Homeowners usually see their payment to their home insurancecompany as a necessary evil. The coverage they offer helps protect your home, belongings, and investment, but those payments can hit your wallet hard.
Shelling out thousands of dollars on an insurance policy may feel like a large financial burden, but did you know that your insurance company can choose to drop or not renew your policy? Circumstances like not paying your premiums, violating the terms of the policy, or committing fraud will obviously jeopardize your coverage, but your company can also drop coverage if it believes you and your property are too risky to insure. In these cases, an insurer may cancel, and you could have a hard time finding another company to protect your property.
Insurers may also decide to not renew your policy for many reasons that don’t ever cross your mind. Consider these common yet unapparent circumstances that could threaten your policy.
1. Old roof
This might surprise you, but having an old roof may prompt your insurer to ask you to replace the roof or run the risk of losing coverage.
Thirty years is usually considered the life of a roof. Once the roof goes beyond that time, there’s a greater chance of damage such as water leaking into the home. Water damage is the most common home insurance claim, so insurers want to make sure you’re protecting your home properly.
But age alone won’t trigger a nonrenewal, says Lyle Fulkerson, president and CEO of HPM Insurance in Amherst, NH. It’s the actual condition of the roof that concerns insurers.
Your insurer may perform periodic checks on your home, and if it sees an aged roof with loose shingles, overhanging trees that might fall on your home, rotting wood, or missing railings, you can expect a letter from your company requesting repairs.
2. Too many claims
As unfair as it might sound, an insurance company will drop you if you file too many claims. You might think “I pay my premiums, so my insurer should cover me.” But news alert: Insurance companies don’t think that way.
An insurer will most likely drop your policy if you file more than one claim in a policy term, says Fulkerson. That’s especially true if the multiple claims are for the same problem.
“The reason is because insurance is based on averages, and the average consumer files a claim once every nine or 10 years. If a homeowner files more frequently, they are above average and hence, in theory, not profitable for the insurance company,” Fulkerson says.
Keep in mind that if you bundle your home and auto insurance, an insurer may also take into account your auto claims, too. So, review your claims history before making another claim to make sure you won’t raise your insurer’s ire.
3. Insurer decides not to cover your area or state
Sometimes you have no control over whether your insurer drops you. Case in point: when an insurance company decides to not cover a specific area or state.
This may happen if an insurance company finds an area is too expensive to cover because there are too many claims. This could occur because your area is prone to major storms, flooding, fires, or crime. If you live in an area with many claims, an insurer may decide that it’s not a financially viable place for it to cover.
There are ways to find another insurer. If you work with an independent broker, discuss other home insurance options. If you have trouble finding another insurance company that will cover your home, check with your state’s insurance department for assistance. The department will know companies that might offer policies to areas that are considered higher risk.
Home insurance companies often cover pets in a policy’s liability coverage in case the pet injures someone or damages another person’s property. However, insurance policies may exclude certain pets (e.g., exotic animals) and dog breeds.
An insurer may be concerned if you already filed claims for your pet if it bit the neighbor’s child or destroyed the neighbor’s fence.
There are also specific breeds that an insurance company may exclude. In that instance, no matter the personality of your dog, the insurance company may not provide coverage for the animal. The same goes for exotic animals such as snakes.
“If you have a high-risk pet that has a history of biting or is an excluded breed, companies may allow you to exclude the pet from the policy, but understand that you would be legally liable and financially responsible if your dog bites someone for medical costs, damages, and possible lawsuits,” says Carole Walker, executive director of the Rocky Mountain Insurance Information Association in Greenwood Village, CO.
How to avoid losing your home insurance
There are steps you can take to make sure you stay in your home insurance company’s good graces. Walker suggests homeowners perform an annual policy checkup to stay up to date on their property and insurance needs.
Perform regular maintenance. Check your property for any potential problems such as overhanging trees, rotting wood, and roof damage. If you find an issue, make the necessary repairs before it becomes a bigger problem or your insurance company sees it and threatens to drop your policy.
Don’t use your insurance policy as a maintenance policy by filing claims that barely meet the deductible. Filing too many claims can cause an insurer to raise your rates and even drop you. Have money set aside to perform regular home maintenance, and leave insurance only for major damage.