If your home insurance is canceled or your insurance company decides not to renew your policy, you'll need to find out why and start looking for new coverage. Fortunately, homeowners insurance can't be canceled without notice. You will have time to find a new policy or solve the problem.
As soon as you get a home insurance cancellation notice, contact your insurance company to see if you can reverse it, and in the meantime, start shopping around.
If you lose your home policy, buying homeowners insurance can become more difficult. Read on to find out why home insurance policies are canceled and what steps to take if it happens to you.
Key takeaways
- The condition of your home, multiple claims and missed payments are some of the reasons your insurance company can cancel or non-renew your homeowner's policy.
- In some cases, an insurance company may stop selling policies in a certain area or non-renew policies in that area due to risk.
- Insurers must give a homeowner notice of home insurance policy cancellation, although how many days that is depends on the reason for cancellation and state law.
- Can home insurance companies drop you?
- What to do if your home insurance is canceled
- Is home insurance non-renewal the same as cancellation?
- How to get homeowners insurance after being dropped
- Reasons home insurance companies drop you
- What happens if my homeowners insurance is canceled?
- How to avoid cancellation of your homeowners insurance
- Frequently asked questions: Homeowners insurance cancellation
Can home insurance companies drop you?
Yes, an insurance company can drop your policy in specific circumstances, although the word "drop" implies that it's sudden, when in fact the company is required to give notice of home insurance cancellation.
Home insurance is a contract, and if you violate that contract, your home insurance company can cancel your policy. Additionally, if you or your home become too much of a risk for the company, it can choose to non-renew the policy - which means that when the policy term ends the company will not renew it.
In some cases, it's not just you. Insurance companies may cancel their homeowners insurance policies in a certain area, withdraw from a state altogether, or even go out of business. While events like these are not the homeowner's fault, they still leave people searching for new home insurance. The current home insurance crisis is affecting some places more than others.
Florida's volatile home insurance market is a good example, as is the recent news of home insurers stopping sales in California.
It's important to note that the contract goes both ways. An insurer has to have an acceptable reason to cancel your coverage. State laws outline the situations in which a home insurance company can cancel or non-renew a policy.
What to do if your home insurance is canceled
If you receive a notice that your homeowners insurance is being canceled or non-renewed, there are a few steps to take.
- Call your insurance company. Speak to a representative or agent and find out if there is anything you can do to reverse the cancellation. If a payment is late, you may be able to stop the cancellation simply by getting your payments caught up.
- Start getting insurance quotes. Even if you might be able to resolve the problem with your current insurer, get some new options lined up just in case. You might even save money.
- Complete any repairs. If incomplete repairs are causing issues with insurance, get them taken care of. You might be able to stop the cancellation, but even if you can't, most other insurance companies will also require that repairs be completed.
- Get help. Contact your state’s department of insurance if you think you’re being treated unfairly or illegally by your insurance company. It can also help you if you can’t find new coverage for your home.
Insurance companies are required to notify homeowners in advance when a policy is being canceled. Laws regarding cancellation and non-renewal notices vary by state.
In California, for example, the insurer must send a non-renewal notice at least 45 days before cancellation. In many cases, if an insurance company fails to inform you in writing, your policy will remain in place until 45 days after the notice is sent.
Depending on why the insurance provider canceled the home insurance policy, you may be able to reinstate your policy. If not, you'll need to find a new insurer.
If the insurer canceled your coverage because of an unacceptable risk on your property, repairing the issue could result in your policy being reinstated. If your insurer still refuses to insure you, you can dispute the cancellation and request remediation or file a complaint with the state department that oversees the local insurance industry.
However, if the insurer canceled your home insurance because you filed too many insurance claims or gave false information on your application, it's unlikely that your policy will be reinstated and you may have difficulty finding another provider.
Is home insurance non-renewal the same as cancellation?
The difference between non-renewal and cancellation is really when the cancellation occurs, as both involve the insurance company canceling your policy.
Non-renewal is when the insurance company decides not to renew your policy at the end of the term. Essentially, it is canceling your policy effective on the last day of the current policy term or, more accurately, simply not renewing it. Most cancellations are actually non-renewals.
Cancellation is usually effective in the middle of the policy term. There are only a few instances when an insurance company can drop you mid-term. They usually involve things like insurance fraud or non-payment of premiums. Even in an “immediate” cancellation, the insurance company is required by law to give you notice so you can find new coverage.
How to get homeowners insurance after being dropped
As soon as you know your insurance policy is being canceled, start talking to other insurance companies. An independent agent or broker can be helpful since they know multiple insurance providers and which accept houses that have been previously dropped.
You may need to look for non-standard coverage (coverage from a company that specializes in high-risk insurance) if the property needs repairs that you can’t afford to complete right now.
"Most insurance companies underwrite or review the eligibility of a property upfront. Existing damage, depending on how bad and what kind, could make a property ineligible for coverage with the 'normal' home insurance companies," says Keith Balsiger, president of Balsiger Insurance in Nevada. Balsiger suggests looking for state assistance.
If you have difficulty getting insurance, call your state's department of insurance and ask for information about assigned risk carriers in your area. The downside is that you'll probably pay higher premiums, but that's better than being uninsured.
FAIR Plans, or Fair Access to Insurance Requirements Plans, are also options for high-risk homeowners. A FAIR plan allows high-risk homeowners to get coverage, but they often come with higher premiums and inflexible terms and conditions. Most states offer a last-resort option for insurance, such as a FAIR plan or a state-run insurer like Florida's Citizens Insurance.
Is it hard to get insurance after being dropped?
In most cases, yes. Finding a new homeowners insurance policy can be challenging if your home insurance has been canceled. Insurance companies consider a person's claims and coverage history when deciding whether they qualify for coverage.
Reasons home insurance companies drop you
An insurance company can cancel your home insurance policy (or non-renew it) only for specific reasons spelled out in state law. Those reasons are also listed in your policy. The most common reason for homeowners insurance to be canceled is that something about your property has become too risky, or the company has discovered a risk it wasn't aware of when the policy was issued. They include:
- A problem found during an inspection. An insurer may cancel an existing policy on renewal if the insurance company's underwriter inspects the property and finds an unacceptable risk.
- Roof issues. If you have an older roof, you could be at risk for a home insurance cancellation.
- Multiple claims. Your home insurance policy can be non-renewed after filing too many insurance claims.
- Living in a high-risk area. An insurer may also elect not to insure any properties in an area prone to natural disasters. "Insurance companies would normally not react to one bad year," Balsiger says. "They do modeling and look at profitability over a period of time. It's not uncommon to have a year where the insurance company loses money."
- Pets. Many insurance companies have an exclusion list for pets. This can include everything from exotic pets like a boa constrictor to certain dog breeds.
- Not paying your premiums. If you fall behind on payments, your insurance company will cancel your policy.
- Bad credit. If your credit has taken a dive since your policy was issued, it might raise red flags on renewal. "Credit along with a poor claims history might be used together to determine if an insurance company will provide coverage for you," Balsiger says. "In most cases, you will be offered coverage -- the question is will it be affordable?"
What happens if my homeowners insurance is canceled?
If your homeowners insurance is canceled, here are a few different things that could occur.
- Your homeowners insurance rate might increase. If your insurance company drops your insurance due to non-payment of premiums, you will have to deal with increased insurance rates with another insurer.
- You could find it challenging to get insurance in the future. Some insurance carriers consider you high risk if there is a gap or lapse on your insurance record, and they might refuse to provide insurance coverage.
- Your mortgage company may purchase lender-placed insurance on your home. Lender-placed insurance, also called force-placed insurance, is an option of last resort, says Gina Clausen Lozier, partner at Berger Singerman Law Firm. This is a policy that protects only the mortgage company’s interests.
“The issue with lender-placed insurance is that it protects the mortgage company, but not the homeowner," Clausen Lozier says. ”Typically, it's more expensive and doesn't provide coverage for personal property and contents and doesn't cover additional living expenses if you have a loss and have to leave your home."
How to avoid cancellation of your homeowners insurance
To reduce your risk of a home insurance cancellation, make sure you've addressed anything an insurer might deem an unacceptable risk. Keeping up with routine maintenance on your home can also help you avoid big-ticket repairs when it's time to renew your policy.
Don't file small claims. If the claim is not too much over the deductible, it might not be worth filing.
The Berger Singerman Law Firm’s Clausen Lozier advises homeowners to ensure their insurance company inspects their home before writing a new policy. She says to videotape and photograph the property so you have a record of what the property looked like at the time the insurance company insured it.
Frequently asked questions: Homeowners insurance cancellation
How long does canceled insurance stay on my record?
Insurance companies report things like claims and cancellations to the Comprehensive Loss Underwriting Exchange (CLUE) database. The CLUE records typically run anywhere from five to seven years.
What happens if you have a lapse in homeowners insurance?
Lapses occur when your current policy runs out and you don’t have new coverage. This concerns insurance companies because it makes the home more of a risk. It’s best to get new coverage before your old policy cancels, but if you do have a lapse, it might mean higher premiums and difficulty finding a new policy.
What happens to my mortgage if my homeowners insurance is canceled?
If your homeowners insurance is canceled due to non-payment, the lender can take out a force-placed insurance policy and charge you.
How many claims can you make before my home insurance drops you?
There's no set number of claims that can trigger a policy cancellation. It usually depends on the severity of claims and the number of claims you have filed during a specific period. It also depends on the type of claims, since an insurer generally can't cancel your policy for multiple weather-related claims.
Can homeowners insurance drop you after a claim?
In general, as long as you have been a good customer and haven't made many claims in the past, your homeowners insurance company will not drop you after one claim. It’s illegal to cancel your insurance policy just because you filed a claim.
However, if the company discovers something during the investigation of the claim that is a reason for cancelations, such as negligence on your part that led to the damage, your policy can be canceled.
