Homeowners’ insurance is in crisis nationwide. Ten to 12 percent premium increases are common. Some insurers are leaving high-risk states. But along with the exodus and high prices come cancellations.
There are several reasons why a homeowner’s policy can be canceled or non-renewed. From bankruptcy to high risk, insurers have the right to cancel or non-renewal your policy. But why do they, and what are your options if it happens to you?
Reasons Homeowner Policies Are Canceled
There’s a difference between a non-renewal and a cancellation. A cancellation happens during the policy term, while a non-renewal happens at the end of the policy. In most circumstances, an insurer can cancel a policy that’s been in effect for less than 60 days without reason. However, this number and reason may change depending on each state’s laws.There are two reasons the insurer can cancel within those 60 days, including failure to pay the premium. They can also cancel if you have committed fraud or made serious misrepresentations on your application.
During the policy term, or after the 60 days, they can cancel you under certain conditions:
- committing insurance fraud
- decline in the condition of your property, increasing the risk
- conviction of a crime that increases hazard to property
- declaration of insolvency by your insurance carrier
Why Homeowner’s Insurance Non-Renewals Are Happening
Non-renewals have become more frequent. According to a Louisiana State University survey, in 2022, 17 percent of homeowners reported non-renewed policies.Underwriting Issues Not Reported
Specific underwriting issues can lead to a policy’s non-renewal. If you’ve changed something on the property and haven’t notified your insurance agent, your policy could be non-renewed if this is discovered.For example, if you file a claim and the adjuster comes to your property and sees you have a pool that didn’t exist when the policy was first written, your policy could be non-renewed. It is wise to immediately report all changes to your property to the insurance company.
Frequent Claims Occur
Filing frequent claims could cause a premium increase. But if you’ve had an exorbitant amount of claims or high-dollar claims, you could be looking at a non-renewal. Homeowners with a lot of claims are considered high-risk and insurers avoid insuring them.Widespread Losses Cause Non-Renewals
Widespread losses, as was the case in Louisiana and the because of the wildfires in California, will trigger non-renewals. Insurance companies can write policies anywhere they want. They can also choose not to write policies. If they see a lot of the same losses like hurricanes or fire in an area, they may leave and, therefore, non-renew policies.Steps to Take When You Receive a Non-Renewal Notice
Even though you’re non-renewed, there are some actions you can take to ensure you have homeowner’s insurance. You may be able to resume coverage with your current carrier or with another one. What follows are some steps to take.Contact Your Insurance Agent
Call your agent or the insurance company directly to find out why your insurance is being non-renewed. You’ll generally have 30–60 days to find new coverage (depending on your state). But start with your insurance company to see what steps you need to take to for them to reconsider.Repair Your Property if Needed
If the non-renewal (or cancellation) is due to your home’s condition, inquire if repairing it will change the decision. Often, the insurer will give you the opportunity to fix or address the issue.For example, if you have a damaged roof, you may have 30 to 60 days to repair it before non-renewal.
Look for a New Plan
You'll need to look for a new policy. If you’re unsure where to go, call your state Department of Insurance and ask for a list of carriers doing business there. They may also provide price comparisons.
But this might be challenging if you’re being canceled for a negative action like fraud.
Government FAIR Plan
If you have no other options, you should ask your state government about the Fair Access to Insurance Requirements (FAIR) plan. Every state offers this plan.This is considered a last resort option. It tends to be pricier and you'll only receive dwelling coverages. Any other coverages will be extra.
What Happens With the Mortgage Lender
If you have a mortgage and lose your homeowner’s insurance, the carrier will notify the lender. You should also call the lender to assure them you are looking for a replacement policy.Your home is collateral for your mortgage, so your new policy must meet the lender’s requirements. Because of this, the lender has the right to buy a policy for you and charge you the premiums. This is called forced-placed or lender-placed.
Forced-placed policies usually have a higher premium than what you would find on the insurance market.
The federal government requires that the lender send you a written notice at least 45 days before they charge you for a forced-placed policy.
Take Action Immediately
If you’ve received a notice that your homeowner’s insurance is being canceled or non-renewed, you need to act fast. If possible, try to work with the insurer to fix the situation.Be prepared to find another company. If you’re having issues, contact your state Department of Insurance.
The Epoch Times copyright © 2024. The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.
