A home insurance provider may terminate your coverage for various reasons, such as not paying your premiums.
Increasingly expensive natural disasters, which result in billions of dollars in insured damages annually across the nation, have led some home insurers to drop policyholders in high-risk areas of the United States However, this isn’t the sole reason for cancellation. Other factors might include unpaid premiums, providing false information on your application, or submitting too many claims.
If your home insurer decides to drop you, there are steps you can take to address the issue. Keep reading to discover what your options are.
Key Takeaways
- Your home insurance can be canceled or not renewed for several reasons, including unpaid premiums or residing in a high-risk area.
- Insurers must provide written notice if they intend to cancel or not renew your policy.
- If you disagree with your insurer’s decision, you have the right to file a complaint with your state’s insurance regulator.
- After exploring all options, you might be able to obtain coverage through your state’s “last-resort” insurance program, commonly known as a FAIR plan.
What Happens if You Lose Your Home Insurance?
One major consequence of being without home insurance is the risk of incurring significant financial losses should something happen to your property, like storm damage or fire destruction. In such situations, you could end up facing tens of thousands of dollars in repair or replacement costs.
Another potential outcome of losing home insurance is that your mortgage lender may purchase a policy on your behalf.
Mortgage lenders require borrowers to maintain insurance on their properties. As a result, if you lose your coverage, your lender can secure insurance and bill you for it. This type of policy is referred to as force-placed or lender-placed insurance.
According to the Consumer Financial Protection Bureau, force-placed insurance can be twice as expensive as standard home insurance. Moreover, it typically protects only the lender’s interests and not the homeowner’s, offering limited coverage that usually excludes personal belongings or liability protection.
Note
Federal regulations stipulate that your mortgage servicer must provide at least 45 days’ notice before charging you for force-placed insurance.
Reasons for Home Insurance Cancellation or Non-Renewal
Cancellation or non-renewal of your home insurance may occur for a few reasons:
- Living in a high-risk area. Doug Heller, the director of insurance at the Consumer Federation of America, states that homeowners in disaster-prone areas, such as those at risk for wildfires, may find their policies not renewed due to heightened risks.
- Failing to pay premiums. An insurer can cancel your policy if you fall behind on premium payments, even before your current policy ends.
- Filing too many claims. If you frequently submit claims, your insurer might choose not to renew your policy. Heller notes that triggers for non-renewal vary by company, and even inquiring about a potential claim could count against you.
- Committing insurance fraud. If your insurer discovers inaccuracies on your application or fraudulent claims, you could be dropped immediately as a policyholder. Heller emphasizes the importance of providing accurate information when filling out an insurance application.
- Neglecting home maintenance. If your home has deteriorated since your purchase and you haven’t made required repairs before a set deadline, your insurer may opt not to renew your policy. For example, some companies discontinue policies based on the age or condition of roofs.
- Leaving your home vacant. If your property has been unoccupied for 60 days or more, your home insurer may choose not to renew your coverage.
What to Do if Your Home Insurance Is Canceled or Non-Renewed
If your home insurance is canceled or not renewed, consider taking the following actions:
- Request a reconsideration. Heller advises contacting your insurer to find out what led to their decision and if they would consider reversing it.
- File a complaint with your state’s insurance department. If you believe the cancellation or non-renewal is unjustified, submitting a complaint could result in the restoration of your coverage, according to Heller.
- Inform your mortgage lender. Your lender should be alerted to your insurer’s decision before they hear it from the insurer, so notify them promptly.
- Search for a new policy. If you receive notification from your insurer about the cancellation or non-renewal, begin looking for new coverage before your current policy expires. Aim to compare quotes from at least three reputable insurers.
- Mitigate risks. If your insurance was dropped due to specific risk factors, consider taking steps to reduce or eliminate those risks. For instance, clear brush around your property in wildfire zones or reinforce your roof in hurricane-prone areas, as suggested by Heller.
- Repair your home. When your policy is canceled due to poor home condition, you can often regain coverage by addressing the cited issues. For example, replacing a worn roof or repairing a deteriorating porch might be necessary.
Fair Access to Insurance Requirements (FAIR) Plan
If you’re unable to find coverage from a private insurer, you can purchase a policy through your state’s “insurer of last resort,” known as a FAIR plan.
Most states run a FAIR plan that provides essential coverage for homeowners unable to secure coverage from private insurers. This insurance may be more expensive than private options and may offer less comprehensive protection.
Note
FAIR plan guidelines and regulations differ from state to state, with some states offering alternative solutions similar to FAIR plans, such as assigned risk plans.
Frequently Asked Questions (FAQs)
What’s the Difference Between Cancellation and Non-Renewal?
Non-renewal occurs when your insurer decides not to extend your coverage at the end of your policy period. Cancellation means your insurer terminates your policy before its expiration date. In both cases, your insurer is required to notify you beforehand.
How Many Claims Can I Make Before My Home Insurance Company Cancels My Policy?
Every insurance company has its own policy regarding the number of claims it takes to trigger non-renewal. Many insurers have tightened their requirements, making it easier to be classified as a high-risk policyholder after multiple claims.
Is It Hard to Get New Home Insurance After My Company Drops Me?
If your coverage is canceled or non-renewed, you may find it challenging to secure a new policy. If the cancellation stemmed from a specific issue—like an old roof—you might need to resolve that before obtaining new coverage. However, if you live in a high-risk area, finding traditional coverage could be difficult, possibly leading you to seek your state’s FAIR plan.
Can My Home Insurance Be Canceled Without Notice?
In most states, insurers are typically required to issue a written cancellation notice at least 30 days in advance.
Can I File a Complaint if My Home Insurance Is Canceled?
Yes, if you believe your insurance cancellation is unjust, you can file a complaint with your state’s insurance regulator, which might prompt your insurer to re-evaluate its decision.
The Bottom Line
If your home insurance provider has canceled your policy or chosen not to renew it, the first step is to contact them for a detailed explanation of their decision. After that, consider filing a complaint with your state’s insurance regulator. If you still lack coverage, begin seeking a new policy or look into securing insurance through your state’s last-resort option.