

Thank You Nitag,
I makes me feel better to know that this was not the standard on this site. I do and did accept responsibility for where I am. I really am not trying to get anything for free, but I went home last night reconcilled to the fact that I just have to buck it up and keep on going.

Your kindness is so appreciated, thank you again.

[schwefls]

OK, I am still determined to lower my mortgage even with the modification which. I am very happy with. So being I have escrowed PITI therr are 2 areas I need to price shop. Homeowners and Taxes. So I called every insurance broker in the phone book (NOT THE INTERNET). I simply told them I was price shopping for homeowners... here is where the white lie comes in....I told them that with credit standards being what they are today I did not want any inquiries on my credit just for price shopping. I asked for a quote from a company who is not credit driven. They bought my line hook, line and sinker. I lowered by deductible from 1000-500 and save 180.00 annually, now my escrow payments will eventually go down. I still have to work on getting the township to reasess the property that is a gamble I am still pondering cauz it could backfire on me. If the assesment comes in more. I have live with it, if you know what I mean. Oh yeah, one more thing I did have a 2k homeowners claim 3 years ago and was still succesful. This is another full time job.

[jennifer]

Hi SCHWEFLS
Thanks for the insurance tip. Here on the Texas Gulf Coast we have 3 insurances homeowners/fire, wind/storm/hail, and flood often with 3 different companies. You can imagine the number of folks looking into my not so good credit ...........
I have fought the tax office every year ........ the small town I live has certain areas of the county they believe should be more profitable than others, namely those properties near or on the water ...... not fair but the way it is.
You can beat them with your homework. What the properties around or near you have SOLD for. Not accessed or appraised but actual $ per sqft price. They can not argue that it is a matter of public record and fact. Other things also but that was the biggie for me. This year in 2008 the accessed value did not increase that says a ot about the housing market.
Have a great day and a very fun weekend !!!
jennifer

[schwefls]

Great information on the "what properties sold for", thank you for that 411. I'm on it like a dog with a bone, see here we only need straight homeowners not 3 sorry my idea on price shopping may not pan out for you.

[nitag]

Hi SCHWEFLS,

Okay here is something, be really carefull when you are getting a lot of quotes for insurance!! If the company has your name, address and date of birth they are still able to run your "Insurance Score" what comes back in an insurace score is your claims history and your credit!!! We are told to tell our clients its a "soft hit" but thats BS, I ran it on myself and it is a hit and we know a hit is a hit when it comes to credit!!!

I live Nevada and the companies we write for that run credit offer lower premiums than with the companies that don't run credit and those are becoming far and few between now a days. It sucks to have to tell someone sorry you can get a loan for a house or a car but your credit sucks so are companies are declining to quote. I don't say it like that but it sure feels like it

So my point is, even if they tell you they don't hit your credit, trust me when I say they do!!

nitag
_____________________
Avelo Mortgage modified my loan!

[Moe Bedard]

Nitag,

Is that also true for auto insurance.
I told them I shouldn't change right now due to this whole mess the credit isn't exactly stellar yet.......she said that she can help lower my policy, but I told her I got these policies many years ago when my credit was good and they have not gone up when the credit went bad.......so why should I tempt fate......but she said that it is only a soft hit and will not have an effect on my score...................not true........eh

[jennifer]

Hi Guys

WOW that is scary Nitag soft hit or hard hit they both leave a bruise !!! Just what we need mislead and lied to in the loan process and then again over insurance !!!
In Texas we have a insurance pool. It is supposed to be similar to FEMA and flood insurance, Do all states have insurance pools are they any good what are your thoughts ???
Any thing has to better than forced insurance thru the lender or I think it is anyway LOL

jennifer

[Struggling]

Our state has an insurance pool, but it is only available to those who can not get insurance. You must have three denials to apply, and then the rates are very high and the coverage very limited.

I just spoke with a very nice agent that advised me to ride this out because in this economy a change will be forced, especially in a state that has tornados and hail as a daily occurance. He also said that even if some companies use credit base risk annalysis it is how they apply the underwriting that can hurt you. Baically they can use the score anyway they want, but always to their advantage. He feels that someone is going to file a discrimination suit soon that will do away with this practice.

I did some checking and there has already been some suits in MI, the insurance industry is spending a lot of money on lobiest to keep this practice in play.

[schwefls]

Nitag:

I had no idea, I can't thank you enuf for sharing this. Ok once again I was snowed, when will I ever wake uP????

But, I guess it's not so bad I did lower my premium and reduce my deductible now I'll have to count the hits to my credit. Not that it is finding it's way out of the trash can yet.