What To Do If Your Home Insurance Company Drops You? (2024)

It’s a shock if you’re notified that your home insurance company is dropping you, as thousands of Florida policyholders have recently experienced. Fortunately, options are available to ensure that your home remains insured.

How Homeowners Insurance Companies Can Drop You

Mark Friedlander, a spokesperson for the industry-supported Insurance Information Institute, explains that there’s a difference between an insurer canceling a homeowners insurance policy and choosing not to renew it.

Cancellation generally refers to an insurer canceling your coverage during the coverage period. Meanwhile, non-renewal happens when an insurer discontinues your coverage at the end at renewal time.

Common reasons for homeowners insurance cancellation

Insurers typically can cancel a policy if:

• You fail to pay your insurance premium.
• You committed insurance fraud or seriously misrepresented information on your insurance application.
• You don’t make timely repairs requested by a new insurer after a home inspection that was ordered by the insurer.

In unusual circ*mstances, a state insurance regulator might allow a home insurer to cancel policies while they’re still in effect 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 policyholders have been given 45 days’ written notice.

A policy can be canceled when state regulators determine a financially troubled insurer is insolvent, meaning it can’t survive. In the past year, several home insurers in Florida and Louisiana have been declared insolvent, Friedlander notes. In an insolvency, an insurer is shut down and state regulators take over its assets.

In the case of insolvency, a guaranty association typically steps in to cover outstanding insurance claims and provide coverage.

Every state, along with the District of Columbia and Puerto Rico, has two types of guaranty associations: a property and casualty guaranty association, which includes homeowners insurance, and a life and health guaranty association. By law, a home insurer licensed to do business in a state must be a member of that state’s property and casualty guaranty 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 for homeowners insurance non-renewal

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, it typically must notify you ahead of time. You should have a certain number of days notice, the amount of which usually depends on state laws. The insurer also must provide a reason for the non-renewal.

Reasons for non-renewal can include:

• An insurance company reduces the amount of policies it will renew or sell where you live. For instance, if there have been frequent natural disasters triggering lots of claims in the area.
• An insurance company backing out of the home insurance market in your area altogether due to business reasons.
• You committed insurance fraud.
• Your insurance credit score dropped significantly.
• You filed multiple claims.

What Should You Do If Your Homeowners Coverage Is Dropped?

Insurance companies are generally required to give you a non-renewal or cancellation notice 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 the coverage ending. But if it fails to do so or you’re unclear about the reason, contact your insurance company. If you disagree with the reason, consider filing a complaint with your state’s insurance regulator.

To dispute your non-renewal if it’s related to your home’s location in a potentially high-risk zone for severe weather, you may have to show documentation that your home isn’t located in a high-risk area or show that you’ve 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 lapse in coverage.

It’s smart to compare home insurance quotes among multiple insurance companies for identical coverage to ensure that you find the cheapest homeowners insurance that suits your needs. Be sure to have your new policy in place before the old policy expires, and notify your mortgage company about the new insurance company.

You may need a FAIR plan as a last resort

But what if you’re not able to find coverage with a new insurer? As a last resort, you can buy a Fair Access to Insurance Requirements (FAIR) plan, which is a state-run program that provides insurance for high-risk consumers.

FAIR plans are generally 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 state’s largest home insurer. Citizens is expected to exceed 1 million policyholders by the end of 2022.

On the other side of the country, California imposed a mandatory one-year moratorium on insurance companies canceling or non-renewing home insurance policies in certain areas in or near wildfires after the governor has declared a state of emergency.

Related: How FAIR plans work for home insurance

Frequently Asked Questions