Understanding Homeowners Insurance Policy Cancellations and How to Navigate Them

Learning that your homeowners insurance policy is getting canceled can be a daunting experience. Your home is likely your most significant investment, and having insurance is crucial to protect you from substantial financial risks in case of a disaster. Insurance companies are required to provide written notice of cancellation or nonrenewal, giving you enough time to explore alternative coverage options.

Depending on the reason for your policy’s cancellation, there are steps you can take to either rectify the issue and reinstate coverage or find a new plan. It’s essential to know that you have options if you’re facing this kind of insurance dilemma.

When Can Your Homeowners Insurance Provider Cancel Your Policy?

Your insurance provider may cancel your coverage during the policy term under specific conditions. Here are some scenarios where an insurer can cancel your policy:

Within the First 60 Days

States generally allow insurers 60 days to assess your risk and decide whether they want to continue your policy. Depending on state laws, an insurer may cancel the policy without providing any reason during this period. In other states, the insurer can cancel within 60 days under certain conditions, such as failing an onsite inspection that reveals a major structural problem in the house or uncovering undisclosed information on the application.

During the Policy Term

After the policy has been in effect for more than 60 days, your homeowners insurance company may only cancel your policy for specific reasons, including:

• Failure to pay your premium on time
• Purchasing the policy through fraud or misrepresentation
• A decline in the condition of your home or property, increasing the risk for the insurer
• Conviction of a crime that increases hazard under the policy
• Declaration of insolvency by your insurance carrier

Policy Renewal

Your insurance company can also decide not to renew your policy when it expires. Depending on your state, your insurer must give you a certain number of days’ notice before officially canceling your policy and explain the reason. The company may have decided to drop that particular line of insurance or to write fewer policies in your region, so the decision not to renew may not be tied to something you did or didn’t do.

What to Do if Your Home Insurance Policy Is Canceled

There are various reasons why an insurer might cancel your policy or decline renewal. The good news is that in some cases, you may be able to fix the issue and resume coverage. If that’s not possible, you may need to shop for new insurance. Here are steps to take if your homeowners insurance policy is canceled or if your insurer chooses not to renew your coverage:

Call Your Insurer

Contact your insurance company and ask why your policy was canceled (or not renewed). Generally, your insurer provides notice—30 or 60 days, for example—before your coverage is set to end. Ask the company the reason behind the move and whether they’d reconsider.

Make Repairs

If the nonrenewal or cancellation was due to issues tied to the condition of your home or an inspection, find out if fixing these problems will allow the policy to be reinstated. Sometimes insurers will give you an opportunity to make repairs or address the reason why the policy is being canceled. For example, if your policy is canceled because of a damaged roof, your insurance provider may give you 30 to 60 days to make repairs to retain coverage.

Shop Around for a New Plan

If you’re faced with not having coverage, it’s time to start shopping for a new policy. Call companies directly or compare homeowners insurance rates online through marketplaces or an insurance broker. Your state insurance department may also provide price comparisons charged by major insurers. Keep in mind that it may be challenging to find new coverage if you’ve been canceled for a negative action like not paying your premium or committing application fraud.

Look at Government Plans

Check out your state’s Fair Access to Insurance Requirements (FAIR) plan. Every state offers some form of a FAIR plan, which is considered a “last resort” option for securing home insurance. Some states operate a single plan, while others have several plans run by different insurers. Coverage varies by state; however, a FAIR plan should at least sell dwelling coverage. Coverage for personal belongings and other structures on your property is usually optional. It’s important to note that FAIR plans often cost more than a standard policy.

Find Your State Regulator

Contact your state’s insurance regulator if you think you’re being treated unfairly. You can find a list of state insurance regulators on the website of the National Association of Insurance Commissioners.

How to Find Cheaper Homeowners Insurance

If you’re facing nonrenewal or a lapse in your homeowners coverage, it’s time to shop around. You may also want to shop for new coverage if your premium increases, if your insurer is making changes to your coverage, or if you don’t have enough coverage based on your home’s value. Here are ways to save on homeowners insurance:

Up Your Deductible

Raising your deductible—the out-of-pocket amount you pay before your insurance coverage kicks in when you file a claim—generally lowers your premiums. Just be sure you can afford to pay the higher deductible if necessary. Add-on insurance, such as flood or earthquake coverage, often has its own deductible. So it’s important to make sure you can cover the cost.

Bundle Your Insurance Policies

Consider “bundling” your insurance, or buying homeowners and auto insurance from the same provider. Some companies that sell homeowners, auto, and liability coverage will lower your premium if you buy two or more policies from them.

Disaster-Proof Your Home

Find out from your insurance company if there are steps you can take to help prevent damage in your house. For instance, you may be able to save on premiums by adding storm shutters or buying stronger roofing materials.

Improve Home Security

Some insurance companies may reduce your premiums if you take steps to lower your risk, such as installing an alarm system, deadbolt locks, or other devices that help protect against burglaries. Discounts may be available for having smoke detectors or a fire alarm.

Look for Discounts

There may be other ways to save on homeowners insurance. For example, you might qualify for lower rates through membership organizations, professional or business associations, alumni groups, or your employer. Some insurers offer discounts for retirees or if you go a certain number of years without filing a claim. You might also cut costs if you pay your premiums in full or use autopay.

Boost Your Credit Score

In most states, insurance companies can check your credit-based insurance score before issuing a homeowners insurance policy. Credit-based insurance scores are designed to predict the likelihood that you’ll file insurance claims that cost the insurance company more than it collects in premiums.

Your credit-based insurance score is different from the credit score lenders use. But it’s based on many of the same factors, including your payment history, overall credit utilization, and whether you have any defaults or collections on your credit report. It’s generally a smart idea to maintain a good credit history because it could translate to lower rates for homeowners and auto coverage. Having a problematic credit history could mean higher rate offers or fewer coverage options.

The Bottom Line

If you receive notice that your homeowners insurance plan has been terminated, you’ll need to take action. In some cases, finding a new plan should be your next step. But you may also be able to work with your insurer to fix the issue and reinstate your existing coverage.

A different insurance company or FAIR plan may provide the coverage you need. If you lose coverage, start shopping for a new policy and look for discounts to save on premiums. And because insurance carriers are allowed to use your credit-based insurance score when setting the price of your coverage, it’s best to keep your credit in good shape if you do need to buy a new policy. Check your credit score and credit report regularly, making adjustments as necessary to improve your score. Signing up for free credit monitoring from Experian can keep you up to date with what’s on your credit report.

For any mortgage service needs, call O1ne Mortgage at 213-732-3074. We are here to help you navigate your mortgage options and find the best solutions for your needs.