If you have a mortgage on your property, you have to have homeowner’s insurance. If your lender finds you without it, they will force place a policy on you. This could cost you more than twice as much as the standard rates could, so you definitely want to avoid it.
Even if you don’t have a mortgage, though, you need protection should something happen to your home. Imagine a fire or tornado bringing your home down to the ground. Do you have the funds to build it up again on your own? If not, you need insurance to protect you.
What happens if you are dropped from your insurance though? Will another company insure you? While it might not be the easiest task, you must take some simple steps.
Find Out Why
First, you must find out why you were dropped from your homeowner’s insurance. Did you not pay the premiums? If so, that’s a legitimate reason for a company to stop insuring you. However, they often give you several chances. Usually, they will notify you that you have 30 days to make up the past due payments or they will cancel your policy. If you pay the full premium during that time, you may be able to keep your insurance. If you don’t, then you’ll end up having to shop elsewhere.
Other common reasons for insurance cancellation include:
- Multiple claims – Too many claims (usually 3) within a short period of time makes you a high-risk customer, and could cause your insurance to be canceled. Many insurance companies will not renew your policy if this is the case. If this does occur, immediately request your CLUE, or Comprehensive Loss Underwriting Exchange report. This is the house equivalent of your credit report. It shows a history of the claims filed on your property. If you find any mistakes in the report, file a dispute and have it corrected. You may then have an easier time getting insurance.
- Failed inspection – Some insurance companies conduct periodic inspections of your home to make sure it’s up to par. One of the most common reasons an inspection fails is the age of the roof. If it’s older than 20 years, an insurance company may consider your home too high risk, as older roofs are prone to a whole host of problems. Replacing the roof quickly will help you from losing your insurance or at least help you get new insurance.
- Too many claims in the area – If your area gets hit with bad weather repeatedly, an insurance company may decide it’s too risky to insure homes in this area and leave you with a canceled policy. This usually does not happen over the course of one year, but over a cumulative period that insurers look at what is going on, keeping an eye out for repeating patterns.
How to Get New Homeowner’s Insurance
So you’ve been dropped, now what? After you order your CLUE report and make sure everything is accurate, it’s time to try again.
- Make the repairs – If your insurance company dropped you because your roof was too old or your home has too many problems (claims), fix them. Document each repair that you do with receipts, contracts, and pictures and prove to the insurance company that you’ve brought everything up to optimal working condition. Whether you go back to your original insurance company or you try new companies, you’ll need the proof of the changes in order to secure an approval.
- Look for an assigned-risk carrier – If your insurance company canceled your policy because of the number of claims you filed, you may need an assigned-risk carrier. Your state should be able to help you locate these carriers. Just like a subprime mortgage lender charges higher interest rates, the insurance companies often charge higher premiums, but at least you’ll have coverage.
- Shop around – Each insurance company has different thresholds for risk. One company may turn you down flat while another will welcome you, but with higher premiums. If you have more than one turndown, compare the reasons why you were turned down. Then check your CLUE report to see if these reasons are legitimate. If they aren’t, file a dispute.
As a worst-case scenario, you can allow the mortgage company to force-place insurance on your property. However, that won’t protect your financial interest in the property. It will just protect the lender, which would at the very least, leave you off the hook for the mortgage if something bad were to happen.
In the end, it comes down to shopping around and asking for help. Your state should provide assistance if you are without insurance suddenly. Your lender can help as well. Checking with different agencies, you may get leads from the agents as well. The key is not to give up and to make sure everything is legitimate on your CLUE report to ensure that you receive fair treatment