Types of Insurance / Homeowners Insurance / Cancellations and Nonrenewal
What to Do When Your Home Insurance Company Drops You
Getting dropped by your insurance doesn’t mean you’re out of options. Read your notice and use a few simple steps to fix the problem, or start your search for new coverage right away.
You just received a nonrenewal or cancellation notice in the mail – what do you do now? Depending on the reasons behind your cancellation, you could have a variety of options before your homeowner’s insurance policy expires. The first thing you might ask yourself is, can an insurance company cancel your policy? Yes, insurance companies can cancel your policy at any time if you’ve stopped paying your bills or they suspect fraud. They can also choose not to renew your policy if you file too many claims or they’re no longer interested in doing business in your state, as some homeowners in California and Florida have learned.
Why is your homeowners insurance company dropping you?
The most important thing to do when you learn your insurance is dropping you is to figure out why. This requires understanding if you’ve received a cancellation or nonrenewal.
- A cancellation occurs at any time during your policy period and is only allowed if you haven’t paid your premiums, have committed fraud, or have seriously misrepresented the details of your home.
- A nonrenewal, however, occurs before your policy renews and just means that a company has decided not to offer you a policy for another year. This can also happen for reasons that are outside of your control – such as your insurance company leaving your state.
Reasons an insurance company can cancel your policy
- Fraud – Committing insurance fraud by seriously misrepresenting your home, household, or filing false claims can not only lead to lawsuits and fines, but insurance companies are allowed to cancel your insurance at any time if they find you’ve committed insurance fraud. Fraud also affects your ability to purchase insurance with other companies and will raise your rates.
- Not paying your premiums – If you’ve had frequent late payments or haven’t paid your bills at all, your insurance company can cancel your policy as long as they give you notice and enough time to resolve non-payment.
Reasons an insurance company can non-renew your policy
- Frequent Claims – While it’s a good idea to use your insurance when you need it, repeated claims (even small ones) can lead to nonrenewal. Insurance companies calculate risk based on a variety of factors, and one factor is repeat claims. Customers with many claims, especially during a short period, can be risky for insurance companies as they’re more likely to continue filing claims.
- Underwriting Issues – Underwriting is the process of evaluating risk that insurance companies use to decide whether they want to issue you a policy and how much they want to charge you. If an insurer determines that your home no longer fits their underwriting criteria, because your roof is too old, you’ve sustained visible damage to your home, or some other factor – they can drop your policy.
- Withdrawing business from your area – Insurance companies are businesses, and they might realize that maintaining coverage in their area is bad for their bottom line. This is more common in states which have had repeated large-scale natural disasters (such as Florida, California, and Louisiana), but can occur in any state.
Steps to follow when your insurance is dropping you
When you receive a nonrenewal or cancellation, the first thing to figure out is why you’ve received a notice and if it can be fixed. Insurance companies are required to provide an explanation, and some issues can be fixed before your policy expires.
- If you have been canceled for non-payment reach out to your insurance company and inquire about payment plans or provide payment. In some states, insurance companies must maintain your policy if you provide payment within a certain number of days!
- If you’ve been canceled for an underwriting issue, such as an older roof or weather-proofing issues, contact your company to see if you can produce documentation or complete repairs that make you an acceptable risk.
- If you haven’t been given a reason for cancellation or nonrenewal, contact your insurance company right away. They are required to provide a reason.
Next, make sure you’ve been given enough time to find a new option or fix your problem. Insurance companies are required to provide advanced written notice, usually 10 days ahead of a cancellation and 30-60 days before a nonrenewal depending on your state's laws. If you have not received appropriate notice, your insurance company does not provide a reason for cancellation or nonrenewal even after contacting them, or you disagree with the reason for cancellation – contact your state’s insurance regulator!
If there is no way to fix your cancellation or nonrenewal, get started on these steps right away.
- Shop around – Some reasons for nonrenewal or cancellation might make finding a new insurer difficult, but not all. If you’ve been cancelled for reasons that are outside of your control, such as an insurer leaving your state, you could easily find the same or better coverage and pricing. If you’re unsure of where to start, contact a licensed insurance agent or broker. Most agents or brokers might require you to call, but Coverage Cat provides online-only quoting and insurance resources for homeowners in California, New York, Texas, and Washington.
- Reduce your home’s risk – If there are issues with your home that caused or contributed to nonrenewal, consider using this time to make and document changes. These could include roof adjustments, weatherproofing, or even installing a burglar alarm in a high-theft area.
- Consider non-standard policies – If you’re having a difficult time finding a traditional insurance policy, you might be a candidate for surplus lines insurance or a FAIR plan policy. These are insurance options which cover homes in high-risk locations, that have special or uncommon risks, or that require high coverage limits.
What is a FAIR plan and do need it?
Fair Access to Insurance Requirements (FAIR) Plans are insurance plans that are provided by states to make sure that individuals and businesses in that state can get coverage, even if private insurers won’t provide them with policies. These are sometimes called “insurers of last resort” because they are typically more expensive and cover fewer events. You may qualify for a FAIR plan if:
- You've been denied insurance from several private companies.
- You live in an area with high risk of weather events such as earthquakes, wildfires, hurricanes, or flooding.
- Your home is risky to insure because of it's age or it has out-of-date plumbing, electrical, or heating systems.
- You live in an area with high rates of theft, vandalism or other crimes.
Every state offers some version of a FAIR plan, but 34 states and Washington, D.C. offer or will soon offer state-sponsored FAIR plans for their residents.
Do I need a FAIR Plan?
While you may qualify for a plan if your insurance has dropped you, it's not always your best option. If you're eligible for a standard homeowners insurance policy, this will almost always be less expensive and offer more protection. Some coverages, like protection for your personal property, might only be offered as add-ons and others, like loss of use or personal liability might be unavailable without purchasing an additional insurance policy. Only consider FAIR plans if you've shopped around, cannot find another policy, and have
Frequently Asked Questions
Is it hard to get homeowners insurance after being dropped?
This depends on why you've been dropped. If you've been canceled for fraud or because you haven't paid your premiums, you might have difficulty finding an insurance carrier to accept you. They might also charge more if they do accept you. If you've been nonrenewed for reasons outside of your control, such as your insurance company decided to leave your state, you could find that other companies are happy to insure your home.
How many claims can I file before a homeowners insurance company drops me?
This depends on your state's insurance rules and your homeowners insurance company. In Texas, for example, your insurance company can decide not to renew your policy if you file three of more non-weather related claims in three years or less - but they have to let you know you're in danger of nonrenewal after you file your second claim. Some companies might be fine with multiple claims, however, and just raise your rates.
Can an insurance company drop me without notice?
No. Insurance companies must provide written notice that they are dropping you, even for fraud or if you stop paying your bills. In most states, you're required to be given 10 days notice if your insurance policy is being canceled and 30-60 days notice if they are choosing not to renew your policy. In states like California and Florida, where insurance can be more difficult to find, you might have more protections. Florida requires insurers give you 120 days notice for a nonrenewal (90 days if you have a bundled home and auto policy), and California requires 75 days. If you haven't received your legally required advanced notice, make sure to contact your state's insurance regulator.
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