Can a homeowners insurance company drop you?

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If you think that once an insurance company issues your homeowners insurance policy, it’s yours until you drop it, think again.

Unfortunately, you aren’t entirely in control of that decision. An insurer can choose to cancel your policy or refuse to renew it if they have a legitimate business reason.

Let’s explore how this could happen, plus, what to do if your home insurance provider decides to drop your homeowners insurance policy.

Key Takeaways

Insurance companies can cancel or refuse to renew your homeowner’s policy if they have a legitimate business reason to do so.
Some legitimate reasons include missed payments, bad credit, your claims history, or increased risks.
Homeowners with policies that are canceled or not renewed could face challenges finding a new policy.
A fair access to insurance requirements (FAIR) plan could be the right solution for homeowners struggling to find a new policy.

Why would a home insurance company drop you?

Insurers can cancel or refuse to renew policies if they have a legitimate business reason to do so, according to Jeff Raizner, partner at Raizner Slania, a Houston-based law firm that specializes in insurance litigation.

The legal reasons for an insurer to drop you vary slightly by state. But a few of the legitimate reasons why an insurance company might drop your homeowners insurance policy include:

● You’ve missed your premium payments.

● You have bad credit.

● Your home fails to pass inspection.

● The risks in your area increase.

● You bring home an aggressive dog breed.

● You’ve filed too many claims.

Here’s a closer look at how these reasons could impact your home’s insurance policy.

Missed payments

A series of missed premium payments could force the insurer’s hand. Without regular payments, the company may allow your policy to lapse. Or the company could decide to cancel your home’s insurance policy altogether.

If you’ve missed a payment or two, a cancellation of the policy might be on the table.

Bad credit

In some states, a homeowners’ insurance company can check your credit before it issues you a policy. Although your credit won’t be the only factor the company considers, it can be an important one. In states that use credit-based insurance scoring, your credit score is one way the insurance company assesses your risk. Insurers’ historical data shows that policyholders with poor credit are more likely to file claims, making them a higher risk.

If your credit score drops, it could be the reason for nonrenewal.

Home issues

An inspection is often part of the homeowners insurance underwriting process. Depending on the condition of your home, you might run into a reason for cancellation.

For example, let’s say that your roof is showing tangible signs of age. If the inspector deems it as a risk for the insurance company, you might find your policy canceled.

High-risk area

Natural disasters, such as wildfires and hurricanes, make it more difficult for an insurance company to operate profitably. An insurance company can make a business decision to stop offering coverage in a particular state based on the increased risks. For homeowners in that state, the move may mean non-renewed policies.

For example, insurance companies in California increased their cancellations and nonrenewals of policies in wildfire-prone areas. That led to new state rules to protect homeowners in the affected areas.

You bring risks home with you

Beyond the risks of a natural disaster in your area, the insurance company will take your individual risks into consideration. A few high-risk activities include getting an aggressive dog breed, being convicted of a crime, and willfully allowing necessary home repairs to remain unfinished.

If you engage in any of these activities, you might find your policy canceled.

You’ve filed too many claims

If you have an extensive history of filing claims, an insurance company may decide to stop working with you. Unfortunately, your history of claims can be seen as a risk that is bigger than the company is willing to take.

What to do if your home insurance company drops you

As a homeowner, it can come as a surprise to discover that your insurance company has decided to part ways with you. Home insurance companies can drop policies for reasons that run the gamut from changing business strategy to increasing risks in your area.

If you have spoken with your insurance agent and think your policy has been illegally terminated, contact your state insurance department to file a complaint or dispute. If the department finds that the practice is particularly pervasive, they can file an enforcement action or lawsuit against the insurance company for improper cancellation practices.

Can an insurance company drop your homeowners insurance policy after a claim?

“The most important point for consumers to understand is that their policies cannot be canceled in retaliation for filing a claim. It’s a fine line to draw because they can cancel for a poor claims history over multiple claims and they can cancel for reasons such as the home being too damaged to insure, but it is illegal to cancel for pure retaliation for filing a claim and consumers need to be aware of that,” explains Raizner.

If you have filed a claim and were dropped during the claims process, you can speak with your agent to get more details on the reason and then contact your state insurance department to file a dispute, if needed.

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How to get homeowners insurance after being dropped

After being dropped by your insurance provider, the first step is to determine exactly why this happened.

In some cases, the answer to this question will be clearly stated in your cancellation or renewal letter. But if not, consider any recent changes in your home. Consider the possible reasons for cancellation, such as the addition of a new puppy, a recent claim, a leak in your roof, or an increase of natural disasters in your state.

You can always call the insurance provider to find out more about their decision. If you can get to the root of the cancellation, you’ll have a better chance of finding a solution.

The good news is that you will likely have some time to find a new policy. In many cases, you’ll have at least 45 days to shop around. Some states, like Florida, California and New York require insurer’s provide more than 45 days’ notice of cancelation.

In that time, seek out quotes from other insurers in your area. But keep in mind that the reasons for your original canceled policy may make it difficult to find affordable coverage through a private company. With that, your hunt for coverage may be more challenging than you had hoped.

Luckily, there is a final option. If you struggle to find a quote that suits your needs, then it is time to turn to your state’s fair access to insurance requirements (FAIR) plan.

The FAIR plan should serve as a last resort. But high-risk property owners will find some peace of mind in the offered FAIR insurance plans.

Frequently asked questions

What would cause an insurance company to drop you?

An insurance company can drop you for a variety of reasons. These include bad credit, missed payments, increased risks, structural damage, and changes in business strategy.

Can you get homeowners insurance with a bad roof?

It may be more challenging to get homeowners insurance with a bad roof. However, it may not be impossible. Ultimately, it will come down to the discretion of the insurance providers in your area.

Is it hard to get insurance after being dropped?

The reasons why an insurance provider chooses to drop your home insurance policy can make it hard to obtain a new policy. As a homeowner, you should consider your state’s fair access to insurance requirements (FAIR) plan if you are running out of options.

Sarah Sharkey

Contributing Researcher

Sarah Sharkey is a personal finance writer with a master’s degree in management from the Hough School of Business at the University of Florida. She enjoys helping readers find money solutions that work. She has written for numerous personal-finance publications including Money Under 30 and The College Investor.