Jeffrey Wade
Homeowners insurance is a valuable asset that protects your home from financial devastation in the event of damage or destruction. However, it can be stressful to find out that your insurance has been cancelled or non-renewed. While it is challenging to get coverage after cancellation, it is not impossible. Insurance companies have specific reasons for dropping customers, and they are required to notify customers in advance of non-renewal. Common reasons for cancellation include non-payment of premiums, insurance fraud, and poor property maintenance. If you have been dropped by your insurance company, you can shop for a new policy, reduce your risk, or look into surplus line insurers or FAIR plans.
| Characteristics | Values |
|---|---|
| Reasons for cancellation | Non-payment of premium, insurance fraud, multiple claims, poor property maintenance, increased risk assessment of the location, roof age or condition, credit score |
| Notice period | 30-120 days, depending on the state and reason for cancellation |
| Actions to take after cancellation | Shop for a new policy, reduce your risk, look into a surplus lines insurer or FAIR plan |
| Actions to prevent cancellation | Make home improvements, such as installing a fire alarm or security system, or a new roof |
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What You'll Learn
Non-payment or fraud
Non-payment of premiums or fraud are two of the most common reasons homeowners insurance carriers cancel or refuse to renew policies. Homeowners insurance is typically required by mortgage lenders, so it's imperative to find a new insurance policy to protect your investment and satisfy your lender's requirements.
Non-payment of premiums is a surefire way to get your homeowners insurance cancelled. If you stop paying your premium, your insurance company will eventually cancel your policy. Missing payments puts you at risk of being dropped by your carrier. However, if you accidentally missed a payment, it's worth contacting a representative to see if there was a paperwork error that can be fixed.
Homeowners insurance fraud is a serious crime and can also lead to policy cancellation. Insurance fraud is a form of stealing and it's illegal in every state. It carries legal consequences beyond policy cancellation, including higher premiums, misdemeanor charges, restitution, community service, probation, and potential criminal charges. In Michigan, for example, homeowners insurance fraud is considered an automatic felony, with violators facing up to four years in jail and up to $50,000 in fines, plus court costs and legal fees.
Fraud can take many forms, including submitting fabricated or inflated claims, lying about a claim, or misrepresenting information on your application. For example, overstating the value of stolen items in a burglary or claiming that a TV was damaged by an electrical storm when it actually broke down due to technical issues.
To avoid insurance fraud, it's important to be completely honest and transparent when applying for insurance or filing a claim. Report events just as they happened and include your proper registration address and past driving offences. Use any insurance payout for repairs as necessary, so insurers don't get suspicious if you file a future claim related to the same issue.
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Poor property maintenance
Insurers may also consider the use of outdated or unsafe roofing materials, such as wood shakes or asbestos tiles, as a reason for non-renewal or cancellation, as these materials are considered high-risk. Similarly, insurers often question the safety of electrical wiring in older homes, and may request that electrical boxes be replaced to mitigate the risk of fires.
Homeowners insurance companies may also cancel policies if there are risks on the property that do not meet their underwriting guidelines. This can include issues such as cracked windows, seemingly neglected yards, or the presence of undeclared structures like an in-ground swimming pool. It is important to note that insurance companies are looking to identify potential hazards and have them mitigated before problems occur, to reduce their own liability.
In some cases, insurers may provide a timeline for mandatory repairs to be completed, and failure to comply within this timeframe may result in non-renewal or mid-term cancellation. However, it is important to note that insurance companies cannot legally force you to perform specific maintenance on your home, and the decision to cancel or non-renew a policy for reasons of poor maintenance may depend on the specific terms of the insurance contract.
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Multiple claims
Making multiple claims on your homeowner's insurance can lead to your policy being cancelled or non-renewed. Insurance companies view policyholders with a history of multiple claims as riskier to insure. While there is no set number of claims that can trigger a cancellation, insurance companies are more likely to cancel your policy if you have made multiple claims in a short period.
The type of claims also matters. For example, if you have made multiple claims for similar issues, your insurance company may deem your property too high-risk to keep on their books. Similarly, if you have made multiple claims for issues that could have been prevented, your insurance company may view this less favourably. However, insurers generally cannot cancel your policy for multiple weather-related claims.
If your insurance company cancels or non-renews your policy, you may struggle to find a new policy. Other insurance companies will see you as a higher risk if another company has decided not to insure you anymore. However, this does not mean that you will be unable to get insured elsewhere. You may just need to shop around and expect to pay more for coverage.
If you are dropped by your insurance company, you may be able to obtain coverage by addressing any issues with your property, being honest with your new insurer, and working with an insurance agent or broker who can help you find potential insurers. You may also need to consider a high-risk insurance pool or your state's FAIR plan, which provides coverage for high-risk homeowners who cannot get insured in the standard insurance market.
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Risk factors
Home insurance companies can drop you for a variety of reasons, and it's important to understand the risk factors that may lead to a cancellation or non-renewal of your policy. Here are some key factors to consider:
- Non-payment or late payment of premiums: Failing to pay your insurance bill on time is a common reason for cancellation. Insurers may cancel your policy mid-term or lapse coverage if payments are not made promptly.
- Insurance fraud or misrepresentation: Any form of insurance fraud, such as providing false information or misrepresenting the condition of your home, can lead to immediate policy cancellation.
- High-risk factors: If your home is located in an area with increased risk, such as a high-risk hurricane zone or an area prone to extreme weather events, your insurance company may deem it too risky to insure.
- Poor maintenance: Neglecting proper maintenance of your home, such as failing to address repairs, outdated plumbing or electrical systems, or neglecting landscaping, can increase the risk of claims and lead to cancellation.
- Multiple claims: Filing multiple claims within a short period can make you appear riskier to insure. Insurers may choose to drop you if they anticipate frequent claims in the future.
- Underwriting issues: If an insurer discovers that your property does not meet their underwriting guidelines, such as having an old or damaged roof, they may cancel your policy.
- Changes in coverage options: Insurance companies may exit certain areas or stop offering coverage in specific regions, leading to policy cancellations.
- Non-payment of premiums: Similar to cancellation, non-renewal can occur if you fail to pay your insurance premiums on time.
- Property condition: If your home's condition has declined or does not meet the insurer's underwriting guidelines, they may choose not to renew your policy.
- Increased risk assessment: If the risk factors in your area have increased, such as rising climate threats or crime rates, insurers may opt not to renew policies in that region.
- Shifts in coverage options: Insurance companies may adjust their coverage options for specific areas, leading to non-renewals for existing customers.
- Multiple claims: While this may not be a direct reason for non-renewal, having multiple claims on your record can make it more challenging to get your policy renewed.
- Credit score: In some states, a low credit score can impact the renewal of your policy, although insurers are prohibited from solely using credit report information for non-renewal.
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Underwriting issues
- An older roof: If your roof is too old, your insurance company may consider it too risky and cancel your policy. Older roofs are more likely to leak or be damaged in a storm, which could lead to an expensive claim. Some companies may refuse to insure a roof older than 20 years.
- Weather-proofing issues: If an insurance adjuster visits your home after a claim and notices that it does not meet the insurer's underwriting guidelines, they may cancel your policy.
- Poor maintenance: If your home is not properly maintained or repaired, it may be considered an unacceptable risk by the insurance company.
- Increased risk: If there is a substantial increase in hazard at the insured property, such as living in a high-risk area prone to natural disasters, your insurance company may decide to reduce its risk exposure and cancel your policy.
- Credit score changes: In most states, it is legal for insurance companies to use credit as part of the underwriting process. If your credit score drops too low, it may be considered a risk factor, especially if there are other issues.
It is important to note that insurance companies are required to provide a reason for cancellation or non-renewal, and you may be able to correct the underwriting issue to keep your coverage. For example, installing a new roof or making necessary repairs could help you get your coverage back and even at a lower rate.
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Frequently asked questions
Home insurance carriers may cancel or refuse to renew policies under some circumstances. The most common reasons for cancellation are non-payment of premium, insurance fraud, and poor property maintenance.
Start shopping for a new home insurance policy as soon as possible. Get quotes from a few different insurers to find the most affordable policy for your situation.
FAIR plans, or Fair Access to Insurance Requirements plans, are state-run programs that offer coverage for high-risk homes. They are collectively backed by a pool of insurers, which helps lower their individual risk in insuring high-risk homeowners.
Make home improvements, such as installing a fire alarm or security system, or addressing issues such as an old roof. This could make it more likely for your insurer to renew your policy.
