It’s surprising to be notified that your home insurance company is going to drop you, as thousands of Florida policyholders have recently experienced. Fortunately, there are options available to ensure your home stays insured.
how homeowners insurance companies can let you down
mark friedlander, spokesman for the industry-backed insurance information institute, explains that there’s a difference between an insurer canceling a homeowners insurance policy and deciding not to renew it.
cancellation generally refers to an insurer canceling your coverage during the coverage period. meanwhile, non-renewal occurs when an insurer discontinues your coverage at the end of the renewal time.
Common Reasons for Homeowners Insurance Cancellation
Insurers can usually cancel a policy if:
- you don’t pay your insurance premium.
- committed insurance fraud or seriously misrepresented the information on your insurance application.
- fails to make timely repairs requested by a new insurer after a home inspection ordered by the insurer.
- an insurance company reduces the number of policies it will renew or sell where you live. for example, if there have been frequent natural disasters that have caused many claims in the area.
- an insurance company that is withdrawing from the home insurance market in your area for business reasons.
- committed insurance fraud.
- Your insurance credit score dropped significantly.
- filed multiple claims.
In unusual circumstances, a state insurance regulator might allow a home insurer to cancel policies while they’re still in force for reasons that don’t apply to you as a homeowner, according to friedlander.
for example, the florida office of insurance regulation recently approved the cancellation of 68,200 fednat insurancegroup policies in the sunshine state because the company is undergoing a financial reorganization. under state law, these members have received 45 days advance written notice.
A policy can be canceled when state regulators determine that a financially troubled insurer is insolvent, meaning it cannot survive. Last year, several home insurers in Florida and Louisiana were declared insolvent, Friedlander says. in case of insolvency, an insurer is closed and state regulators take over its assets.
In the event of insolvency, a guarantee association typically steps in to cover outstanding insurance claims and provide coverage.
All states, along with the District of Columbia and Puerto Rico, have two types of guaranty associations: a Property & Casualty Guaranty Association, which includes homeowners insurance, and a Life & Casualty Guaranty Association. Health. By law, a homeowner’s insurer licensed to do business in a state must be a member of that state’s property and casualty guarantee association.
When an insurer is declared insolvent, the guaranty association will switch the failed insurer’s policies to another insurance company or cover policyholders on its own.
Common Reasons Homeowners Insurance Doesn’t Renew
Non-renewal occurs when your insurance company decides not to renew a policy when it expires. If your insurer decides not to renew your policy, they generally must notify you in advance. You must have a certain number of notice days, the amount of which generally depends on state law. the insurer must also provide a reason for non-renewal.
reasons for not renewing may include:
what should you do if your homeowners coverage is cancelled?
Insurers are generally required to give you a notice of non-renewal or cancellation before your coverage ends, such as 30 or 45 days. this gives you time to shop around for another policy.
An insurer is supposed to explain the reason for termination of coverage. but if she doesn’t or isn’t clear why, she contact her insurance company. If she disagrees with the reason, consider filing a complaint with her state’s insurance regulator.
To dispute your non-renewal if it is related to your home’s location in a potentially high-risk severe weather area, you may need to show documentation that your home is not located in a high-risk area or demonstrate that you have completed severe weather mitigation measures.
start shopping for a new homeowners insurance policy
Whether or not you contest the cancellation or non-renewal, you should start shopping for new home insurance to avoid a gap in coverage.
It’s smart to compare homeowners insurance quotes among multiple insurance companies for identical coverages to make sure you find the cheapest homeowners insurance that fits your needs. Make sure you have your new policy in place before your old policy expires, and notify your mortgage company of the new insurance company.
you may need a plan just as a last resort
But what if you can’t find coverage with a new insurer? As a last resort, you can purchase a Fair Access to Insurance Requirements (FAIR) plan, which is a state program that provides insurance for high-risk consumers.
Fair plans are often more expensive than a standard policy and have limited coverage.
friedlander notes that Citizens Property Insurance Corp., Florida’s home insurer of last resort, is adding 6,500 policies a week and has surpassed 850,000 total policies to become the largest home insurer in the state. citizens are expected to exceed one million policyholders by the end of 2022.
Across the country, California has placed a mandatory one-year moratorium on insurance companies canceling or failing to renew home insurance policies in certain areas in or near wildfires after the governor declared the state emergency.
Related: How Fair Home Insurance Plans Work
frequently asked questions about the plan just when your homeowners insurance is canceled
Here’s key information to know about fair plans if you can’t buy homeowners insurance elsewhere after your policy cancels.