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A homeowners insurance policy is designed to protect you from financial devastation should your home be damaged or destroyed by a covered peril, whether it’s a windstorm, hail, lightning strike, fire and smoke or another type of peril. While homeowners insurance may not be top of mind every day, having the right type and amount of coverage can give you peace of mind that you’re protected should the unexpected occur.
On the other hand, learning that your homeowners insurance policy was canceled or nonrenewed can be stressful and frustrating. But the reality is that it can happen, and you need to know why and how to resolve the issue if it does. Understanding the types of home insurance cancellations, the causes of these issues and what you can do about each scenario could be the key to feeling more confident when managing your homeowners insurance policy or preventing a lapse in coverage.
Types of homeowners insurance terminations
There are several different types of homeowners insurance terminations. Some have easy solutions, while others might mean you need to find a new insurance company to avoid a lapse in coverage. These types of cancellations apply to condo and renters insurance as well. The three common reasons for cancellations are:
A homeowners insurance lapse may be the simplest type of issue to fix if you handle it quickly. A policy typically lapses if you failed to make your premium payments. Having a coverage lapse could put you at financial risk of having no insurance if your home is broken into or disaster strikes.
Most homeowners insurance companies offer you a grace period in which you can make your payment to reinstate your coverage. If you are responsible for making your premium payment, paying your overdue bill right away is the fastest way to resolve a lapse in coverage issue, as long as you are still within the grace period. If your mortgage company pays your insurance from an escrow account, you may need to call your mortgage lender and request that they release the payment immediately if it has not been paid on time.
Nonrenewals can be initiated by you or your carrier. You may decide to initiate a nonrenewal if you have gotten quotes from other companies and decided to switch insurance carriers at your renewal date. Your insurance company may also decide not to renew your policy for several reasons, including your claims history and the condition of your home. If you no longer fit into the company’s underwriting profile for any number of reasons, your policy may be nonrenewed.
In other cases, your insurance carrier may no longer operate in your area or might withdraw coverage after a series of costly claim scenarios in your community or state, such as a major flood or other natural disasters. Regardless of the reason, state regulations require insurance companies to notify you in writing if they decide not to renew your homeowners insurance at the end of your current policy term and explain why they are not renewing your coverage. When issuing a nonrenewal, insurers are required to provide you with advance written notice ranging from 30 to 120 days (regulations vary by state) to allow you enough time to shop around and find alternative coverage. According to the Insurance Information Institute (Triple-I), you may not necessarily be charged a higher premium when switching to another carrier because of a nonrenewal, depending on the circumstances that led to your insurer’s decision.
As with nonrenewals, either you or your insurance company may initiate a cancellation. Cancellations differ from nonrenewals in that the last day of coverage does not necessarily coincide with your policy’s renewal date. For example, if your homeowners insurance policy starts and ends on January 1 every year, a nonrenewal notice will not become effective until the end of your current policy term. A cancellation notice can stop coverage anywhere within the policy term with advance notice required by your state’s insurance regulations.
Insurance companies may choose to cancel your policy for a number of reasons. If you misrepresented yourself or omitted information during the application process, for example, your policy may be canceled, even if you have only recently purchased your home and policy.
One of the most common reasons that insurance companies cancel home insurance policies is related to inspections. Insurance companies generally do exterior inspections of homes when new policies are written, and on occasion after that. For example, if your roof is in poor condition, your home has structural issues or your company discovers that you own an ineligible dog breed, you may receive a cancellation notice requiring you to correct the issues or risk your policy being canceled altogether.
Insurance companies are required by state laws to send you a written notice of cancellation. Typically, companies must give you at least 30 days of notice based on your state’s insurance regulations. This gives you time to discuss the cancellation with your carrier, and correct any concerns so that the company will continue coverage or find a new home insurance company.
A policyholder can also initiate a home insurance cancellation. Perhaps you found a cheaper company or you have sold your home. You can call your agent or carrier to request that your policy be canceled on a specific date. You may need to sign a cancellation form to confirm your request. You may also be entitled to a prorated premium refund if paid in advance for the entire policy term.
What to do if your homeowners insurance is canceled
Depending on the type of notice you receive, you may either need to take steps to remedy the problem or find new coverage. Here is an overview on what to do for each type of notice:
- A notice of lapse in coverage: If you receive a homeowners insurance policy lapse letter, contact your insurance carrier or agent right away and make any past-due payments. Once you have reinstated your policy, you may also need to notify your lender to avoid a “forced-placed” policy, which is a policy purchased by your mortgage company that you are required to pay for.
- A notice of non-payment: If your homeowner’s insurance is paid through your escrow account and you receive a notice of non-payment, it is important to contact your lender right away. There may be a simple clerical error or there could be a larger issue that you need to remedy directly with your lender.
- A notice of nonrenewal: If you receive a nonrenewal notice, your first step is to find out why your policy is being terminated. The letter you receive may include an explanation, or you could call your carrier or agent to get more information. Depending on the situation, you may be able to make changes to your home or policy that will satisfy the insurance company and allow you to keep your coverage.
- A notice of cancellation: If you receive a cancellation notice, talking to your insurance company or agent is a good first step. If your homeowners insurance was canceled after an inspection, you might be able to make the necessary changes to your home, like repairing or replacing a deteriorated roof. This could be enough for the company to rescind the cancellation and keep your coverage.
If you are not able to remedy the issue or convince your insurance company to keep your policy, it may be time to look for a new policy. Unfortunately, it may be harder to find coverage after a cancellation or nonrenewal, especially if you have numerous claims or your home is in poor condition. If you are having trouble finding affordable home insurance after a cancellation, it may benefit you to check around for providers offering coverage for high-risk homeowners in your area.
Frequently asked questions
There are many reasons why your home insurance could be canceled or nonrenewed. Your insurer is required to provide you with a cancellation or nonrenewal notice containing an explanation for their action and giving you a specified amount of time before your coverage ends. Your coverage may have lapsed for nonpayment of premium, your insurance company may decide not to renew your policy due to claims you have made or significant issues may have been discovered during the insurer’s inspection of your home, among other reasons. In hurricane-prone states such as Florida, your insurer may issue a nonrenewal notice because your roof is more than 10 years old, regardless of its condition.
You may be able to contest a cancellation or nonrenewal, depending on the situation. If you have an agent, they may be able to work directly with your insurer’s underwriter to come to a compromise, or you could call your company directly. If you have filed numerous claims, for example, you may be asked to increase your deductible or remove a certain coverage in exchange for the company keeping your policy. However, it may be a good idea to get quotes from other home insurers as a backup so that you are not left scrambling to find coverage in a short time if your negotiations fail.