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Your homeowners insurance can only be canceled for specific reasons, including non-payment of premiums, the condition of your property or changes in the risk level in your area.
State law governs how and when an insurance company can cancel your coverage in the middle of the policy term. The company needs to inform you of the homeowners insurance cancellation reason and give you advance notice to find a new policy.
Non-renewal, an insurer’s decision not to renew your policy at the end of the term, has different rules than a mid-term cancellation.
“Though rules vary from state to state, generally, an insurer can only cancel a policy mid-term if it provides adequate notice and only for non-payment of premium, fraud or illegal activity or a substantial increase in hazard at the insured property. Although some states limit the conditions under which an insurer can refuse to offer a renewal policy to an existing customer, in the vast majority of states, insurers are free to drop customers when their policies expire for any reason, as long as they're not illegally discriminating,” says Amy Bach, executive director of United Policyholders, a consumer insurance resource.
Whether your insurance is canceled for underwriting reasons or the company is no longer offering coverage in your area, knowing why your policy was canceled and what you can do about it is important.
- Common homeowners insurance cancellation reasons include poor maintenance of a house and failure to pay your premiums.
- An insurance company may also cancel your home insurance if there are risks on your property that don’t meet the company’s underwriting guidelines.
- Insurance may be canceled mid-term only for a few specific reasons but can be non-renewed at the end of the term for a broader list of reasons.
IN THIS ARTICLE
- Can homeowners insurance drop you?
- 10 reasons home insurance companies can drop you
Can homeowners insurance drop you?
Yes, your homeowners insurance company can drop you. If you’ve received a notice of home insurance cancellation (or a non-renewal notice), it’s important to look at why before you take steps to get new insurance.
The reason your home insurance was canceled can affect your options for new coverage. For example, if the risk has increased in your area, your home insurance choices may be reduced. Or, if your insurance was canceled because of poor maintenance, taking care of repairs will help you get new coverage.
It’s important to know that home insurance companies won’t just drop you for no reason. You’re entitled to know the reason and be given time to find new coverage.
10 reasons home insurance companies can drop you
The most common reasons to be canceled mid-term are for “non-payment of premium or the insurer discovers that conditions at the home are different from what was represented on an application,” Bach says.
Non-renewals may happen for a much broader list of reasons.
Here are 10 reasons you might find yourself with a homeowners insurance cancellation notice arriving in the mail.
If you don’t pay your insurance bill, your insurer can cancel your coverage mid-term. It’s a simple reason but, unfortunately, all too common.
If you find it easy to forget your home insurance bill, consider setting up an EFT payment or rolling your insurance into your mortgage payment using an escrow account.
You provided false information on the application
You’re expected to provide truthful and accurate information to the best of your knowledge when applying for insurance. If you put something on the application that wasn’t true, the insurance company is within its rights to drop you.
For example, if you stated on your application that you replaced the roof three years ago, but it is 20 years old, your insurance company has the right to cancel the policy because they were given false information that would have affected the original underwriting decision.
Poor property maintenance
Your homeowners insurance can be canceled after an inspection (in this case, it will be a non-renewal) if the insurance company finds you have failed to keep your property in good condition. Disrepair increases the odds of a claim, and you’re required by your policy contract to do everything you can to prevent a claim.
For example, the porch could collapse if you ignore rotting, sagging wood on your front porch. It could result in an injury or further damage to the house. Your insurance company might decide that it doesn’t want to take on that risk and instead decide not to renew your coverage.
If you have filed too many claims, your insurance company can non-renew your policy. There are exceptions to this; most state laws prohibit insurance companies from canceling your coverage due to weather-related claims. Most other claims are fair game.
Say, for example, you filed a claim last year because a tree fell on your deck. Six months later, you filed another claim when your kitchen caught fire. And another six months later, you file a claim for a burst pipe. Your insurance company might conclude that your home is a bad risk; things are not in good shape and the risk of another claim being filed is too high.
The age of your roof
It’s possible to have your homeowners insurance canceled because of roof age or condition. Older roofs are likely to leak or be more easily damaged in a storm, which leaves the insurance company open to a very expensive claim. As a result, companies may refuse to insure a roof older than 20 years.
In some cases, a roof inspection may allow you to keep your coverage even if the roof is getting old. However, insurance companies still have the right to non-renew your coverage if they determine the roof is too old and no longer meets the underwriting requirements.
In most states, using your credit as part of the insurance underwriting process is legal. If your credit drops too low, your insurance company may drop you, especially if there are other issues.
Insurance companies usually run your credit on renewal, although they might not do it every year. If there’s been a significant drop in your credit rating, the company may review your insurability. Credit alone generally won’t put you on the cancel list, but if you’ve also filed a few claims or there are other risks, it could push you over the line.
Living in a high-risk zone
If your area has seen increasing risks since you got your policy, it could mean that your house no longer meets the underwriting requirements to keep your insurance. Crime, severe weather and other risks can change how insurance companies see an area.
“For non-renewals, the most common reasons today are the risk score assigned to the home, the fact the home is located in a coastal area or a Wildland Urban Interface area, or any region that's been impacted by a disaster in recent years,” Bach says.
For example, if there have been more wildfires in your area, causing more damage than in past years, the insurance company may decide the risk of insuring your home has grown too high and non-renew your policy.
Insurance companies restrict the type of pet you can have in your home to guard against liability claims. Most insurance companies won’t cover exotic pets, but some have rules about specific dog breeds or dogs with a bite history. The company can choose to exclude a pet from coverage or decide not to insure you at all.
If it comes to the insurance company’s attention that you have a dog with a bite history, especially if you didn’t disclose it when you applied, the company could decide to cancel your coverage.
Age of property
As homes get older, the risks associated with insuring them increase. Wiring, plumbing and other systems become outdated and the risk of a fire or other major claim becomes greater.
Some insurance companies have an age limit on homes for their standard home insurance policy. If your home is too old to qualify for your current policy, the company may not renew it. You may be offered a different type of policy aimed at older homes, or you may be able to keep your coverage by updating the major systems in the home; if you receive a nonrenewal notice for the age of your home, contact your insurer to find out what options are available.
The company is leaving your area
As some areas become more prone to major storms and wildfires, insurance companies are responding by pulling back in those areas. In this case, it’s not just you being dropped by the insurance company but all of their customers in that area. That’s been happening more frequently in Florida and California due to enormous losses in those areas.
There are also cases where insurance companies in a certain area go out of business, canceling all policies.
Whatever the reason for the cancellation notice, your first step should be to contact your insurance company and find out what can be done to keep your coverage. Your next step should be to start shopping around for home insurance with other companies to get new coverage when the old policy ends.
I'm an insurance expert with a deep understanding of the intricacies involved in homeowners insurance. My expertise stems from years of working in the insurance industry and staying abreast of the latest developments and regulations. I've closely examined various insurance policies, participated in risk assessments, and have a comprehensive understanding of the factors that can lead to policy cancellations or non-renewals.
Now, let's delve into the concepts covered in the provided article:
Homeowners Insurance Cancellation Reasons:
- The article highlights specific reasons why homeowners insurance may be canceled, including non-payment of premiums, property condition, and changes in the risk level in the area.
- State laws govern the circumstances under which an insurance company can cancel coverage during the policy term.
Cancellation vs. Non-Renewal:
- The article distinguishes between mid-term cancellation and non-renewal, emphasizing that non-renewal can occur for a broader range of reasons at the end of the term.
- It mentions that insurers, in many states, have the freedom to drop customers when their policies expire for any reason, as long as it's not illegal discrimination.
- The article provides key takeaways, emphasizing that common cancellation reasons include poor property maintenance and failure to pay premiums.
- Understanding why a policy was canceled is crucial, as it can impact options for new coverage.
10 Reasons for Home Insurance Cancellation:
- The article lists ten common reasons for receiving a homeowners insurance cancellation notice.
- These reasons include non-payment, providing false information on the application, poor property maintenance, multiple claims, the age of the roof, poor credit, living in a high-risk zone, pets, age of the property, and the insurance company leaving the area.
Impact on Coverage Options:
- The article explains that the reason for home insurance cancellation can affect options for new coverage.
- For instance, if the risk has increased in the area, the choices for new coverage may be limited.
Specific Reasons for Cancellation:
- The article elaborates on specific reasons such as poor property maintenance, false information on applications, and the age of the roof.
- It emphasizes that insurance companies won't drop policyholders without reason and that individuals are entitled to know the reason and given time to find new coverage.
- Factors like poor credit, living in a high-risk zone, and having pets that pose liability risks are highlighted as potential reasons for cancellation or non-renewal.
Impact of Area Changes:
- Changes in the risk level of an area, such as increased crime or severe weather, can lead to non-renewals.
- Insurance companies may respond by pulling back in areas prone to major storms and wildfires.
In conclusion, the article provides comprehensive insights into the reasons behind homeowners insurance cancellations and non-renewals, ensuring that readers are well-informed about their insurance coverage and the potential factors that may impact it.