If you have a mortgage on your house, you know that homeowner’s insurance is required by your lender. Even if you own your home outright, not having a homeowner’s insurance policy is downright foolish. A fire or other disaster could destroy your home and belongings in minutes, leaving you with nothing. However, there are situations in which you cannot get homeowner’s insurance or you are refused a house insurance renewal by your insurance company.
TL;DR (Too Long; Didn't Read)
Your insurer can refuse homeowner's insurance for certain reasons, which may include dangerous conditions on the property. Keep your house free of hazards to avoid this possibility.
Reasons Home Insurance is Declined
Every home and every homeowner is different, even if properties are similar. One of the most common reasons for an insurer to decline coverage is a history of excessive claims on the homeowner’s part. Unfortunately, a history of excessive claims on the part of the prior owner may make an insurer wary of providing coverage for a recently purchased dwelling. Insurers consider such homes high risk or view such residences as claims waiting to happen. Remember that insurance companies make money by not paying out claims if they don’t have to do so.
Sometimes, there is no issue with obtaining home insurance even over a period of many years until an insurance underwriter visits the property and finds problems. These fall under the label of external or internal hazards. The former deals with items outside the home, including a roof in poor repair, hazardous trees and limbs, junk and trash in the yard, foundation cracks and do-it-yourself repair jobs that aren’t up to code. The latter concerns the home’s interior, and insurers may refuse or cancel coverage if they find evidence of hoarding, disrepair or anything that may pose a fire hazard. That includes wood stoves, which may save money on heating bills but can cause cancellation of insurance even if the stove was installed by a professional. That’s why it is critical to contact your insurance company if you are considering the installation of a wood stove or similar item and make sure adding one to your home won’t affect your coverage.
Mitigating the reason the insurer plans to cancel your policy can result in reinstatement. The most obvious example is replacing an old roof. The cost of such mitigation is often expensive, but you really have no alternative if you want to maintain insurance. The cost of not having home insurance should you suffer major damage or liability is even greater.
Areas That Are High Risk
Insurers may decline coverage not based on your dwelling itself but on its area. Increasingly, it is becoming more difficult for those living in places regularly hit by natural disasters to purchase home insurance policies. Keep in mind that standard homeowner’s insurance does not cover flooding. For that, you must have a separate flood insurance policy.
The Pet Problem
For the most part, pets aren’t an issue with insurers, as long as you have the right kind of animal. If your four-legged family includes a dog breed known for its biting predisposition, you may find yourself unable to obtain insurance as long as Fido lives under your roof. State laws vary, but some allow insurance companies to exclude certain dog breeds or other animals known to cause harm to humans. Problematic dog breeds include but are not limited to any type of pitbull or Staffordshire terrier, Cane Corsos, Rottweilers, wolf hybrids, Akitas and Presa Canarios. Even if your dog wouldn’t hurt a fly, there are members of their breed who have caused serious bites and even fatalities, and insurers aren’t willing to take the risk. If your dog looks like one of the banned breeds, even if they're a mutt, they may not prove insurable.
But dogs aren’t the only pet that could cause you to have your home insurance declined. Not too many people keep boa constrictors as pets, for example, but if such a snake gets loose in the house it can easily strangle a child or even an adult. Don’t even think about not telling your insurer that you have a banned pet when you buy home insurance. In a worst-case scenario, if your dog mauls somebody, your insurer will almost certainly cancel your policy if they were not informed of the animal’s presence.
Credit Checks and Cancellation
If you don’t pay your premiums on time, you expect to have your insurance policy canceled. However, if you are applying for homeowner’s insurance and you have a poor credit history, the insurer may deny coverage or make you pay a great deal more for it. If you recently obtained a mortgage, it is likely your credit is good enough for you to qualify for homeowner’s insurance. Otherwise, clean up your credit report to the best of your ability before applying for homeowner’s insurance.
Insurance Coverage Non-renewal
There is no obligation on the part of an insurance company to renew your policy, even if you haven’t had excessive claims or any other obvious reason for non-renewal. If your insurer notifies you that it is not going to renew your policy, call to find out why. It is possible that the information they have about your home is inaccurate. If they do have a legitimate reason to drop your policy, you may persuade them to increase your premiums because of the additional risk factors. Of course, you can shop around and may find another insurer perfectly willing to offer coverage, but if your original insurer has a good reason not to renew your policy, it is possible that no other insurer will take you on. In such a situation, your current insurer may agree to continue coverage at a higher rate if you have always paid your premiums on time.
High-Risk Homeowner’s Insurance
If you are ineligible for standard homeowner’s insurance, don’t despair. You can still purchase such a policy from a company specializing in high-risk homeowner's insurance if you can afford these higher premiums. Such insurers are known as assigned risk carriers. Your state’s Department of Insurance can provide you with information about local assigned risk carriers. Another option is the Fair Access to Insurance Requirements (FAIR) plan. Although you may receive coverage via a FAIR plan, you’ll end up paying more and receiving less coverage than under a standard policy.
If you have a mortgage, the insurer of last resort is your lender. When your insurance coverage is denied or not renewed, your lender receives notification. To protect their investment, the lender will, in essence, become your insurance provider, and it will cost you considerably. When the lender provides the insurance, they are not interested in protecting your personal property. That belongs to you, while much of the actual structure belongs to them. That means if there is a loss, your “stuff” isn’t covered and you don’t receive the sort of coverage provided in traditional policies, such as funds for living expenses if the house is uninhabitable.
Preventing Insurance Cancellations
Besides ensuring your premiums are paid on time, there are ways you can minimize the odds of having your homeowner’s insurance canceled. One of the best ways to minimize cancellations is by not filing unnecessary claims. Sure, if you have a major claim, such as a tree falling on your home, you must file. That’s the true purpose of homeowner’s insurance: To help you deal with calamity. On the other hand, filing a claim for a broken window or some other relatively inexpensive item is a good way to have your policy canceled. Address any small problems in your home, such as leaks, before they become big problems requiring a claim.
A graduate of New York University, Jane Meggitt's work has appeared in dozens of publications, including PocketSense, Zack's, Financial Advisor, nj.com, LegalZoom and The Nest.