A home insurer can drop your coverage for several reasons, such as failing to pay your premiums.
The rise in costly natural disasters—triggering billions of dollars in insured losses each year around the country—has prompted some home insurers to drop policyholders in certain parts of the United States where risks are high. But that’s not the only reason insurers might drop you. Other potential reasons include failing to pay premiums, lying on your policy application, or filing too many claims.
If a home insurer drops you as a policyholder, there are steps you can take toward correcting the situation. Read on to find out what options you may have.
KEY TAKEAWAYS
- Your home insurer can drop you for several reasons, including failing to pay premiums or living in a high-risk area.
- A home insurer is required to provide a written notice of its decision to cancel or not renew your policy.
- If you disagree with your insurer’s decision, you can file a complaint with your state’s insurance regulator.
- Once you’ve exhausted all your other options, you may be able to purchase coverage through your state’s “last resort” insurance program, often known as a FAIR plan.
What Happens if You Lose Your Home Insurance?
One of the obvious consequences of going without home insurance is the potential for suffering financial losses if something happens to your home, such as damage from a tornado or destruction by fire. In these instances, you could be stuck with tens of thousands of dollars in repairs—or costs to replace your home.
Another consequence of lacking home insurance could be that your mortgage lender buys it for you.
Mortgage lenders typically require borrowers to insure their homes. So, if you wind up without coverage, your mortgage lender can buy insurance and charge you for it. This coverage is known as force-placed insurance or lender-placed insurance.
Force-placed coverage might cost twice as much as what you’d normally pay for home insurance, according to the Consumer Financial Protection Bureau. On top of that, force-placed coverage generally protects the lender, but not the homeowner.1 It has limited coverage and typically doesn’t cover personal items or owner liability.
Note
Federal law requires your mortgage servicer to give you at least 45 days’ notice before charging you for force-placed insurance.
Reasons for Home Insurance Cancellation or Non-Renewal
Reasons for cancellation or non-renewal of your home insurance include:
- Living in a high-risk area. Doug Heller, director of insurance at the Consumer Federation of America, said that if you live in a high-risk area—such as one prone to wildfires—or in an area where disaster risks are rising, a home insurer might decide against renewing your policy.
- Failing to pay premiums. If you’ve gotten behind on premium payments, a home insurer can cancel your coverage even before your policy expires.
- Frequently filing claims. A home insurer might decide against renewing a policy if you’ve filed numerous insurance claims. Heller said the triggers for non-renewal in this scenario differ from insurer to insurer. “Depending upon the company,” he said, “even making an inquiry about a possible claim can count against you when an insurer decides to non-renew.”
- Committing insurance fraud. If a home insurer discovers you lied on your policy application or filed a fraudulent claim, it could immediately drop you as a policyholder. “When filling out an insurance application,” Heller said, “you are expected to provide correct and accurate (information) to the best of your ability.”
- Letting your home deteriorate. If your home is in worse shape than when you bought it, and you haven’t made insurer-required repairs before a specific deadline, the insurer might not renew your policy. For example, some insurers drop consumers based on the age or condition of their roofs.2
- Leaving your home vacant. When your home has gone unoccupied for 60 days or more, your home insurer might decide against renewing your policy.
What to Do if Your Home Insurance Is Canceled or Non-Renewed
If your home insurance is canceled or is not renewed, here are some of the moves you can make:
- Ask your insurer to reconsider its decision. Heller recommends asking your insurer what triggered the decision and what supporting evidence it has, and then potentially asking if the insurer can reverse the decision.
- File a complaint with your state’s insurance department. If you disagree with the reason for the cancellation or non-renewal, filing a complaint might lead to restoration of your coverage, Heller said.
- Tell your mortgage lender. Your mortgage lender doesn’t want to be surprised by your home insurer’s decision to drop you. Therefore, be proactive and notify the lender before your insurer does.
- Shop for a new policy. If your insurer alerts you that it has canceled or isn’t renewing your policy, search for new coverage before your current policy expires. Ideally, you should compare quotes from at least three highly rated insurers.3
- Reduce your risk. If your insurer dropped you because of issues tied to risk, look into reducing or eliminating the risk. For example, you might clear the brush around your home if you live in a wildfire-prone area or strengthen your roof if you live in a hurricane-prone area, Heller said.
- Fix your home. When an insurer drops you because your home is in poor condition, you might be able to restore your coverage by fixing the items cited by the company. For instance, Heller said, you may need to replace your roof or reinforce your front porch.
Fair Access to Insurance Requirements (FAIR) Plan
If you can’t find coverage from a private insurer, you may be able to buy a policy through your state’s “insurer of last resort,” a Fair Access to Insurance Requirements (FAIR) plan.
Most states operate a FAIR plan that provides basic coverage to homeowners who can’t get it from a private insurer. This coverage might cost more than what you’d be able to get on your own in the private insurance market, and it may provide less coverage.4
Note
FAIR plan regulations and structures vary by state. Some states have other mechanisms (such as assigned risk plans) that are similar to FAIR plans.
Frequently Asked Questions (FAQs)
What’s the Difference Between Cancellation and Non-Renewal?
Non-renewal refers to your insurer deciding not to extend your coverage when your policy expires. Cancellation means your insurer will halt coverage before the policy’s expiration date. In both situations, your insurer is generally supposed to notify you in advance.5
How Many Claims Can I Make Before My Home Insurance Company Cancels My Policy?
Each insurer sets its own rules regarding the maximum number of claims it takes to trigger non-renewal. Most insurers have become stricter about the number of claims you can file before you’re labeled a high-risk policyholder.
Is It Hard to Get New Home Insurance After My Company Drops Me?
If your home insurance has been non-renewed or canceled, you might find it more difficult to find another insurer willing to sell coverage to you. If your coverage was dropped for a specific reason–like your roof is too old–you may have to address that concern before insurers are willing to cover you. But if you live in a high-risk area, it may be difficult to get traditional coverage at all. You may have to turn to your state’s FAIR plan instead.
Can My Home Insurance Be Canceled Without Notice?
In most states, an insurer typically must provide a written notice at least 30 days in advance that your home insurance is being canceled.
Can I File a Complaint if My Home Insurance Is Canceled?
If you believe your coverage is being unfairly canceled, you can file a complaint with your state’s insurance regulator. This might result in your insurer reversing its decision.
The Bottom Line
If your home insurance provider drops you through non-renewal or cancellation, one of the first steps you should take is to contact your insurer to get a thorough explanation for its decision. Then, you can consider filing a complaint with your state’s insurance regulator. If you’re still without coverage, you should shop for a policy from another insurer or secure coverage through your state’s last-resort insurance program.
Going without home insurance may get you in trouble with your mortgage lender. It may also put you on the hook for thousands of dollars in expenses to fix or replace your home if it gets damaged.
