For various reasons, your home insurance company may cancel your policy or refuse to renew it. This puts you at risk for being stuck paying huge repair or replacement costs if your home is damaged. Furthermore, without home insurance you may default on your mortgage if you bought your house through a loan. It can also impede your ability to get another affordable home insurance policy in the future.
This article will cover:
How a cancelled or non-renewed home insurance policy affects you
The primary danger of your home insurance policy being cancelled or not renewed is that you may have to pay thousands of dollars out of pocket if you don't have home insurance and an accident occurs at your house.
Depending on the reason for your policy's termination, your ability to obtain a new policy may vary. For example, say your policy is going to end due to changes in the company's coverage structure. Or it might not be renewed for another reason out of your control. It shouldn't be too hard to find another insurance carrier because it wasn't due to any action on your part.
If your policy was cancelled for reasons under your control, such as filing many claims, it might be harder to find a new policy. This is because your insurance history is recorded in the Comprehensive Loss Underwriting Exchange (CLUE) database. This database tells insurance carriers about your insurance history. Insurance companies will be able to see if your homeowners insurance policy was cancelled or not renewed. This may put you in a high-risk category almost immediately when finding another provider.
If you purchased your home through a mortgage and your home insurance is cancelled or not renewed, you'll want to get a new policy as soon as possible. Otherwise, you risk defaulting on your loan. Mortgage providers require home insurance for the duration of the loan. To avoid a default, you want to make sure any homeowners policy you get insures an equal or greater amount than your loan balance.
Why do insurance companies cancel home insurance policies?
There are several reasons why your homeowners insurance policy may be terminated. Your insurer can choose to either cancel or just not renew your homeowners policy, depending on the situation, but non-renewal is the more common of the two. If you've had your policy for more than two months, there are only two reasons why it can be cancelled. One is if you haven't paid your premiums. The other is if you've engaged in fraudulent behavior.
Even so, a home insurance company can refuse to renew your policy at the end of its term for many other reasons, including:
- Filing too many claims.
- Having a bad credit score.
- Owning aggressive pets.
- Having a trampoline or pool.
- Not living in your home.
- Having a criminal record.
- The company stops offering coverage in your state.
Your insurer will generally give you at least 10 to 20 days before they cancel your homeowners policy. For non-renewal of your policy, your insurer must give you at least a 45-day window. This gives you time to look into other insurance companies and compare rates. These time periods can vary depending on your company and state, so make sure to read your policy to understand your provider's time frame.
You might have heard stories of insurers ending policies due to the risk of tornadoes or wildfires. However, remember that insurance companies can only cancel your policy if you've purchased it before the 60-day mark. Because of this, they'll likely wait for your policy term to end and elect not to renew it. If an insurance company decides not to renew your policy, they must provide a letter explaining why.
What should I do if my home insurance is cancelled or not renewed?
There are a few steps you can take to find coverage if your policy is cancelled or not renewed. You could start by talking with your previous insurer about what went wrong with your policy. They might give you some suggestions on how to improve your home. They could also advise you on dealing with your home's issues. They may be able to give you a second chance or refer you to another company.
You might also contact your state insurance department to find other highly rated insurers in your region. They may be able to give you some insight on the best insurers for your situation.
As a last resort, you can try to get a policy through your state's Fair Access to Insurance Requirements (FAIR) plan. These are public programs that offer homeowners insurance to people considered high-risk. The catch is that premiums tend to be high, and coverage is typically limited.
If you're having trouble finding a new insurer, QuoteWizard can help you get home insurance quotes from multiple companies.
Having trouble finding home insurance? Get quotes from multiple insurers.
If you think your home insurer treated you unfairly and you want to contest your cancellation or non-renewal, you have options. You can reach out to your state's department of insurance and file a complaint against your insurance company. From there, the department will decide if they want to take further action.
What you can do to prevent homeowners insurance policy termination
Claims and maintenance are two areas to focus on if you're looking to avoid a policy cancellation or non-renewal. The more claims you file, the more you present yourself as a risk to your insurer. Ways to avoid filing claims would be maintaining your home well, performing routine inspections and paying for small repairs out of pocket.
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