Getting Insurance Coverage After a Non-Renewal

21 May

In most cases, homeowners receive a renewal form from their insurance company a few months before the end of their policy term. In this case, the homeowner simply needs to review the information, sign the renewal, and send it back to sign up for another year of coverage. 

Unfortunately, some homeowners receive a non-renewal notice which means that their insurance company is not willing to insure their home anymore.  

If you have received a non-renewal on your homeowners policy it is important to start looking for a new policy immediately. If you currently policy ends and you don’t have a new one in place, your coverage will lapse, and your home will not be protected. 

In addition, if your home has a mortgage, your lender will be notified that your coverage has lapsed, and they will put a policy in place in order to protect their investment in your home. You will be billed for the policy they put in place. This is called forced-placed insurance and it is typically much more expensive than a standard policy

Why your policy was nonrenewed

There can be a number of reasons that your homeowners policy may not be renewed. Here are few of the more common reasons:

  • Excessive claims

This is one of the more common reasons for a nonrenewal. If you have filed several claims in a short amount of time your insurer may decide that you are too big of a risk for them to insure. Typically, filing more than one claim in a three-to-five-year period is a red flag for an insurer. Insurance should be saved for major issues, filing a claim for small problems can result in a premium increase or a nonrenewal notice. 

  • Your risk factors changed

Insurers can drop customers if their risk factors change dramatically. As severe weather and wildfire risk increases in certain areas, insurers are more likely to refuse writing policies in that area.  If your risk factors increase dramatically, you may end up having your policy nonrenewed. 

  • Insurer no longer writing coverage

Insurance companies may stop writing a certain type of insurance or pull out of a state or region entirely, which will result in a nonrenewal for their customers. It may be a simple realignment of the company or in some cases, the losses that the insurer is experiencing in that area make it unprofitable to sell coverage. This has happened in disaster prone states such as California (wildfires) and Florida (severe weather) where the risks made it unprofitable to sell policies in certain areas. 

Insurers must advise you in advance

In most states, insurers are legally required to inform policyholders of nonrenewal in advance. While it varies by state, in most cases, you should receive notification of nonrenewal anywhere from a month to three months before your policy’s expiration date. Some states require the insurer to send an explanation for the nonrenewal while other states do not require an explanation. 

If you would like an explanation or feel the nonrenewal is unjustified you can contact your insurer for details. It is also possible to file a complaint with your state’s department of insurance who may investigate the reason for the non-renewal. 

Can you find a new homeowners policy after a nonrenewal?

In most cases, the answer is yes. The majority of nonrenewals are sent out because the insurer is changing their focus or updating their risk appetite not because you are a bad customer. If this is the reason for nonrenewal you should be able to easily find a new policy by shopping your coverage with other insurers.

On the other hand, if you were nonrenewed because of your actions, non-payment, or too many claims, you may have trouble finding a new policy, at least one that doesn’t come with a steep premium increase. While there is more than likely an insurer out there that will write coverage for your home, you will likely be paying a much higher premium. 

Finally, if an insurer is pulling out of an area due to increased risks, it may be hard to find a policy in that area. Some California homeowners where wildfires are a major risk have found it next to impossible to find an insurer willing to cover their homes. 

The FAIR Plan

Many states where it can be difficult to find a policy in the private market due to increased risks have a FAIR plan in place. FAIR stands for Fair Access to Insurance Requirements and these are insurers of last resort that help cover high risk properties in areas of the state where finding coverage in the private market is difficult to impossible. 

FAIR plans are high-risk insurance pools administered by a state’s department of insurance. They are typically funded by private insurance companies that are licensed to write insurance policies in the state. 

Many FAIR plans require homeowners to meet specific requirements before they can purchase a policy. As an example, many states require you to prove that you have been turned down by at least three private insurance companies before you can purchase a FAIR Plan.

In addition, FAIR plans tend to be bare bones policies and have lower coverage limits and higher deductibles than policies available in the private market. 

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