Being dropped by your insurance company can be frustrating. Learn how to find a new policy and potentially save money.
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.
An insurance cancellation and a non-renewal each signify a break between you and your insurer, but they occur for different reasons. 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:
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.
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.
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.
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:
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.
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 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.
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:
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.
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. This will happen at the end of your current policy period. You will receive a notice of cancellation informing you of the decision, giving you enough time to secure another home insurance policy.
Policyholders facing non-renewal or cancellation must be given between 30 or 60 days' notice (depending on your state) from an insurance company if it is planning on canceling your coverage.
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.
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. These actions — along with abiding by your insurance provider’s guidelines — can keep you from being surprised by a cancellation notice or non-renewal.
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 is a good fit for your needs.
Simply enter your ZIP code or give us a call at 1-888-255-4364 to get started.