What To Do If Your Home Insurance Is Dropped
Over 1 million homeowners policies are cancelled in a typical year. Many reasons are used by insurance companies to cancel or not renew home policies. There are two types of triggers that may result in a dropped or non-renewed policy:
- Location related risk changes. There may be heavy insurance losses in your area due to natural disasters or an increased risk of flooding or earthquakes. If you end up living in one of these high risk areas, then your home insurance may be dropped or not renewed.
- Excessive claims by policy holders. These may be legitimate claims, but if the insurance company considers them excessive and can't continue to insure you, then you may be dropped or not renewed. This is especially true if there are 3 or more non-weather related claims within a 2 year period.
If your homeowners insurance lapses and you have a mortgage on the property, then the mortgage company can "force place" a policy to cover the property itself (dwelling insurance). Many times these policies are very high risk policies that can be three times higher in cost compared to your previous policy. This could increase your overall mortgage payments by hundreds of dollars per month.
The home insurance company is required to give you a 30 day notice of cancellation or non-renewal. A non-renewal typically occurs if either of the two triggers above occurs. A cancellation occurs if the insurance company uncovers risks that weren't noted in the insurance application, fraud is suspected and/or unpaid insurance premiums within the first 60 days of the policy term. You have 30 days to respond or you will be force placed or left uninsured.
If the insurance company doesn't give you 30 days notice of non-renewal, then they are required to renew your policy for another term. This doesn't apply to cancellations.
What do I do if my home insurance is cancelled or non-renewed
If you receive a 30 day non-renew or cancellation notice, then you have to act quickly. You have certain rights as a homeowner and should act on them unless you already believe that the decision is fair.
- You are entitled to a detailed written explaination of the reasons for non-renewal or cancellation. This written explaination may be included with the non-renewal or cancellation notice. Ask for a detailed explaination of the reasons for non-renewal or cancellation from your insurance company including the "sound underwriting or actuarial principles" and statistical evidence for why your home is a higher risk compared to other homes that the company currently continues to insure.
- You also have the right to challenge your claims history as noted in the Comprehensive Loss Underwriting Exchange (CLUE) , which is the database that is used by insurance companies to accept or deny applications and/or make renewal decisions. You can get a copy of your CLUE report from Choice Point Consumer Center. There should be a CLUE reference number on your non-renewal or cancellation notice. You'll need this in order to get your copy. If you can't find this number, then contact your insurance company.
- You can not be denied coverage due to discriminatory practices related to age, race, gender, national origin, religion, marital status, disability or geographic location within a given rate class regardless of the age or value of your home. If you believe that this is the reason, then contact an attorney in your area that specializes in consumer protection or insurance law. Contact your local Bar Association for a referral.
If you can show that the decision was made unfairly, then provide a written explaination directly to your insurance company. Send the notice via certified letter and be sure to ask your insurance company to whom in the company the letter should be sent. If you don't receive a reply within 30 days or the response is inadequate, then contact your state's insurance department and ask them how to proceed.
You should also begin looking for another home insurance company during the 30 day notification period in case your appeals fail. Get several quotes from as many sources as you can. Be sure to be upfront about your non-renewal notice if it's asked during the application process. If you aren't, then you may get cancelled by the new company. Don't let your home insurance lapse if you can avoid it. This could cause you to pay an even higher premium. Either get the situation resolved within the 30 day period or get new coverage.
How to avoid getting non-renewed or cancelled
Don't contact your insurance company for small claims. In fact, you should raise your deductible as high as possible in order to reduce your home insurance rate. Small claims are a cancellation magnet. A broken window is not a good reason to contact your insurance company; a tree falling through your roof is another story.
Always keep your home in good repair. Keep the wiring, plumbing, etc. in good condition in order to reduce the chances of a claim. You may even get a discount if you notify your insurance company of any improvements completed on the home.
Get separate liability coverage for people on your property getting hurt. You can buy separate general liability coverage that's not a part of your homeowners insurance to cover you in case someone gets hurt on your property. Umbrella coverage up to $1 million dollars can be bought for a few hundred dollars per year. It's worth it to keep any claims away from your homeowners policy.
Want to find a lower homeowner insurance rate?
If you would like to see if you can save some money compared to your current homeowners insurance or if you are buying your first home, then we suggest that you compare policies and rates from as many insurance companies as you can prior to buying a policy. We recommend Insureme who allows you to compare several home insurance policies from major highly rated insurers. They are also unique in that they include quotes from dozens of local insurance agents in your area. In many cases, independent agents may be able to give you a better deal for becoming one of their customers.
This should not be considered financial advice which can only be given by a qualifed financial professional. We suggest you consult with a qualified financial planner and/or insurance professional who is most qualified to consult with you regarding policy decisions. Many factors are involved in your policy premium some of which may not be mentioned in this article. We are an affiliate of the Bankrate Insurance Network.
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