Homeowner’s insurance is an important tool for protecting one of your most valuable assets: your home. This policy is designed to cover you financially in the event of theft, fire, and other costly events.
But with many areas of the country affected by the effects of climate change, non-renewing insurance policies are becoming common. And there are other reasons your home insurance could be canceled by accident—including late payments or even misrepresentation of information.
When that happens, it can (understandably) cause panic. But this dilemma can be solved if you know the critical steps to take.
Different types of terminations
There are various reasons why an insurance company may terminate your policy or refuse to renew it. The good news is that in some cases you can correct the problem and resume coverage. However, it is not always possible, and you may find yourself suddenly shopping for new insurance.
“Insurance companies have strict rules about what makes a home uninsurable and they look at many factors. These factors can change over time, making a home that was previously acceptable no longer eligible. Or the insurance company just found an existing problem,” Leslie said. Kasperowicz of Insurance.com.
Some of the reasons your insurance may be terminated or not renewed include being in a geographic area affected by worsening weather, severe home damage, and or incorrect information when you started the policy.
Cancellation
The most common reasons home insurance policies are canceled include material misrepresentation or breach of contract. Material misrepresentation usually means that the home is not as described on the application, and omitted information will prevent the insurance company from issuing the policy in the first place.
“It could be an untrue statement or an omission of an important fact,” Kasperowicz said. “For example, if the applicant states that the roof of the house was replaced five years ago, but the inspection shows that the roof is 25 years old and has a lot of damage, the insurance company can cancel the policy.”
Issues that can lead to a breach of contract include cases of fraud, lying on claims, or reasons related to inspections such as poor housing conditions.
Left behind
Your non-payment or late payment is also a reason to cancel your home insurance policy. However, this is usually the easiest situation to resolve as there is a grace period during which you are allowed to pay off and return the policy.
“However, during the coverage, the submitted claim will not be paid, and if there are many delays, even if you finally pay, it can be a reason to cancel the policy,” said Kasperowicz.
It is also not good to have too many lapses because other insurance companies will see it as a risk, and you may be subject to higher premiums elsewhere when you apply for a new policy.
No more renewals
Non-renewal is the most common type of cancellation and usually means that the policy will no longer be available at the end of the current term. This situation is often triggered by changes in the level of risk associated with your home.
Insurance companies, for example, may see your home as a higher risk if there are many claims. “There are laws that prevent insurance companies from dropping coverage based on claims caused by natural factors like hurricanes, but other claims, such as theft or fire, can work against you,” explained Kasperowicz.
Also, if your home has not been well maintained and the insurance company knows, they may choose not to renew the policy if the necessary repairs are not made. Anything that the insurance company sees as a risk, like a broken roof, can result in non-renewal.
In other cases, insurance companies may choose to terminate all policies in a certain geographic area when the area becomes too risky. This usually occurs in areas with a high risk of natural disasters but may also be associated with other issues such as litigation or high fraud.
“In some cases, insurers may find that certain coverages are not financially viable,” says Renata Balasco, insurance expert and licensed agent for The Zebra. “Insurance companies may not cover your area due to extreme weather conditions. California homeowners have struggled with these changes in recent years following wildfires and other natural disasters. Companies have tried to cancel or deny coverage in these areas , resulting in non-renewals for homeowners.
Before not renewing, you must receive a notice explaining the reasons for the insurance company’s decision. This notice is designed to allow you to find new policies. Legal notice requirements vary by country, but insurance is usually required to give customers between 30 and 60 days notice when not renewing, said Balasco.
What to do if your insurance stops
Having your policy canceled can be worrying and frustrating. Depending on the reason for the cancellation, you may have several options.
Not paying: Usually in the case of non-payment, you can contact the insurance provider and make a payment that has already been paid to try to restore the policy. “Every company is different, and nothing is guaranteed, but some insurance companies can give you a grace period and work with you again,” Balasco said.
Also, if your policy is canceled or not renewed because of an inspection-related problem, the company may be able to refund you if you fix the problem. You also have the right to dispute the cancellation, request remediation or file a complaint with the state insurance department.
Housing conditions: If the non-renewal or cancellation is due to a problem related to the condition of the home or the inspection, find out if fixing the problem will allow the policy to be reinstated. “It’s possible that the company can reinstate you if you fix the problem,” Balasco said. “You also have the right to dispute the cancellation, request remediation, or file a complaint with your state’s insurance department.”
For example, if your insurance company does not renew your policy because there are dead trees on the property that threaten to fall and cause serious damage, the trees should be removed and evidence must be returned.
“Once the risk is eliminated, the home will be eligible for coverage again,” Kasperowicz said.
Shopping for new insurance
If your insurance is not renewed or non-refundable, you should immediately start shopping for another policy.
Online insurance comparison sites can be a good place to start. They can provide insight into which insurance companies offer coverage in your area and the general price range for policies. It is always good to get quotes from different companies and be sure to ask what the policy will and will not cover for the price quote given.
You may also consider asking your neighbors whose home insurance company “If the house is in the same neighborhood, there is a good chance that they have the same risk profile and that the company can also accept your house,” says Kasperowicz.
If you live in a geographic area where insurance companies no longer provide coverage or are simply not profitable enough to secure insurance for other reasons, there is a state-run Fair Access Insurance Requirements plan (FAIR plan). However, there are some downsides to the policy. This includes higher than average premiums and limited coverage under the policy.
“The FAIR plan is a last resort,” Kasperowicz said. “After you have been rejected by several insurance companies, you can contact the state insurance department to find out if there is one [FAIR] plan and how to apply.”
It is important to note that these policies are designed to provide basic coverage and reduce the financial burden for those who cannot afford home insurance. FAIR policies do not provide comprehensive coverage like private insurance.
Takeaway
Home insurance policies can be canceled or not renewed for a variety of reasons. This could be because you have fallen behind on payments or you misrepresented yourself or your home when you started the policy. Additionally, your policy may not be renewed if you live in a high-risk area. If you suddenly encounter these challenges, it is important to correct the situation as soon as possible or start shopping for new insurance so that your home is not without coverage.