What To Do When Your Homeowners Insurance Gets Dropped
We’ve all seen the television ads: A smiling face promises to be there when we need them. They’ll help us pick up the pieces when life falls apart, we’re told—like a good neighbor.
And we believe it. After all, why wouldn’t we? Buying home insurance is stressful. It’s confusing. It’s expensive. Most of us just want someone to tell us they’ll be there when we need them—offering comfort, support, and maybe even a plate full of warm, fresh-baked cookies.
It’s a nice sentiment. But is it true? To put it succinctly: No.
If a scan of the headlines is any indication, most insurance providers will be there for us exactly as long as they’re obligated and only so long as the risk calculus makes sense. In the last five years alone, insurance providers dropped more than 350,000 customers in the state of California in response to mounting wildfire risk.
Not very neighborly behavior.
It turns out even the best home insurance companies can—and often do—leave customers high and dry, and the conditions under which they are allowed to do so are defined by an often dizzying array of state laws. Untangling these regulations can help you protect yourself, but it’s difficult work.
Fortunately, we’ve done the work for you. Read on for a crash course in how and why insurance companies drop their customers and how you can protect yourself from becoming a victim.
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How can I get home insurance after my policy has been dropped?
If you’ve received a notice of cancellation or non-renewal, don’t panic. Again, most states require that insurers give you advance notice and tell you why they’re dropping you. The first thing you should do is educate yourself on your rights. The table above is a great starting point.
Next, you should contact your insurance company to see whether there is anything you can do to avoid losing coverage. If you’re being dropped because of damage to your home, you might still have time to repair it. If you are being dropped for having filed too many claims, you might be able to convince your insurer the underlying problem has been remedied or accept a higher deductible in exchange for continued coverage.
If all else fails and you’re convinced your insurer has violated your rights in some way, you also have the option to file a complaint with your state’s department of insurance.
If none of the above strategies solve the problem, you might be forced to find new insurance, and that can be a scary prospect. After all, if one insurer decided you were too much of a gamble, it might seem likely that others will, too, but you still have options.
First, you should find out what your coverage options really are. Online tools like Insurify provide the ability to compare home insurance quotes across dozens of providers a quick, painless task. If you find your options are still limited, you should contact your state’s department of insurance to learn about high-risk insurance options in your region.
Thirty states offer some form of state-mandated insurance for high-risk homeowners. These programs are known as FAIR (Fair Access to Insurance Requirements) programs. Though a boon to those who can’t find coverage elsewhere, these plans tend to cost more and offer more limited coverage, so they should be treated as an option of last resort.
Frequently Asked Questions - Mid-Term Cancellations
Can I lose my mortgage if my homeowners insurance policy is canceled?
If you’ve lost homeowners insurance coverage, don’t worry. You are not in immediate danger of losing your home. That said, you do need to be proactive and find replacement coverage as quickly as possible. Your mortgage requires that you maintain sufficient insurance coverage so that the mortgage company wouldn’t lose everything if your house were to be damaged. In a worst-case scenario, your mortgage lender will purchase new insurance themselves and include the cost in your escrow payments. This isn’t ideal, though, for at least two reasons. First, lender-placed insurance protects your lender, not you. It won’t cover damage to personal property or living expenses if your home is rendered uninhabitable. Second, lender-placed insurance tends to be a lot more expensive than a standard policy.
Will filing too many home insurance claims cause me to lose my policy?
It certainly can. Your insurance company will drop you if you are costing them so much that your policy is no longer profitable for them. Some states regulate the extent to which insurers are allowed to consider past claims history when calculating risk. However, the law tends to favor insurers. Your best defense against being dropped for filing too many claims is to be conservative. If you can cover the costs of a home repair on your own, it is often in your best interest to do so.
Can insurance companies find out if you've had a policy canceled?
Yes, they can. All insurance companies participate in what is known as the “Comprehensive Loss and Underwriting Exchange,” a shared database of consumers’ claims history. It’s unlikely you’ll be able to hide a policy cancellation when shopping for new insurance. Still, the fact that you’ve been declined coverage by one company does not mean you won’t be able to find coverage elsewhere. Every insurance provider assesses risk differently. They also have varying levels of risk tolerance. If you’re in the market for a new insurer, your best bet is to use an online quote comparison tool like Insurify. It’s the fastest way to find the best and cheapest insurance available to you.
Does canceled home insurance affect auto insurance?
Having your home insurance canceled can affect your car insurance rates and coverage if you have both policies bundled with the same insurance company. It’s worth noting that, in the case of bundled coverage, having too many car insurance claims could also affect your homeowners insurance.
Regardless of what their marketing tells us, insurance companies do drop customers all the time. This is an unpleasant fact, but it doesn’t have to frighten you. You just need to know your rights.
For the most part, state laws prevent insurers from arbitrarily dropping customers. They can only do so for certain reasons, and they must give you warning and explain their rationale beforehand. You can avoid most problems by being truthful when communicating with your insurer, proactive in maintaining your property, pragmatic when filing claims, and mindful of how decisions you make will affect your risk profile.
If you’ve already received a notice of cancellation or non-renewal, don’t panic. You still have options. You can negotiate with your insurer to maintain coverage. You can use tools like Insurify to find new insurance on the open market, and you can turn to state-run FAIR plans for high-risk coverage. Even in the very worst-case scenario, you aren’t likely to lose your home, since your bank will purchase lender-placed coverage rather than invalidate your mortgage agreement.
While neighborly assertions might offer short-term comfort, knowledge is our best defense when it comes to protecting our homes and loved ones.
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