Homeowners Insurance: Why was my Policy Canceled?
- Nov 22, 2016
Finding the right homeowners insurance policy can be a lengthy process as you peruse through what various companies have to offer. However, maintaining a policy can be just as complicated. The wrong types of behavior can drive insurers away and result in policy cancellation or nonrenewal. Some reasons are obvious, like fraud and late payments, but could be due to large claims and extended home vacancy.
Fraud and Late Payments
One of the most common reasons for home insurance cancellation is fraud. This includes identity theft or any other subject matter related to the policyholder or their home during the application process. For instance, if someone applied for home insurance under a different person’s name, the policy would be subject to cancellation.
Another reason for cancellation is late payments because most companies do not offer a grace period. Failure to make a payment to your insurance company will result in a lapse in coverage, which is something you will want to avoid at all costs. The good news is that typically coverage will be extended for 30 days in the event of a late payment. Once you’re past that mark, there will be no financial compensation.
If your policy was canceled due to nonpayment, can the cancellation be revoked if you send in a payment? The answer is yes and no, as it depends on your insurer because reinstatement of coverage is subject to approval. Furthermore, reinstatement is not permitted beyond 30 days after the cancellation date.
For those who purchased their home through a mortgage lender, home insurance is mandatory. Should a homeowner’s policy be canceled, the lender will automatically open a new policy for which the homeowner will have to cover the costs. These policies tend to be more expensive so in the long run, homeowners end up paying more than they would have with their original insurer.
If the homeowner decides to add or remove a feature of the house that can eventually cause deterioration, the insurer may decide to cancel the policy. This can happen especially if repairs are expected to exceed the expenses defined in the policy. Before undertaking any renovations or making large-scale alterations to the structure of your home, consider the long-term repercussions on the structural integrity of the property. Whether you think that far in advance or not, your insurer definitely will.
Informing your insurer should your home be vacant for more than 30 days is a must since the risks associated with an empty house are high. For example, in the case of a fire or flood, there will be nobody present to take action and minimize damage. For that reason, insurers will not look favorably upon those who are constantly leaving their homes vacant.
Although filing a claim will not increase your premium, an extensive history of filing claims might hinder the renewal process. Similarly, homeowners who have filed one or two large claims for which they were at fault may be heavily scrutinized during renewal. The insurer may even decline renewal in these cases.
It is important for homeowners to stay on top of their insurance payments and steer away from behaviors that may potentially damage the policyholder-insurer relationship. From honesty during the application process to taking carefully calculated steps in home maintenance, the homeowner can have coverage on their home for decades. The penalty behind nonpayments and lapsed coverage can be difficult because it makes it harder to find a new insurer. Keep in mind, you are less likely to receive approval if you have a history of late payments, nonpayments and cancellations.