Homeowners Insurance After a Cancellation
Being dropped by your home insurance company can be frustrating. Learn how to find a new policy quickly and easily.
Homeowners insurance after cancellation, lapse or non-renewal
Receiving a notice of cancellation or non-renewal from your insurance company can be an unpleasant surprise. Home insurance cancellation can be frustrating, as finding a new policy after being dropped can sometimes be a challenge.
Because homeowners insurance is typically required by your mortgage lender, it’s imperative to find a new insurance policy in order to protect your investment and satisfy your lender’s requirements. Read on to discover why insurance companies drop policyholders, as well as how to get a home insurance policy after you’ve been dropped.
Home insurance cancellation vs. non-renewal
An insurance policy cancellation and a non-renewal each signify a break between you and your insurer, but they occur for different reasons. Let's explore each term and understand what may lead to policy cancellations and non-renewals.
Technically, a homeowners insurance company can cancel your policy for any reason within 60 days of the policy's inception. Once your policy has been active for more than 60 days, a cancellation usually only happens in one of two circumstances: non-payment of premiums or a breach of policy terms
Missing payments puts you at risk of being dropped by your carrier. Similarly, any instance of fraud can be grounds for cancellation. This may include lying about a claim or misrepresenting information on your application.
Non-renewals usually occur near the end of a policy period. If an insurer decides not to renew your policy, you will be notified beforehand. Legal notification requirements vary by state, but insurers are usually required to give customers between 30 and 60 days notice in the event of non-renewal. However, some states require 120 days written notice. Also, many states require a written notice to explain the reason why you are being non-renewed.
Bear in mind a non-renewal can come from the homeowner. If you shop around and find better coverage at a cheaper rate, moving on from your current home insurance company to another is considered a non-renewal.
Common reasons for home insurance non-renewal
There are a number of reasons an insurance provider might elect to drop a policyholder. Non-renewal may occur as a result of a policyholder’s profile, though it can also stem from a higher-level change at an insurance company. Below are some of the primary reasons for insurance non-renewal:
Reason 1: You filed too many insurance claims
Those with extensive claims history are considered high-risk by most insurance companies. Not only are high-risk homeowners more likely to be dropped by their carriers, but they also face higher insurance premiums on average when they find a new insurer. Learn more about how to get insurance as a high-risk homeowner.
Reason 2: Changes in the company’s coverage options or area(s) of coverage
In some cases, an insurer may find that certain coverages are not financially viable. This means that — at the minimum — you would essentially have a new policy after your current one ends. In some cases you could be non-renewed, forcing you to look elsewhere for coverage.
Homeowners in California and Florida have struggled with such changes in recent years as many home insurance companies have attempted to void and refuse coverage in areas prone to wildfires or other natural disasters.
Reason 3: Your insurance profile no longer meets the company's requirements
Your personal profile has an impact on whether or not an insurance company wants to provide coverage. Essentially, if the risk that you represent is too great to make financial sense, your insurer is not likely to renew your policy.
This could include situations as varied as the following:
- Business decision by the insurer: Insurance companies sometimes adjust their underwriting rules or business strategies based on a variety of factors, such as claims history in a certain area, changes in the legal environment, or exposure to certain risks. This can result in a decision to non-renew policies in certain regions or for certain types of properties.
Filing too many claims: Similar to cancellation, insurers may choose not to renew a policy if a homeowner files numerous claims within a policy term, suggesting a higher level of risk.
Significant increase in risk: If your property or the surrounding area undergoes major changes that increase the risk of damage or loss, the insurer might decide not to renew your policy. This could include additions like a swimming pool or trampoline, significant renovations, or increasing crime rates in the neighborhood.
Home left vacant or unoccupied: If a property is left unoccupied for an extended period, the risk of vandalism, theft, or unnoticed damage (like leaks) can increase. Insurers may choose not to renew policies in such cases.
Significant decrease in credit score: Where it's legally permitted to do so, insurers may use credit-based insurance scores as a part of determining risk. A significant drop in your credit score could result in non-renewal.
New liability risks: Certain additions to your home like a trampoline, swimming pool, or certain breeds of dogs can be viewed as increased liability risks. Some insurers may choose not to renew policies with these features.
Home doesn't meet underwriting guidelines: If your home doesn't meet certain updated underwriting standards of the insurer – for example, they may require certain updates on older homes (like electrical or plumbing updates) – the insurer might not renew the policy.
Common reasons for home insurance cancellation
Though it varies slightly from non-renewal criteria, homeowners insurance cancellation follows a similar logic. The difference, of course, is that cancellation can occur during the policy, indicating a more severe cause for discontinuing coverage. This is most often due to errors (whether intentional or not) on the part of the policyholder. Below you'll find some of the most common causes for insurance cancellation:
Non-payment of premiums
If you consistently fail to pay your insurance premiums on time, your insurer may cancel your policy. Payment history is a key aspect of maintaining your insurance coverage.
Filing too many claims in a short period
Insurance is designed to protect against unexpected and significant losses. If you frequently file claims, especially for small amounts, your insurer may view you as a higher risk and cancel your policy.
Significant increase in risk
If you've made major changes to your property such as adding a swimming pool or undertaking significant renovations without informing your insurer, it changes the risk profile of your home. Similarly, if your home suffers damage (like from a storm or water leak) and it's not repaired, this also increases risk.
Misrepresentation or fraud
Providing false information at the time of applying for the policy or while making a claim, like lying about the condition of your home or its contents, could result in the cancellation of the policy.
The home does not pass an inspection
Insurers may periodically inspect properties. If they find undisclosed potential risks or hazards, such as a cracked foundation or a roof in need of repair, they could cancel the policy.
If illegal activities are being conducted at the property, insurers will likely cancel the policy as this dramatically increases the risk of damage and liability.
How to get a new home insurance policy after being dropped
Home insurance cancellation can be frustrating and worrying. Finding a new policy that doesn’t drown you in higher premiums can be difficult. Chances are your search could be difficult because of the same reasons you were dropped.
However, going without coverage is inadvisable for many reasons, not least that gaps in your coverage will negatively affect your rates or ability to find affordable coverage.
The best option that most homeowners have is to shop around. While having a high number of home insurance claims is likely to make your rates higher, it’s very likely that another company will be able to offer you an affordable policy.
If you are struggling to find affordable homeowners insurance, you might consider whether or not your state offers any relief. Many states have what is known as a FAIR plan, which can help to alleviate the financial burden of those who may not otherwise be able to afford a home insurance policy. The Fair Access to Insurance Requirements (FAIR) Plan is a government-run program that can help homeowners find basic coverage. These policies do not provide as much coverage as a private plan but are an option of last resort that helps homeowners find coverage and adhere to the requirements of their lending company.
Home insurance after a lapse
Homeowners insurance lapses when a policyholder is unable to make payments for multiple monthly premiums. If you miss a payment, the insurance company will give you 30 days to complete the payment before canceling your policy. If possible, it’s best to avoid a lapse in coverage to the best of your ability. While it’s not the end of the world, it can make getting future insurance coverage slightly more challenging.
It may also be harder to get approved for another insurance policy after a lapse. Policyholders whose insurance has been canceled by the company have a more challenging road ahead when it comes to finding insurance coverage.
If for some reason your policy does lapse, you have time to get it back on track. Insurers often offer grace periods and adequate notice (usually 30 days) to pay the premium and reinstate the policy.
Why to avoid a lapse in coverage
An important reason to avoid coverage lapses is to keep your home and its contents protected. When insurance lapses, your policy is no longer valid, leaving your home and belongings vulnerable. If your home is financed through a mortgage lender that requires insurance coverage, a lapse could be costly: in the event of a lapse, your mortgage lender will find a new insurer on your behalf, often resulting in higher premiums for which you will be responsible.
How to cancel a homeowners insurance policy
If you choose to cancel your policy with your home insurance provider, you can get the process started by contacting your agent or a company representative. Generally, you cannot cancel your policy online. After you communicate your intent to cancel the policy, you will have to request this in writing by sending a letter. This letter should contain identifiable personal information like your name, policy number and the insured address. You will also need to specify the date you want your coverage terminated.
As long as the policy has been active for a minimum of 60 days, policyholders can drop their coverage at any time after this period.
Insurance companies do not charge fees or penalties if you simply choose to not renew the policy at the end of its term. However, if you cancel midway through a policy period, you should check your policy documents or call your insurer to see if a penalty would be imposed if this is the case — sometimes, it actually costs more to switch home insurance companies if there are fees involved.
This depends on your policy term and payment plan. If the policy was paid in full for the year before it was canceled, you can expect a pro-rated refund to be issued following the last day of coverage. If you pay monthly, you won't be eligible as you haven't paid enough to qualify for one.
Coverage will cease after the policy termination date. If you've switched companies, you should notify your mortgage lender as soon as possible; failing to do so can result in your lender charging you for force-placed insurance on your home, which will generally be more expensive than conventional home insurance. In worst-case scenarios, not replacing your coverage can be seen as a breach of your mortgage agreement, and can result in the lender eventually seeking to foreclose on the property. It is critical that homeowners maintain the lender's desired level of coverage and alert them to any changes in the policy.
How to save money after a homeowners insurance cancellation
In order to satisfy the requirements of your mortgage company, you will have to find homeowners coverage. Those who have had their policies canceled may find getting cheap coverage to be difficult, but there are ways to save money.
For instance, look for discounts by finding an insurance provider who can offer both home and auto insurance under the same roof. Likewise, carrying a higher deductible can also save money on monthly payments while simultaneously discouraging you from filing unnecessary claims, thereby reducing your chance of being dropped by your insurer.
Overall, the best way to save on homeowners insurance is to shop around. The Zebra can help you find insurance quotes from the nation’s top insurance companies, allowing you to compare rates and policy details.
For those who have unique homeowners insurance needs, The Zebra’s in-house insurance agents can help answer questions and find a policy that fits your needs.
Simply enter your ZIP code or give us a call at 1-888-255-4364 to get started.
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Frequently asked questions
Can homeowners insurance companies drop you in the middle of your policy term?
In short, yes, but only in certain situations. Insurance companies can usually drop you for any reason during the first 60 days of your policy. However, to be dropped in the middle of a policy period, policyholders will have had to have missed payments or committed fraud that violates the policy terms. The most common way for an insurance provider to drop insurance coverage is through non-renewal at the end of your current policy period.
Can a policyholder fight insurance cancellation?
There are steps that you can take. If you feel that your home policy is being unjustly canceled, your first course of action is to call your insurer. If that does not yield the results you are looking for, you could consider filing a complaint with your state’s department of insurance. Keep in mind, however, that a non-renewal may come about for reasons unrelated to you. This can include changes in their coverage offerings or the company simply writing fewer policies in certain areas.
How can homeowners prevent homeowners insurance from being canceled?
To avoid homeowners policy cancellation, keep your home well-maintained and pay insurance premiums on time (at a minimum). Think twice about filing claims when the damages can be fixed out-of-pocket, as too many claims can make you seem like a risk to an insurer. It can also be a good idea to have your insurance company do an inspection before writing your policy.
How do I get new homeowners insurance after being dropped?
The best option that most homeowners have is to shop around, as it’s very likely that another company will be able to offer you an affordable policy. If you are struggling to find affordable homeowners insurance, you might consider whether or not your state offers any relief such as a FAIR plan, which can help to alleviate the financial burden.
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