Your home insurance company may cancel your policy or refuse to renew it for various reasons. This puts you at risk for being stuck paying huge repair or replacement costs if your home is damaged. We can help you learn what to do if your homeowners insurance policy is canceled or not renewed by your provider. Below, we'll explain why insurance companies cancel home policies and what you can do if it happens to you.
This article will cover:
What happens when my home insurance is canceled or non-renewed?
The primary danger of your home insurance policy being canceled 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 in this situation because it wasn't due to any action on your part.
If your policy was canceled 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 canceled or not renewed. A home insurance claim can remain on your record for five to seven years. This may put you in a high-risk category almost immediately when trying to find another provider.
If you purchased your home through a mortgage and your home insurance is canceled 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.
What's the difference between cancellation and nonrenewal?
Your insurer can choose to either cancel or just not renew your homeowners policy, depending on the situation, but nonrenewal is the more common of the two. Both cancellation and nonrenewal of your policy end up with your insurance policy being stopped. Nonrenewal occurs when your insurance company chooses not to renew your policy at the end of the term. If an insurance company cancels your policy, they'll cancel it within a certain number of days after the start of your policy for any reason. After two months from when your policy started, your insurer can only cancel your policy if you fail to pay the premium or if you committed fraud on your application.
Why do insurance companies cancel home insurance policies?
There are several reasons why your homeowners insurance policy may be terminated. If you've had your policy for more than two months, there are only two reasons why it can be canceled. 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 nonrenewal 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.
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 had it for fewer than 60 days. Because of this, they'll likely wait for your policy term to end and then 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 canceled or not renewed?
There are a few steps you can take to find coverage if your policy is canceled 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 give you a second chance or refer you to another company, too.
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.
If you think your home insurer treated you unfairly and you want to contest your cancellation or nonrenewal, 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 happens when there is a lapse in your policy?
If you failed to make your insurance payment, then this will create a lapse in your home insurance coverage. If there is a lapse in your coverage, you should immediately try to pay your premium and restore your old policy or find a new one. When your policy lapses, your insurance company won't cover any damages that occur during that time. If you do have a lapse in coverage, you might have to pay higher premiums or have difficulty finding another policy.
If you have a lapse in coverage, your mortgage company may purchase home insurance for you since most mortgages require home insurance as a part of your agreement. Your mortgage lender can purchase a lender-placed policy for you, which is usually more expensive and has less protection than a standard insurance policy.
Having trouble finding home insurance? Get quotes from multiple insurers.
Ways you can avoid having your home insurance getting canceled
To avoid your home policy being canceled, you should pay your premiums on time. It's important that you're truthful when filling out your application for home insurance, too. You should also maintain your home and get necessary updates. We recommend not filing small claims if you can pay for the damages out of pocket. If you file too many claims, your insurer can cancel or not renew your policy since you present yourself as a risk to your insurer.
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