Insurance companies are experts at assessing risk. Certain circumstances that aren’t an anticipated part of that risk can lead to cancellation of your homeowner insurance policy. However, by maintaining your home and preparing for common risks in your area, you can avoid having your homeowner’s insurance cancelled. Here are some risks that can lead to home insurance cancellation, and what you may be able to do about it.
Reasons that may lead to cancellation
Too many claims
You probably did the math when you filed that claim years ago for a minor water leak that cost more to repair than your deductible. But was it really worth filing? Was the cost to repair significant? If you’ve filed multiple insurance claims for small issues, it can be a sign that there are too many risks in your home to make it worth insuring. Your policy could be canceled, or the premium could be raised.
How many homeowner’s insurance claims are too many? It depends on the severity, frequency, and type of claims you file, as well as your insurer's appetite for risk. The more claims you file the more of a risk you become, which typically leads to higher insurance premiums to help offset the payouts the insurance provider can assume they’ll be responsible for.
Depending on the insurance provider there may be a limit to how many claims you can file in a certain time period before they’ll issue a cancellation, so it’s a good idea to check with your insurance company to see if they have any limitations before you file too many claims.
Issues discovered by an inspection
Upon inception of your home policy and sometimes at policy renewals, an insurance company’s underwriter may have to send an inspector to the property. If they find too many risks — such as fire hazards and areas in disrepair — then a policy may not be renewed.
To fix this, the solution is simple: fix the damaged areas. New plumbing or electrical systems may have to be installed or fire hazards eliminated to keep the policy active.
Inspectors might even need you to clear debris from the yard or gutters and trim any overlapping branches that may hang too close over the home. Be sure to make sure these conditions are rectified in the time frame the inspectors provide you with to keep the policy from cancelling or to be able to reinstate the policy if it has already been cancelled.
An older home can have many problems, starting with an old roof that may need to be replaced. Insurance companies may require an inspection if your roof is 20 years old, and others may not insure you at all if your roof is that old.
Not paying your insurance premiums on time can lead to a quick notice from your insurer that could lead to cancellation if not resolved. A 30-day grace period is typical for catching up on payments, and your insurance provider may offer you more flexibility on payment due dates. If you can’t make a payment on time, call your insurance provider to see what options are available to avoid any lapses in coverage.
In most states, bad credit can also affect your homeowner’s insurance. Insurers will likely perform a credit check before issuing a policy, and while bad credit usually won’t make you ineligible for coverage, it could make your premium higher in many states than it would be otherwise.
Living in a high-risk area
If you live in an area that’s prone to natural disasters such as tornadoes, flooding and hurricanes, your area could be an unacceptable risk. Too many claims by homeowners in your area could create too high of a risk for insurance coverage.
Insurers are unlikely to leave an area after one bad year of disasters. But accepting risk year after year because of a multitude of flood claims could cause them to stop offering coverage in those areas.
High risk areas can also be those with high crime, vandalism, and theft. Not all carriers will write insurance in high-risk areas so it’s a good idea to use an agency that works with multiple carriers so that you can see a few different options. To see which carriers are returning rates in your area get an online home quote here
You just got a dog
Although some states prevent insurance companies from denying coverage to owners of specific breeds, in states where it is allowed, some insurance companies won’t cover homes that have certain types of dog breeds. They want to avoid the risk of dog bites and blacklist certain breeds. Even if the Rottweiler or pit bull terrier you’ve had for months has never bitten anyone, you may still be denied coverage because of historical statistics for the breed. Mixed breeds that include part of a banned breed can be excluded too.
If you don’t tell your insurer about your pet and it bites a neighbor resulting in an insurance claim being filed, your coverage could be cancelled for not disclosing the pet.
What to do if your homeowner’s insurance is cancelled
If your policy is about to be cancelled, you’ll typically get a 45-day notice in writing. There are a few things you can do to prevent this, such as repairing any problems raised by your insurer, like a damaged roof.
If the cancellation stems from filing too many claims or living in a high-risk area, it may be time to shop for a new insurance provider. Some companies specialize in homeowners who live in certain areas that are usually higher risk, like coastal areas. Certain carriers also might be able to more readily accept homeowners with a higher amount of claims as well.
Reducing your risk is the best way to ensure your insurance policy isn’t cancelled. Routine maintenance can help avoid big-ticket repairs later and could make your current premiums lower.
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