Why Is Homeowner's Insurance Allowed to Cancel Your Policy?

The purchase of homeowner's insurance can be a mind-numbing ordeal of balancing inexpensive costs and adequate coverage. However, please don't believe that you're in the clear once you've purchased your coverage; many homeowners fail to recognize that insurance providers can and frequently do cancel policies, making the process more difficult the next time they are buying.

Review the Small Print

In most areas, insurance companies may only cancel a homeowner's insurance coverage following the terms outlined in the contract's fine print. Read your policy thoroughly to ensure you understand why your insurance could be canceled.

Contrast Cancellation and Non-Renewal

As if obtaining homeowner's insurance wasn't already tricky enough, many buyers fail to distinguish between the cancellation and non-renewal of an insurance contract. A cancellation occurs within the active period of the insurance policy. However, a non-renewal indicates that your insurer chose not to renew your policy when it expired. Cancellation and non-renewal can have dramatically different causes. A policy may not be renewed for various reasons, including a significant fall in your credit score, a history of frequent claims, or a sequence of severe weather events in your area that result in frequent claims from other insured parties.

Nonpayment of Premiums

For most policyholders, a canceled homeowner's insurance policy is a matter of cold, hard cash — or lack thereof. If you fail to pay your insurance premiums on time, your policy will likely be canceled. Notify your insurer as soon as possible if you cannot pay the entire premium on time, and make payment arrangements as soon as possible.

Fraud, Crime, or Misrepresentation

If you misrepresent the condition of your home, how you use it, or even your details, your insurer has the right to cancel your insurance throughout the policy term. Severe structural or other issues with your property that were not reported or discovered throughout the application process might result in cancellation, as can an undisclosed home business, such as daycare. In the same way, misrepresenting yourself, neglecting to report a known hazard, or providing other misleading information may result in cancellation. Using your residence to commit a crime might potentially result in the cancellation of your license.

Leaving the Premises

Without telling your insurer of your departure, you may find yourself without homeowner's insurance. When there is no one to report or mitigate the damage, unoccupied homes are susceptible to vandalism, natural disasters, and other issues that may go undiscovered and inflict severe damage. Notify your insurer if you plan to relocate or spend a lot of time away from home.

State by State Specifics

Although these are the most typical reasons insurers cite for canceling a homeowner's policy, legislation regulating cancellations may vary in your state of residence.