When you have a homeowners insurance policy, you enter into a contract or agreement with an insurer. While there are protections as the policyholder, know that insurers typically reserve the right to cancel the policy if conditions aren’t met.
Failure to have insurance coverage can lead to some serious repercussions, leaving your family exposed to accidents and catastrophes. Therefore, it's important to understand why insurers may cancel your policy and how to prevent it in the first place.
Table of Contents
In this article, you will learn answers to the most frequently asked questions about insurance cancellation:
Q. What Are Common Reasons Why Home Insurance Is Cancelled?
Q. Are Insurance Carriers Required to Give You A Warning Before Cancellation?
Q. What Happens After My Insurance Policy Is Canceled?
Q. How Can I Prevent My Homeowners Policy From Being Cancelled Or Not Renewed?
Q. What Happens To My Mortgage If My Homeowners Insurance Is Cancelled?
Q. What's So Great About Independent Insurance Agents?
If you’re worried about your policy being canceled or it's already happened, you should speak with an independent insurance agent immediately. Independent insurance agents are able to assess your situation and recommend how to proceed in the best way possible.
Are Insurance Carriers Required to Give You a Warning Before Cancellation?
If you’ve had your policy for more than two months, insurance companies can only cancel your policy if you haven’t paid your premiums or if you’ve engaged in fraudulent behavior. Even so, an insurance company can refuse to renew your policy at the end of its term for the aforementioned reasons.
Generally speaking, an insurer will give you at least 10 to 20 days before canceling your homeowners policy. For nonrenewal of your homeowners policy, the insurer must give you a 45-day window to find other insurance coverage. So at least you'll have time to find a proper solution.
What Happens After My Insurance Policy Is Canceled?
As mentioned, you have a time frame to make sure that you have no lapses in insurance coverage for your home. During this period, it is extremely important to get your home covered as soon as possible.
If you do not have insurance coverage for your home, you leave your home susceptible to various risks. If, for example, a fire breaks out in your home without insurance coverage, you will have to pay for those repairs out of pocket.
Also, depending on the reason for your policies termination, it may be harder to obtain a new policy in the future. If you believe it wasn’t due to your actions, such as a company restructuring the way it provides coverage, you shouldn’t have a problem finding a new insurer.
However, if your policy was canceled for reasons that you were held responsible for, finding a new policy can be now more challenging. The reason for this is there are records of your insurance history compiled in a database known as Comprehensive Loss Underwriting Exchange (CLUE). CLUE reports tell insurance companies about your insurance history, which factors in whether a company decides to underwrite your homeowners policy.
Last, if you don’t own your home outright and have a mortgage, your home loan may be affected. See “What Happens To My Mortgage If My Homeowners Insurance Is Canceled?” below.
For more information about challenges you may face if your insurance is canceled, contact an independent insurance agent today. They can look into your insurance history and provide you with an accurate idea of your current insurability and what course of action you should take.
How Can I Prevent My Homeowners Policy From Being Canceled or Not Renewed?
There a few ways to make sure that your homeowners insurance policy isn’t canceled:
File fewer claims
First, make sure that you don’t file a claim unless it is necessary. Policyholders that file more claims are typically regarded as more risky than others, which can lead to being dropped. Of course, this means that you should:
- Fix and maintain your home as needed to prevent liability exposures
- Perform routine inspections with the help of a professional
- Pay for small repairs out of pocket
Increase your deductible amount
It may seem counterintuitive, but establishing high deductibles on your homeowners insurance policy can prevent a cancellation. While you’ll end up paying more upfront for insurance coverage, high deductibles decreases the likelihood you’ll file a claim. Furthermore, you enjoy lower premium amounts as an added benefit.
Contest your cancellation
Facing a cancellation? You have options.
If you believe that your cancellation was unfair, be aware that you have the ability to contest your cancellation and maintain coverage.
Perhaps the easiest way to contest your cancellation is by speaking with the insurer since they canceled the policy in the first place. And if they can give you the exact reason why they canceled your policy, you will have some insight for the future. Some insurers cancel policies based on the uninsurability of your house, so you may be able to take action and get coverage as soon as possible, like removing risk factors.
Another possibility is that your insurer might even take you back on the policy. For example, if you are waiting for a contractor who has been delaying repairing your home, that might be a valid reason. Or if you’re in the process of selling your second home and plan to move back into your primary residence, the insurer may reevaluate your policy and interrupt a cancellation.
Failing this, you do have the opportunity to reach out to your state's department of insurance and file a complaint against the insurer. If it is determined that your case is valid, the department will take further action and may prevent or suspend some of the negative effects of the policy’s cancellation.
What Happens to My Mortgage if My Homeowners Insurance Is Canceled?
Lapses in homeowner insurance coverage can significantly affect your home’s mortgage. Because the lender wants to have some assurance that their investment — lending you money to own a home and the home itself — mortgage lenders usually require homeowners insurance coverage for the duration of the mortgage. This means that you must have coverage that insures an amount equal to or greater than what remains on your loan balance.
Some lenders will even go as far as insuring your home themselves and charging you for this expense. This type of insurance tends to be more expensive than standard homeowners insurance policies, which can compound your problems if you’re having financial troubles.
Therefore, it is important to get a new policy as soon as possible if you face an insurance cancellation. Speaking with an independent insurance agent immediately can give you insight into your options. For example, an independent insurance agent can recommend other insurers that you qualify for and offer more coverage. Or they can get answers from the insurer that canceled the policy and pinpoint what you need to do to move forward.
What Makes Independent Insurance Agents So Great?
Independent insurance agents are experts when it comes to finding homeowners the perfect insurance coverage to protect. But your relationship doesn't just stop there. Your agent is only a phone call away and always ready to help adjust your coverage or work with you whenever there's a problem. That means if you ever have a problem, like your insurance is going to be canceled, they'll be there to help you fix things where it's possible and work to find the perfect solution for you.
TrustedChoice.com Article | Reviewed by Paul Martin
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