Insurance companies are experts at assessing risk. By avoiding too many losses that require insurance payouts, they can be profitable businesses.
Certain circumstances that aren’t a normal part of that risk can lead to insurance companies canceling homeowner insurance policies. Some reasons, however, can be overcome by explaining what you’re doing to resolve the issue so you can remain insured.
Here are some risks that can lead to home insurance being canceled, and what to do about it:
Filing too many claims
You hopefully did the math when you filed that claim years ago for a minor water leak that cost more to repair than your deductible. But was it really worth filing? Did it cost thousands of dollars more to fix after your deductible was paid?
Insurance is meant to cover catastrophes. If you’ve filed multiple insurance claims for small issues, it can be a sign that there are too many risks in your home to make it worth insuring. Your policy could be canceled or the premium could be raised.
If your home policy is bundled with your car insurance, then too many auto insurance claims could affect your home insurance or cause the insurer to cancel the entire policy.
To try to convince your insurer to still cover you, it can help if your frequent claims were on area — such as water damage — and you can show that all of the problems have been fixed.
If all of your claims were $5,000 or less, an insurance company might keep you on if you increase the deductible to $5,000, which should reduce its risks and put more of it on you.
Cancellation after inspection
Upon renewal of your existing policy, an insurance company’s underwriter may have to inspect the property. If they find too many risks — such as fire hazards and areas in disrepair — then a policy may not be renewed.
To fix this, the solution is simple, though potentially costly: Fix the damaged areas. New plumbing or electrical systems may have to be installed or fire hazards eliminated before your insurance policy can be reinstated.
An older home can have many problems, starting with an old roof that may need to be replaced. Insurance companies may require an inspection if your roof is 20 years old, and others may not insure you at all if your roof is that old.
Roofs usually last 30 years. If your roof is within 10 years of that, it can be more of a risk for your insurer. Failing an inspection at renewal time can lead to your policy being canceled, then hopefully reinstated when a new roof is added.
Not paying your insurance premiums on time can lead to a quick notice from your insurer that could lead to immediate cancellation if not resolved.
A 30-day grace period is normal for catching up on payments, and your insurance provider may offer you more flexibility on payment due dates. Without payment up to date, any claims made during that time could be denied.
Bad credit can also affect your homeowners insurance. Insurers will likely perform a credit check before issuing a policy, and while bad credit probably won’t make you ineligible for coverage, it could make your premium higher than it would be otherwise.
Living in a high-risk area
If you live in an area that’s prone to natural disasters such as tornadoes, flooding and hurricanes, your area could be an unacceptable risk. Too many claims by you or homeowners in your area could create too high of a risk for insurance coverage.
Insurers are unlikely to leave an area after one bad year of disasters. But losing money year after year because of a lot of flood claims could cause them to stop offering coverage in those areas.
High risk can also be an urban area with high crime, vandalism and theft. Adding an alarm system to your home could allow insurance to be reinstated.
You just got a dog
Some insurance companies won’t cover homes that have certain types of dog breeds. They want to avoid the risk of dog bites and blacklist certain breeds.
Even if the Rottweiler or pit bull terrier you’ve had for months has never bitten anyone, you may still be denied coverage because of historical statistics for the breed. Mixed breeds that include part of a banned breed can be excluded too.
Some states prevent insurance companies from denying coverage to owners of specific breeds, though they can charge higher premiums.
If you’re denied coverage, ask if you can buy liability insurance outside of your homeowners policy if you muzzle or train the dog.
If you don’t tell your insurer about your new dog or other exotic pet (boa constrictor), and it bites a neighbor and an insurance claim is filed, your coverage could be canceled for not disclosing the pet.
What else to do
If your policy is about to be canceled, you’ll typically get a 45-day notice in writing. There are a few things you can do to prevent this, some of which were mentioned above.
Start by repairing any problems raised by your insurer, such as a damaged roof. You can next dispute the cancelation and request remediation or file a complaint with the state department that oversees the insurance industry.
If you’ve filed too many claims or live in a high-risk area, it may be time to shop for a new insurer. You may be able to at least get basic insurance coverage. Some companies specialize in high-risk homeowners, which require higher premiums. They’re called “assigned risk” insurance services, and your state department of insurance can tell you who the assigned risk carriers are in your area.
Another option are Fair Access to Insurance Requirements Plans, or FAIR Plans. These plans for high-risk homeowners have higher premiums. They’re insurance pools for people who can’t get insurance in the voluntary market.
In seven Atlantic and Gulf states, a counterpart to the FAIR Plans are the Beach and Windstorm Plans. They provide insurance in designated areas against hurricanes and sever windstorms.
Reducing your risk is the best way to ensure your insurance policy isn’t canceled. Routine maintenance can help avoid big-ticket repairs later and could make your current premiums lower.