- Insurance providers may cancel your homeowners insurance if you pose too great of a risk.
- Your policy may have been dropped due to poor claims history or a change in underwriting guidelines.
- Shop for alternative insurance providers that offer coverage to high-risk homeowners.
Your homeowners insurance policy protects what is probably your largest investment. However, in recent years, U.S. insurance providers' exposure to risk has grown amid an increased frequency of catastrophic events, population migration into high-risk regions, and inflated rebuilding costs. As a result, insurers have been more carefully managing their exposure and the potential for financial losses.
Here's what to do if your policy is canceled and how to get homeowners insurance after being dropped.
Why Homeowners Insurance Policies Get Dropped
The non-renewal of your policy ultimately comes down to your insurer managing its exposure. Your provider most likely determined that you and your home are too much of a liability. Here are a few specific reasons your home insurance provider may have chosen not to renew your policy:
Common Reasons for Policy Cancellations and Non-Renewals
Non-Payment of Premiums
Failure to pay your premiums on time is one of the most common reasons for policy cancellation. Insurers typically provide a grace period, so if you miss a single premium payment, you may still have a few weeks to catch up. However, consistent late payments can lead to termination of your policy.
High-Risk Property Conditions
If an inspection determines that your home is unsafe due to potential fire hazards and tenuous structure, your insurer could refuse to renew your policy unless you address those issues.
Fraud or Misrepresentation
Insurers take fraud seriously, so if you provide false information or fail to disclose important details when applying for insurance, they can drop your policy if they find out.
Claims History
If you have too many home insurance claims on your record, your insurer may decline to renew your coverage. For instance, if you have two fire-related claims, you may see a 60% increase in premiums. After the third claim, your insurer may choose to drop you because of the risk that you'll file another one.
Increased Risk Factors
For example, if you adopted a pet during your coverage that insurance companies usually blacklist, you might be at risk for non-renewal since aggressive, large breeds pose a liability risk.
The Difference Between Cancellation and Non-Renewal
Cancellation means your policy is terminated before its term ends, usually because of issues like non-payment or fraud. Non-renewal, on the other hand, is when your insurer decides not to extend your policy when it expires.
Steps to Take If Your Homeowners Insurance Is Canceled
Here's what to do if you receive a notice from your homeowners insurance provider that your policy is getting canceled.
Step 1: Contact Your Insurance Company for an Explanation
While your insurer should give the reason for the non-renewal through a written notice, speaking with an insurance agent could give you more clarity.
An independent agent could help you understand any changes in exposure and what to do moving forward, according to Jason Bataille, division growth leader at World Insurance.
"A knowledgeable agent with proper geographically specific carriers would normally be able to provide you with options and limit the downside of reduced coverage or increased price," he says.
Step 2: Ask If You Can Reinstate or Modify Your Policy
Before you start shopping for a new policy, ask your insurer if there's a way to reinstate your existing coverage. In some cases, cancellations can be reversed if you're able to address the issue that triggered it, such as catching up on a missed payment or updating outdated information.
Step 3: Address Any Issues That Led to the Cancellation
Once you figure out the reason for your cancellation, address the issue. For example, if your insurer chooses not to renew you because of a failed inspection, take steps to fortify your home against damage.
You may also consider purchasing extra coverage to protect your investments, such as flood insurance or earthquake insurance. Having additional coverage is especially important if you live in a high-risk area.
Step 4: Shop for a New Homeowners Insurance Policy
If you aren't able to fix the problem or convince your homeowners insurance company to keep your policy, you'll need to find insurance elsewhere. Consider working with an independent insurance agent who can connect you with insurers who are open to covering high-risk homes. Just make sure to be honest about your situation when you apply for new insurance to avoid any more issues down the line.
Step 5: Consider State-Backed Insurance Options
Another option worth exploring is the Fair Access to Insurance Requirements (FAIR) Plans that many states offer. Here's how it works: Rather than having a single carrier, this type of policy is collectively backed by a pool of insurers, which helps lower their individual risk in insuring high-risk homeowners. This means that if you file a claim, the insurers all pay a portion of the benefit.
According to III, FAIR Plans cover fire, vandalism, riots, and windstorms, but these policies may cost more than private insurance and offer less coverage.
How to Find a New Homeowners Insurance Policy
Here's how to get homeowners insurance after being dropped.
How to Compare Homeowners Insurance Providers
To compare homeowners insurance quotes, know what's going into each policy's coverage to make the best apples-to-apples comparison. A standard homeowners insurance policy will include dwelling, personal belongings, liability protection, and coverage for additional living expenses. Ensure any additional coverage you want is included in your quote.
Companies That Offer Coverage for High-Risk Homes
If you've been dropped by your insurer, look for companies that specialize in high-risk properties or offer broader underwriting guidelines. For example, Foremost Home Insurance offers high-risk home insurance policies for older homes as well as those with a history of claims or bad credit.
Tips for Lowering Your Premium After Getting Dropped
Getting dropped from your homeowners insurance means you may have to pay higher premiums in the future or face coverage limitations. But there are a few ways to soften the blow. The most straightforward one is to ask your new insurer if they offer any discounts. You could also raise your deductible, which means you'll pay more if something happens, but your monthly premium could drop. Keeping your home in good shape and avoiding small claims can also work in your favor.
What to Do If You Can't Get Homeowners Insurance
As mentioned earlier, if your homeowners insurance policy is dropped, you can find coverage elsewhere by looking into FAIR plans or high-risk insurers. But if you prefer other options, here are a few alternative ways to protect your home and finances in the meantime.
Alternative Options for Protecting Your Home
- Build an emergency fund: Your emergency fund won't replace a full policy, but it can help you avoid going into debt after a minor incident.
- Look into named-peril policies: Named-peril policies offer limited coverage for specific risks (like fire or theft) and can be easier to qualify for than standard policies.
- Consider a home warranty: Though a home warranty isn't a replacement for homeowners insurance, it can cover things like HVAC, plumbing, or appliance breakdowns. You can find our guide to the best home warranties here.
- Strengthen your home's defenses: Investing in upgrades like a new roof or a security system can keep your home safe and help you qualify for insurance later on.
Preventing Future Policy Cancellations
Having your homeowners insurance dropped can leave you vulnerable to potential damages and financial challenges. Here are some ways to lower the chance of that happening.
Keeping Up with Home Maintenance & Repairs
Failure to properly maintain your home not only raises the risk of claims but can also pose a threat to your family's safety. You can keep your property in good condition by maintaining your landscaping, ensuring systems like plumbing and electrical are in good shape, having your roof regularly inspected for damage, etc.
Avoiding Multiple Claims That Raise Red Flags
As mentioned earlier, if you have too many claims on your record, your insurer may decline to renew your coverage. So, avoid filing claims for issues that aren't covered by your policy. Also, if the repair or replacement cost of a damage doesn't exceed your deductible, it'll make more financial sense to just pay for it yourself instead of filing a claim.
Maintaining a Good Credit Score & Insurance History
A solid credit score signals that you're responsible and pay your debts and bills on time, which makes you less of a risk in an insurer's eyes.
So, to avoid getting your homeowners insurance policy dropped again, you'll want to stay on top of all your debt payments and keep your overall debt low to build your credit. The more reliable you look on paper, the better your chances of keeping your policy in good standing.
Shop for a new homeowners insurance policy
FAQs
Why would my homeowners insurance be dropped?
Your homeowners insurance can be dropped due to common reasons like multiple claims, failure to maintain the property, living in a high-risk area, or insurer business decisions.
Can I get my homeowners insurance reinstated?
You could get your homeowners insurance reinstated in some cases. If the issue is minor (e.g., a late payment or small repair), your insurer may allow you to reinstate the policy.
How do I find a new homeowners insurance company?
To find a new homeowners insurance company, you'll want to obtain multiple home insurance quotes and compare them side-by-side. You may want to work with an insurance broker.
What if no insurance company will cover my home?
If no insurance company wants to cover your home, look into state-run FAIR plans, which provide last-resort homeowners insurance.
How can I prevent my homeowners insurance from being canceled?
To prevent your homeowners insurance from being canceled, you'll want to keep up with home maintenance, avoid filing small claims, and stay informed about changes in your insurance provider's policies.
