Homeowner’s insurance is a necessity, and losing your policy unexpectedly will pile on a lot of stress you just don’t need.
Cancellation vs. Non-Renewal
Homeowners often use the word “cancellation” when they talk about losing their home insurance policy unexpectedly, but there’s a difference between cancellation and non-renewal.
Cancellation of a policy happens before the policy’s term has been completed. Cancellation can be sudden, and how much notice you receive depends on the regulations in your state. Your insurer can cancel your policy for any reason during the first 60 days of the policy; the most common reason for cancellation during this time is non-payment of premium. After you’ve had the policy for 60 days, your insurer can only cancel your policy for specific serious reasons. Common reasons are non-payment, or fraud, or misrepresentation in the information you gave them when you bought the policy.
Non-renewal of a policy happens at the end of the policy’s term. When the end of the term is approaching, your insurance company will notify you that they are either considering non-renewal unless you comply with certain conditions or they have decided not to renew your policy. With non-renewal, you have time to comply with any conditions your insurance company has given you, or to shop around for another policy.
Here are eight things that can trigger cancellation or non-renewal of your homeowner’s insurance.
If you’ve made a large claim compared to the value of your home, especially if you caused the damage yourself, your homeowner’s insurance company may decide that you are too big of a risk and decline to renew your policy.
Too Many Claims
Just like with a large claim, making too many claims can send a red flag to your insurance company. While the occasional claim is to be expected, several claims within the same policy term can lead your insurer to decide that you’re too much of a risk.
Poor Payment History
If you are frequently late with premium payments, or if your payments are very late, your insurance company can decide not to renew your policy or can even cancel your policy before the term is finished.
Some Unexpected Risks
Most homeowners aren’t aware more and more insurance companies are now doing curbside “spot-checks” to look for things that may pose a financial risk for them. You might not even know your home has been spot-checked until you get a letter from the homeowner’s insurance company telling you that you need to make changes or face non-renewal of your policy. Here are some of the risks that have caused homeowners to receive these letters, seemingly out of the blue. Some of these may surprise you:
- Leaky roof
- Swimming pool
- Moss on the roof
- Windowsills in disrepair
- Bad rain gutters
- New dog of an unapproved type (e.g. large or “dangerous” breed; check your policy before bringing home a new dog)
Not Passing an Inspection
Some homeowner’s insurance companies will request a short inspection before they renew your policy. Common things that lead to nonrenewal after an inspection are the items in the list above, as well as:
- Not meeting fire codes (e.g. dangerous conditions in the kitchen)
- Bad pipes
Criminal Charges That Indicate Risk
If you ever face criminal charges, your homeowner’s insurance company will find out about it. If the charges carry with them anything that hints you might be a risk, such as a citation for illegal burning, an assault charge, a charge involving your dog, etc., then your insurer may decide not to renew your policy.
Leaving a Home Vacant for 60 Days
Most insurers will decide not to renew a policy on a home if they discover it has been left vacant for 60 days.
Giving Incorrect Information
If your homeowner’s insurance company discovers you gave them incorrect information when you purchased the policy, such as giving the incorrect number of residents or not disclosing that you had a dog, you can face nonrenewal or cancellation of your policy.
Use these tips to avoid a surprise non-renewal letter, and keep your home properly insured.