Homeowners insurance is a necessity for every homeowner, but homeowners insurance cancellation isn’t uncommon either. In fact, homeowners insurance cancellation rates are on the rise in recent years. This blog discusses some of the reasons for homeowners insurance cancellation and what policyholders can do to prevent it from happening! Give our friendly, licensed agents in Ohio, Maryland, West Virginia, and Maryland a call, so we can discuss your homeowners insurance options with you.
Home Insurance Cancellation vs. Non-Renewal.
Firstly, homeowners insurance cancellation and homeowners insurance non-renewal are not the same. Non-renewal means that your homeowners insurer is no longer providing coverage for you after a certain date or event (like when your policy expires). Homeowners insurance cancellation occurs when an insured homeowner has their home damaged so severely they can’t be covered under homeowners insurance.
Reasons for Homeowners Insurance Cancellation:
- Age: Younger homeowners typically have higher rates than older ones for homeowners insurance, making them more likely to undergo an homeowners insurance cancellation due to their age.
- Location: If you live in a high risk area or happen to live in an area that has a homeowners insurance cancellation rate of more than 20%, you could be at risk.
- Structural changes: Making structural changes to your home may also increase the likelihood for homeowners insurance cancellation. For example, adding features like a deck or pool, which can both lead to homeowners insurance cancellation.
- Homeowners insurance cancellation and homeowners coverage: If you don’t have an adequate amount of homeowners coverage, your homeowners insurer may cancel the policy
- Coverage limits: For example, if a homeowner has homeowners insurance with only fire damage protection but their house catches on fire and they won’t be covered for anything other than fire damage (like smoke or water damage), homeowners insurance cancellation will occur.
- Deductibles: If a homeowner has an inadequate amount of homeowners coverage, they may be forced to pay more out of pocket in the event that something does happen.
Reasons for Homeowners Insurance Non-Renewal.
State laws require insurance companies to inform policyholders of nonrenewal anywhere from a month to three months before the policy’s expiration date. The required number of days notice varies from state to state. In some states, an explanation for non-renewal is not required.
Be sure to check with your state’s Department of Insurance to see what the rules are for non-renewal. If you think your carrier’s non-renewal decision was unfair or you want a more detailed explanation, contact the insurance company. If you’re still not satisfied, contact your state’s department of insurance to file a complaint. When you file, your state’s consumer protections agency will evaluate the complaint to see if there was any wrongdoing on the part of the insurance company. If they determine that your insurance company was in the wrong, you may be able to reinstate your policy.
Here are a few reasons why your policy may have been non-renewed:
- You filed too many homeowners insurance claims. It’s important to note that sometimes, homeowners insurance companies will let you file one more claim before permanently cancelling your policy.
- You didn’t pay an auto or boat loan on time. These loans are considered high risk because they’re usually taken out by people with lower incomes who have a higher chance of filing homeowners insurance claims in the future due to low income and lack of money for repair costs after damage occurred. Insurance companies may not renew these if loans go unpaid.
- Your risk changed. If your homeowners coverage is too expensive, the company might not renew it.
- You’ve made any changes to your property without informing your insurance carrier (like adding a deck). This may increase the risk of homeowners insurance cancellation due to structural changes in your home.
Be sure to examine all factors when examining non-renewal rates! For example, some homeowners insurers don’t offer coverage in certain geographic areas so their cancellation is inevitable.
How Can a Policyholder Prevent Insurance Cancellation?
You can avoid homeowners insurance cancellation by:
- Being honest on your application. It’s illegal and considered misrepresentation to lie about anything on homeowners insurance applications. If you’re not truthful, the company will find out eventually when they investigate a homeowners claim or if there are other violations of homeowner policy provisions that exceed their coverage limits – like adding furniture which exceeds the limit for personal property coverage – in most states.
- Purchasing enough homeowners insurance to cover all potential damage liabilities associated with living at your home. This includes protection from fire damages, like smoke and water damage, as well as theft and vandalism or any risks specific to where you live such as earthquakes or hurricanes.
If a homeowners insurance cancellation is unavoidable, you can purchase homeowners coverage riders, which are supplemental policies to your homeowners policy that cover specific needs. These may include additional liability protection in case you have another person living with you who has their own homeowners insurance or if they’re not covered by the same company as yours. AOther examples are features such as earthquake coverage for homes located near major fault lines or flood insurability zones. If someone else owns the home but it isn’t being used as anything other than an investment property (such as rental), some insurers will offer what we call ‘condo’ homeowners insurance policies that only cover those items within the condo unit itself and don’t provide
Can a Policyholder Fight Homeowners Insurance Cancellation?
A homeowner can file a complaint to one of many state insurance regulators. They may be able to help if the homeowner’ insurer is being unfair or discriminatory when they cancel homeowners coverage. For example, cancelling a homeowners insurance policy on a property that has never had an issue before, without evidence suggesting otherwise (such as proof that a claim was filed but not paid).
How to Get a New Policy After Being Dropped
You’ll need to find a new homeowners insurer, which is often easier said than done. Most homeowners insurers don’t want anyone with a homeowner cancellation history because they have no idea how much risk they may be in the future.
If you’re looking to get homeowners insurance coverage again, it may be tough. The majority of homeowners insurers won’t offer homeowner policies to anyone who has been dropped in the past six months or so because they want to avoid risk and uncertainty.
Some companies will allow people with homeowner cancellation history back in five years after one incident as long as there have not been any other claims against your policy over that period (and all security features are up to date). Otherwise, most firms require at least two incidents before being allowed back into the homeowners plans. Some states also limit how many times an insurer can cancel a contract within three consecutive years.
Finding cheap homeowners insurance coverage after a cancellation or non-renewal will be tricky as well. Most homeowners insurers will charge a higher premium for homeowners insurance coverage after cancellation or non-renewal, as they are taking on more risk.
In some cases, homeowners insurers will let you file one more claim before permanently cancelling your policy; this is often referred to as ‘time limited nonrenewal’. This generally happens after there have been two claims over roughly five years with no major changes around your home related to safety and security measures like new locks or fire prevention systems.
You can save money on your insurance by bundling home and auto insurance together with one company. This way, you get homeowners insurance and auto coverage at a discounted rate with the same provider because they can share risk factors across both policies.
Disclaimer: This blog post is meant for general informational purposes only and may not reflect your specific policy.
About the Author:
Alekha is an expert in the insurance space and has been with the Malhotra & Assoc. Insurance team since its inception. Alekha provides expertly written and researched content for the Malhotra & Assoc. Insurance agency.