Three Ways Insurance Companies Can Cancel Your Policy
For homeowners and renters, cancellation of an insurance policy can be shocking and panic-inducing. Fortunately, under the umbrella term of “ cancellation,” there are three distinct ways in which your insurance provider may sever service.
Each is distinctly different, and after discussion and repairing the issues that prompted the cancellation notice, you might be able to continue coverage if you choose. Here’s a look at each type of cancellation.
Reasons for Home Insurance Policy Lapse
Cancellation due to non-payment of your insurance payments is easy to solve. A policy lapse occurs when you’re more than 30 days late on your payment. Insurance companies generally give a grace period, so when you get notification of non-payment, you’ve likely missed a few payments and the insurance company won’t cover any claims for events that occur.
Sometimes, this comes as a surprise because the money for your insurance premiums is often held in escrow and paid by your mortgage lender. You make your monthly payment to the bank, and that’s that. But there’s always room for error. Maybe a new hire made a mistake, or the computers were down and payments didn’t get processed on time.
Do not ignore notices of non-payment, but don’t fear them either. If you know that you missed a payment or two, call your insurance company to discuss a payment plan. If you are unaware of missing payments, contact your insurance company to find out which payments are missing and then discuss the situation with your lender so they can get things squared away.
Home Insurance Cancellation
There are several reasons why your insurance company might cancel your policy. They can cancel it if you omitted or misrepresented information on your application. One example of this is if you state that you have a dog but fail to mention that Spot is a dog breed that they don’t cover. Giving fraudulent information is also grounds for cancellation.
A company may cancel a policy if there’s been a recent weather event that caused large amounts of damage in your area. Paying out more in claims than was projected may cause them to reevaluate coverage. Another reason you might find your insurance canceled is if you’ve filed an excessive number of claims.
Non-payment of premiums and failing to occupy the property are other reasons why your insurance coverage can be canceled. They may determine that your home needs some serious repairs to make it safer and more secure.
When an insurance provider wants to cancel your policy, you’ll get written notice from them stating this, along with the termination date. Likewise, you can terminate the contract if you decide to switch insurance carriers.
Most state laws require that an insurer give 30 days’ notice before canceling the policy so that you have plenty of time to find a new policy to maintain insurance coverage on your home. If you prefer to stay with your insurance provider, you can call them to discuss ways in which you might be able to remedy the issue and continue coverage.
Home Insurance Non-Renewal
A non-renewal of a policy is not a cancellation because it allows the policy to remain in place until the end date. Let’s say your policy renews every September 1. If the company decides not to renew the contract in June, they will still cover you until August 31.
Typically, you’d pay your annual or semi-annual premiums before September 1 and be good to go for the following year. In this case, you have until August 31 to find a new home insurance company so that your coverage doesn’t lapse.