Learn what to do if your homeowners insurance policy is cancelled or not renewed by your insurer. We'll also show you how to avoid having your home insurance coverage dropped in the first place.
If you're a homeowner, your home is probably your largest asset. This is why it's so important to have homeowners insurance. But what if your insurer cancels your homeowners policy?
There are many reasons why your insurance company might cancel your policy. Maybe you forgot to pay your monthly premium, filed too many claims, or engaged in fraudulent behavior. Whatever the case, here’s a guide for what to do if you’re insurer drops your coverage.
As stated above, there are multiple reasons why your homeowners policy may be terminated. Your insurer can choose to either cancel or just not renew your homeowners policy, depending on the situation.
If you've had your policy for more than two months, there are only two ways 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, an insurance company can refuse to renew your policy at the end of its term for many reasons.
The most common reasons for cancellation or non-renewal of a policy include:
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 will give you time to look into other insurance companies and compare rates.
Depending on the reason for your policy’s termination, your ability to obtain a new policy will vary. For example, say your policy is going to end due to changes in the company’s coverage structure. Or it might be cancelled 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.
But if your policy was cancelled for reasons under your control, it might be harder to find a new policy. This is because there are records of your insurance history in the Comprehensive Loss Underwriting Exchange (CLUE). 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.
Having your homeowners insurance policy canceled is not uncommon, and it can happen for a variety of reasons. For example, insurance providers may drop your policy if:
You might have heard stories of insurers ending policies due to the risk of tornadoes or earthquakes. 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 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.
There are ways to avoid a cancellation or non-renewal of your policy. Here are the most common ones:
Michelle Johnson is the external communications director for Obrella. This company provides expertise on all things home and auto insurance related. She says, “Insurance companies love two things: loyalty and bundling. Bundle your home, auto, and life coverage to show your value and dedication to their policies.”
Johnson also mentioned that avoiding filing small claims can get you discounted premiums in the long run. A win-win situation for you and your home.
If you think your treatment was unfair and 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.
Having your policy cancelled can do a lot of damage to your ability to obtain homeowners insurance in the future. Whether your insurer cancels or doesn’t renew your policy, you'll have a blemish on your insurance record.
Your CLUE report provides information about your previous claim and insurance history. If you have a bad report, it might be hard to find an insurer that'll take you. At least one that offers decent rates.
Luckily, there are a few steps you can take to find coverage. You might want to start by talking with your previous insurer about what went wrong with your insurance 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 might even 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 might even be able to give you some insight on the best insurers for your CLUE record.
As a last resort, you can try to get the Fair Access to Insurance Requirements (FAIR) plan. This is a public program that offers homeowners insurance to people who are high risk. The catch is that the premiums will be high, and there will be limited coverage.
If you’re having trouble finding a new insurer, QuoteWizard can help you get home insurance quotes from multiple companies.
A: If your home insurance is cancelled or not renewed, get a new policy as soon as possible. Otherwise you’ll risk defaulting on your loan. Johnson’s advice is, “To avoid any type of default on the loan, you must make [sure] the policy insures an equal amount-or greater amount-than your loan balance equals.”
If your policy is cancelled or not renewed, your loan isn't affected if the coverage equals the overall mortgage balance.
A: Filing too many claims cause you to lose your policy. It can also cost you a lot of money. Think about how high you set your deductible. Now think about every time you file a claim, and pay that deductible before your insurance coverage kicks in. That can add up to a lot of wasted money—especially if these are small claims.
Filing too many claims also makes you look like a large liability, from your insurer’s vantage point. Johnson suggests trying to file no more than two claims per year—if you absolutely have to file one at all. She says talk to your agent. They'll tell you how many claims you can file before they won't renew your policy.
A: Insurance experts like Johnson list three top reasons for policy termination. The most common reasons for policy termination are filing too many claims, lying on applications, and the exclusion cause.
The exclusion clause determines what insurance companies will and will not cover. For example, maybe they won’t cover certain natural disasters, because they can be so costly when they occur. Or maybe a company won’t cover a certain city or neighborhood because of the high crime rate. Whatever the case, make sure that you choose a reliable company and you understand what is excluded from your policy.
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