10 Reasons Your Homeowners Insurance Was Canceled
After thorough research, you found the perfect homeowners insurance policy that aligned with your needs and budget. With it, you can rest easy knowing that in the event of unforeseen loss, your policy would offer coverage for damages to your home and belongings.
However, suppose your insurer decides to cancel or not renew your policy. This situation can be scary and nerve-wracking, especially if you have a mortgage. If your policy gets canceled and you take a while to find a new insurer, you leave a gap that could be detrimental.
Imagine heavy winds damaging your home during this lapse, and you are left paying for the repairs out of pocket. There can be several reasons why your insurance company may cancel or not renew your policy - it is, after all, a contract, and any breach could lead to a cancellation.
Moreover, becoming a high-risk yourself or due to your home can also result in non-renewal. The big question is, how can you handle the tricky process of cancellation or non-renewal? It's important to have a proper understanding of each term, and this guide will help you navigate through these intricacies to prevent being dropped by your carrier.
10 Reasons Your Homeowners Insurance Was Canceled:
- Your Home Insurance Can Be Cancelled For Not Paying On Time
- You Did Not Renew Your Policy
- Frequent Claims Can Result In Your Insurer Dropping You
- An Aggressive Pet Can Cost You Your Coverage
- Insurers Can Cancel Your Policy Due to Your Risky or Criminal Behavior
- Insurance Companies View Poor Credit Unfavorably
- Your Insurance Company Experiences Hardship or Changes Direction
- Insurance Fraud Will Result In Your Policy Being Canceled
- Not Maintaining Your Home Is Another Way of Losing Insurance
- Not Notifying Your Insurer That Your Home Will Be Vacant Is a No-No
Shop for a New Homeowners Insurance
What Are the Reasons Why Your Homeowner Insurance May Drop You?
There are three ways an insurer can discontinue your homeowners insurance: lapses, cancellations, and non-renewals.
1. Your Home Insurance Can Be Cancelled For Not Paying On Time
In most cases, a policy lapses if you have not paid your premium each month or if you have not paid it on time continuously.
To avoid the lapse, you should catch up on making payments immediately.
Most insurers have a grace period to reinstate your policy. The grace period differs per insurer, but if you make up for missed payments, you’ll avoid the lapse.
Remember that you must pay off your delinquencies within your grace period.
2. You Did Not Renew Your Policy
A non-renewal of homeowners insurance is when either the insurer or the policyholder chooses not to renew the policy when it expires or is near the end of your policy period.
Your lender is required by law to notify you of a non-renewal with the advance written notice ranging from 30, 60, or 120 days, the most typical time periods that vary by state. This gives the homeowner time to find another insurer, so there’s no gap in coverage.
If you exercise a non-renewal, the main reason why is that you have found more affordable and better coverage and plan to switch your existing policy to the new one at your renewal date.
However, if you don't find another insurance company and policy you will be without coverage and protection.
3. Frequent Claims Can Result In Your Insurer Dropping You
Now, if your insurer decides not to renew your policy, it may be due to you having filed several claims.
No matter how large the insurer is, the company’s overall goal is always to keep costs down. If you make a claim, the insurer will consider you a risk and believe you are more likely to make additional claims in the future. This is reason enough to drop you.
In addition, if you make multiple claims filed within a policy period, your insurer won’t be able to afford to pay out too much in claims and could lose much money on just one policyholder.
4. An Aggressive Pet Can Cost You Your Coverage
Your insurer also may not renew you if you have a liability claim due to your pet dog. If your dog has bitten multiple people, and you make claims for each, the insurer will choose not to renew your policy because your pet is considered high risk.
5. Insurers Can Cancel Your Policy Due to Your Risky or Criminal Behavior
If you do something that raised your insurer’s risk considerably, such as conducting illegal activity in your home that increases the risk of damage or theft. Should your insurance company gain wind of this fact, they may cancel your policy.
Any other risky behavior such as the discovery of a criminal record or arson could also jeopardize your coverage.
6. Insurance Companies View Poor Credit Unfavorably
If your credit has taken a hit since your policy was issued, such as if you’ve applied for too many credit cards that required too many credit check inquiries or made too many late payments on your bills, this may cause a non-renewal.
7. Your Insurance Company Experiences Hardship or Changes Direction
An insurer may also activate a non-renewal on you that has nothing to do with yourself or your home.
For example, an insurer may stop operating in your area or may have gone out of business.
Or an insurer may withdraw coverage in an area or community that is too costly for it, such as if you live in a place prone to floods and earthquakes or other catastrophic natural disasters that are covered by your homeowners insurance.
8. Insurance Fraud Will Result In Your Policy Being Canceled
If the policyholder commits fraud whether related to payment or identity, these are reasons for cancellation.
An example of fraud is when a homeowner lies about her identity, such as if she applied for insurance under another person’s name.
Another example is making fraudulent payments.
Committing insurance fraud is a serious crime and may also result in charges being brought as well as prison time.
9. Not Maintaining Your Home Is Another Way of Losing Insurance
Your policy can also get canceled if a home inspection reveals that you have not maintained your home. Your home is considered a risk to the insurer if your roof is old or there are unaddressed structural issues.
Some insurers will drop you just because of that.
If you neglected to make repairs on your HVAC and other systems that have failures, that can also cause an immediate drop.
Hoarding is another high-risk behavior and situation that insurance carriers will typically cancel your coverage over.
10. Not Notifying Your Insurer That Your Home Will Be Vacant Is a No-No
Most insurers require you to tell them if your home will be vacant for 30 consecutive days or more.
If you fail to notify your insurer, your policy may be canceled.
That’s because vacant homes are more susceptible to crimes and you may have to make a high claim.
Also, if the home is uninhabited and a covered peril such as a fire starts in your house, it will most likely spread because there is no one there to notify the fire department. As such, your home may be a total loss.
What's the Difference Between Insurance Getting Canceled and Not Renewed?
The difference between a cancellation and a non-renewal is that cancellation is usually put into effect in the middle of the policy term, while a non-renewal happens when your policy term expires.
A homeowners insurance company can cancel your policy on your home or yourself immediately after notifying you.
In this case, written notice of the cancellation should be at least 30 days before the insurer drops you.
But if you've had your insurance for more than two months, there are only two reasons why it can be canceled: if you fail to pay your premiums or if you are engaged in fraudulent behavior.
Are There Any Things You Can Do to Get Reinstated?
You should focus on claims and maintenance.
If your home is considered too risky to be insured, you should speak to your insurer about agreeing to make any repairs for upkeep and performing routine inspections on a more diligent schedule.
As a result, you can usually avoid filing claims, which the insurer would like to see, as well as avoid cancellation of your policy.
If you receive a lapse letter, you need to contact your insurer as soon as you receive it and pay your past-due payments in full.
If the insurer agrees to reinstate you, don’t forget to inform your mortgage lender since your lender requires you always to have homeowners insurance.
This is a necessity. If you don’t notify your lender, the lender may purchase a new home insurance policy on your behalf and force you to pay for it. The insurance company that the lender will pick will most likely be more prohibitively expensive than your current lapsed policy.
This is called a “force-placed” insurance policy.
Since the lender is only looking out for itself and needs to protect its investment, you'll be faced with a new policy that may not include coverage of personal property that a basic homeowners insurance policy usually has.
If your carrier still denies you, you can file a complaint with the state department that handles insurance or request remediation.
Will it Be Difficult for Me to Find an Insurance Carrier After I Was Dropped?
Yes and no.
If your policy was canceled or non-renewed for reasons that had nothing to do with you, such as the restructuring of the insurance company that forced it to pull out of your area, you should find it easy to obtain a new policy without exorbitant rates because it wasn’t due to any action on your part.
But if your policy was terminated because you filed too many claims or had not paid your premium in months, it may be hard to find a new insurer.
That’s because your homeowners insurance record follows you.
It will be notated in the Comprehensive Loss Underwriting Exchange (CLUE) database, which insurance companies look at to identify whether you’ve been canceled or not renewed. This will raise a red flag to a new insurer you’re applying to, and the insurer may refuse to take you on, making it harder for you to secure insurance for your home.
And if you find an insurer willing to work with you, you may be hit with high premium rates that you may not be able to afford.
What Can You Do If You are Denied New Insurance Coverage?
If you are continually denied by insurers, you have to keep looking.
Getting insurance quotes online or through an agent and then comparing different policies with the same coverage amounts is your first defense line.
Since you are a risk, you may not find an affordable insurer, so you may have to go with an insurer that has high premiums.
Your state insurance department may help you find better coverage for your situation at a cost you can swallow. But in most cases, you may still end up with high premiums.
As a last resort, your state’s government program FAIR (Fair Access to Insurance Requirements) may be of help. FAIR offers insurance to people considered high-risk.
But FAIR homeowners insurance is unlike a standard home policy.
A standard policy covers many unforeseen events that you have no control over, such as theft, smoke damage, hail, the weight of snow or ice, and many more.
FAIR, on the other hand, provides inadequate coverage, and your home is only protected against fire, windstorms, vandalism, and riot.
In addition, it depends on your state if insurance with FAIR covers personal belongings.
Also, keep in mind that only 30 states in the US offer FAIR.
So, even though FAIR lacks many benefits that a standard home insurance policy offers, it’s better than leaving your house uninsured.