Insurance Companies Allowed to Drop You

Understanding Policy Nonrenewal and Cancellation

Insurance companies generally have the right to non-renew or cancel your policy, but the rules vary by state and by the timing of the claim. Cancellation typically occurs within the first 60 days of a policy, often due to fraud, non-payment, or undisclosed risks. Nonrenewal, on the other hand, happens when an insurer decides not to extend your policy after its term ends.

Can One Claim Lead to Nonrenewal?

A single claim rarely results in an immediate cancellation, but it can impact your renewal. Insurers track your claims history, and even one large or unusual claim can raise red flags, especially if it suggests ongoing risks. For example, a water damage claim from poor maintenance could make a company view your home as a higher risk.

Multiple Claims Increase Risk

The bigger concern comes when you have multiple claims within a short period. Two or more claims within three to five years often trigger nonrenewal notices. Insurance companies may view this as a pattern, signaling that future claims are more likely. Weather-related claims like hail or hurricane damage are sometimes treated differently, but frequent non-weather claims (like theft, fire, or liability) are riskier.

State Protections for Policyholders

Most states, including Texas, have regulations that prevent insurers from dropping you without cause. They must provide advance written notice (typically 30 days for nonrenewal and 10 days for cancellation). Additionally, insurers cannot non-renew solely due to age or length of time with the company. However, claims history is a legitimate factor they can use.

How to Protect Yourself

To avoid losing coverage after a claim:

• Only file when necessary. Minor repairs might be cheaper out-of-pocket.
• Improve home safety. Installing storm shutters, alarms, or new roofing lowers perceived risk.
• Shop around. If dropped, other insurers may still offer coverage, though possibly at a higher premium.

Conclusion

Yes, insurance companies can drop you after a claim, but it usually happens through nonrenewal at the end of your policy term rather than immediate cancellation. A single claim is unlikely to end your coverage, but repeated claims raise your risk profile. Understanding state protections and managing claims wisely can help you stay insured.