Laws and regulations in several states allow insurers to cancel homeowners insurance policies if too many claims have been made. In Maine, the law permits and insurer to cancel a policy if more that one claim is made in 12 months. These laws have been instituted in part to deter bogus homeowner insurance claims and in part to protect insurance companies.
However, it is unclear whether the insurer can drop the policy after having accepted the premium payment for a certain period. Empirical evidence suggests that insurers have cancelled policies mid-way after having accepted the premium. The policies were dropped on the pretext that the claimant had made too many claims.
These regulations were adopted initially as insurers were not becoming profitable. However, it does lead one to introspect that if insurance is unable to protect people from financial losses occurring due to unforeseen damages, what good is it.
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