What to Do If Your Homeowners Insurance Is Canceled or Not Renewed
Home insurance can be a financial lifeline, protecting your most valuable asset. But what happens when your insurance company decides to drop you? Recent events have made this a growing concern for many homeowners.
Insurance companies, like any business, assess risk to ensure their financial stability. Unfortunately, external factors like weather-related events and increased claims can lead to insurance companies canceling or not renewing policies. Understanding the reasons behind these decisions, the differences between cancellation and nonrenewal, and your options, is key.
It can be disturbing to learn your homeowners insurance is canceled or not renewed, and that there are options for securing new coverage.
Reasons for Cancellation or Nonrenewal
Several factors can lead a home insurance company to cancel or choose not to renew your policy.
- Non-payment: Failure to pay your premiums is a clear breach of contract, leading to cancellation.
- Frequent Claims: Filing multiple claims within a short period often raises premiums and might trigger a cancellation.
- Insurance Fraud: Any fraudulent activity, such as intentionally causing damage, can lead to policy cancellation.
- Underwriting Issues: If your property doesn’t meet the insurer’s standards (e.g., a dangerous tree, an unpermitted swimming pool), they may cancel your policy.
- Widespread Losses: Insurers may stop writing policies in areas prone to disasters like wildfires or hurricanes.
Cancellation vs. Nonrenewal: What’s the Difference?
- Cancellation: This happens during the active policy term and typically requires stricter conditions, often involving serious violations like fraud or non-payment.
- Nonrenewal: Occurs between the policy’s expiration and renewal, and is often permissible for reasons like poor property maintenance or increased risk assessment of your location, but requires advance notice.
Cancellations look worse on a homeowner’s record, potentially making it difficult to find new coverage. Nonrenewals can be problematic, but might not be as challenging to overcome.
What Should You Do if Your Coverage Is Dropped?
If your insurance is canceled or not renewed, the first step is to understand why. Your insurance company is usually required to provide notice. The period ranges from 30 to 120 days, depending on the state and the reason for the action. If you haven’t received a clear explanation, contact your insurance provider.
If you can’t resolve the issue, take the following steps:
- Shop for a new policy: Start looking for a new policy immediately. Obtain quotes from several insurers to compare costs and find the best fit for your situation.
- Reduce your risk: If your policy was canceled due to risk factors, address them. Consider improvements such as storm-resistant windows or a new roof.
- Look into Surplus Lines Insurers: If you’re struggling to find coverage, consider surplus lines insurers. They’re not subject to all the same regulations as standard insurers and may be an option for high-risk properties, but you can usually expect higher-than-average premiums.
- Improve the condition of your home: Address any property condition issues that may have caused the cancellation. This can improve your chances of getting coverage with a new insurer.
Home Insurance Cancellation Laws By State
State regulations vary regarding insurance cancellations and nonrenewals. Check with your state’s Department of Insurance for specific laws.
What is a FAIR Plan?
If you’ve been denied coverage by standard insurers, a Fair Access to Insurance Requirements (FAIR) Plan might be an option. These state-managed programs, funded by private insurers, act as a last resort for homeowners. Note that you may need to prove you were denied coverage by multiple insurers to qualify. FAIR plans offer coverage, although with potentially less protection and higher premiums than standard policies. Coverage from a FAIR plan usually includes protection for fires, vandalism, riots, and windstorms. Some plans also include personal liability insurance.
Frequently Asked Questions
- Is it hard to get home insurance after being dropped? Depending on your location and the reason for cancellation, it can be difficult. Areas prone to severe weather events, such as Florida and California, are experiencing increased challenges.
- How many claims can you have before a home insurance company drops you? There’s no fixed number, but a history of claims, the frequency of claims, and the claims’ severity, can lead to nonrenewal.
- Can an insurance company drop you without notice? Insurance companies are usually required to provide notice before cancellation or nonrenewal, often 30 to 120 days before the policy ends.
