An active home insurance policy, or homeowners insurance, is crucial to protect your property and belongings. Insurance reimburses you in the event of damage or other issues that affect your home, which is likely the largest investment most people ever make. Your insurance policy should be renewed automatically every year, but that isn’t always the case. So, knowing what to do if your home insurance policy is non-renewed or canceled is important. If you get a home insurance non-renewal letter, you need to know what to do next. Read on to learn more about how to handle a home insurance cancellation and what you can do to get your policy reinstated.
Understanding home insurance policies
Home insurance policies cover the cost associated with any damage to your property, personal belongings, and other important assets that you may have in your home. When a disaster strikes, your home insurance policy is there to help you recover. Most home insurance policies are good for one year and renew automatically. You will receive an official letter of renewal that should include more details about your policy, like the current deductible and coverage limits. If your home is currently mortgaged, then in most cases, the premium will be paid through escrow and included in your monthly mortgage payment. Otherwise, you are responsible for paying the premium before the new policy goes into effect.
Home insurance non-renewal
The term insurance non-renewal refers to times when an insurer may decide not to renew a policy. If this applies to you, your insurance company must send you an official “non-renewal letter” notifying you of their decision. Here are some important things to know about a home insurance non-renewal letter.
- A non-renewal letter is a written notice that the insurance company is not planning to renew your policy after expiration.
- Insurers send this letter to policyholders to alert them of their intent not to renew the policy, and it’s required by law in most states. For example, insurers must send these letters to policyholders at least 45 days before the non-renewal date.
- The letter will include the date the letter was written, the name of the company sending the letter, and pertinent information about your policy’s non-renewal, including why the insurer made the decision. These letters are typically sent between 30 to 60 days before the policy date ends. This gives homeowners ample time to try and obtain coverage and another policy from a different insurance company. The letter should also include contact information in case you have any questions, as well as the official date when the current policy will expire.
- Non-renewal can occur for many reasons. Some of the most common reasons are that the home is not properly maintained, the homeowner has filed too many claims, the location of the home is in a very high-risk area, or the homeowner failed to pay their premiums. In some cases, certain insurance companies may no longer be offering this type of coverage to people in your area. People living in regions with a lot of natural disasters like hurricanes, tornadoes, or wildfires are some of the most common policyholders who receive a non-renewal letter.
Home insurance cancellation
In cases of a home insurance cancellation, your insurer has decided to stop covering your home immediately. In this case, there is no requirement to give you advance notice. Home insurance cancellations are rare, but they do happen occasionally. You can only receive notice of a home insurance cancellation within 60 days of your purchase policy date unless you failed to pay your premium or committed fraud in some manner.
- Home insurance cancellation means that your policy is no longer active or valid, which means that your home is left without the protection it needs in the event of a serious peril like a severe storm, natural disaster, or fire.
- This differs from non-renewal since it can happen more quickly, very little notice is given, and it must happen within 60 days of your policy’s purchase. Non-renewal happens at the end of the policy term, while cancellation happens much sooner. However, most states still mandate that insurance companies notify policyholders in writing 10 to 30 days before the cancellation occurs.
- There are a few reasons why a home insurance company might send a notice of cancellation. One of the most common reasons is that a home is vacant or in such bad condition that the insurer does not see a benefit in continuing coverage. Issues regarding fraud or misrepresentation by the homeowner may also cause a policy to be canceled. Most of the time, policy nonpayment and fraud or a clear breach of contract are the only reasons a home insurance company would cancel a policy so quickly. Another reason may be that your home failed an inspection ordered by the insurance company or that you own an aggressive dog breed, which increases the chances of a liability claim.
Implications of home insurance non-renewal or cancellation
While there are serious implications of getting a home insurance non-renewal or cancellation notification, there’s no need to panic. We’ll cover what you should do if this happens to you later in the guide. However, knowing what to expect if you receive one of these notices is important so you know how best to proceed. You will need to start looking for a new policy as soon as possible to avoid a lapse in home insurance coverage.
Here are some of the consequences of having your policy affected by cancellation or non-renewal and some ways a non-renewal or cancellation could affect your eligibility for future home insurance coverage.
- If you filed too many claims, you may have difficulty finding a new company that will cover your home. This information is entered into the Comprehensive Loss Underwriting Exchange (CLUE) database, so some underwriters may deny your application for a new policy. Claims usually stay on your record for between five to seven years.
- Without proof of an active insurance policy at your address, you run the risk of defaulting on your loan. If the mortgage company sees that you aren’t currently covered by home insurance, they may take steps to file for foreclosure or perform other actions that could have very significant consequences.
- If your policy lapses and/or is canceled, your home won’t be covered in the event of a serious disaster, and you’ll have to pay for everything directly out of pocket. It may also mean that it will be more challenging to pass inspection when you purchase a new policy.
What to do if your home insurance policy is non-renewed or canceled
Fortunately, there are some steps you can take after receiving a non-renewal or cancellation letter. Here are some tips to help you navigate this issue in order to get the active coverage you need.
- Start by contacting your home insurance company right away if you might be able to resolve the issue that caused the cancellation. For example, if you received a notice due to a damaged roof, you might be able to make repairs and then have the policy reactivated or reinstated.
- You might be able to contest or dispute the notice you receive if you feel that it’s unfair. You can call your insurance company’s customer service or consumer affairs department to find out how to proceed with a non-renewal or cancellation dispute. Contacting your state’s insurance department may also be helpful. Always make sure that you submit your dispute in writing and keep track of the dates. Doing so could save you valuable time if you need to shop for a new insurer.
- Start shopping for a new insurance policy immediately. The sooner you get a new policy, the lower your premiums should be. Consider getting a home warranty plan to show the new insurer you’re serious about protecting your home.
- Always make sure that the date of your new policy starts at least one day earlier than the current coverage so that there’s no lapse. In some cases, mortgage companies may make you purchase force-placed or lender-placed insurance, which costs much more.
- You may need to enroll in high-risk home insurance if your home was deemed high-risk. These policies usually cost more, but they also help you avoid a gap in coverage and give you peace of mind.
- Look into your state’s Fair Access to Insurance Requirements Plan, or FAIR Plan. This government insurance program offers coverage for homes that don’t otherwise qualify for private homeowners insurance.
Getting a notice of home insurance cancellation or non-renewal is stressful, but it isn’t the end of the world. Always try to proactively manage your home insurance policy and respond quickly to any non-renewal or cancellation issues you face. Your property and peace of mind will stay protected with the right home insurance policy.