As is the case with any business relationship, things between you and your insurer might not always work out the way it was planned. When it comes to home insurance, both you or the insurer might decide to walk away from the deal. Of course, if your insurer ends your home insurance contract, you have somewhat of a problem because when you apply to a new insurance provider you will have to disclose this fact.
It’s better to know exactly why a home insurance policy can be canceled and to do your best to prevent it from happening in the first place. Below we list some of the most common reasons.
Failure to pay the premiums on time
Although most insurance firms will give you a 30-day grace period to get your account up to date again after failing to make a payment, this remains one of the top reasons why they terminate home insurance policies. Even if you catch up on a late payment within the grace period but you consistently make late payments, the insurer could one day decide that your account has become too risky and cancel it.
Submitting too many claims
The fewer claims you file, the better your risk profile will look to the insurance company. The more claims you submit, on the other hand, the worse your risk profile will be. Eventually, the firm might simply decide to walk away and cancel your home insurance policy.
Your region becomes too much of a risk to the insurance company
If the area where you live becomes somewhat of a disaster zone with more than one tornado, hurricane, flood, earthquake, or wildfire - or a combination of those - in any particular year, the insurer has the right to stop providing coverage for that area. Although this won’t tarnish your insurance record (because you had no control over what happened), it will still make it more difficult to get affordable home insurance because the region might be designated as ‘high-risk’ by insurance firms.
Nondisclosure, misrepresentation, or fraud
If you lie on the insurance application form, you fail to disclose certain information, or you intentionally misrepresent the truth, your home insurance policy can get canceled or even worse, have a claim denied.. For example, if you say in the application that you live in your home while you are actually renting it out, this affects the risk from the insurer’s point of view. The company then has the right to void the policy ab initio (from the start, as if it never existed).
If this happens after you submitted a claim because your house burned down, the claim will not be paid.
Failing to maintain your home
Lack of property maintenance can eventually cause major damage. And if the insurance company feels that this was due to negligence on your behalf, it might simply reject your claim and refuse to renew your policy. Imagine the financial implications if your home’s leaking old roof collapses because you failed to have repairs carried out on time. And the insurer rejects your claim and terminates your policy.
Other hazards you have to watch out for are trees that need trimming badly or that are overhanging the house, broken windows, a sidewalk that is lifting up, and a lack of handrails if there are too many stairs to an entry/egress. Unnecessary delays with the inspection can also become a problem between you and your home insurance company. It has to be done within 60 days of the inception date.