Your home insurance can be dropped for a handful of reasons (and that list is getting longer and longer.) For homeowners, it’s a harrowing experience filled with anxiety and even utter panic, when they discover their home insurance company will no longer insure their property.
We understand. If you need immediate help getting home insurance, skip to the part of this article titled Shopping for New Home Insurance if You’ve Been Dropped.
If your home insurance was recently dropped, for any reason, you’re in the right place. Our team of licensed insurance agents at Einsurance.com is ready to help you understand how (and why) this happens, how to prevent it, and steps you can take to move forward finding new homeowner’s insurance if your home insurance has dropped you.
This article explains:
First, let’s explore the reasons an insurance company can drop you, meaning your policy will be cancelled or non-renewed. We’ll also cover important vocabulary you should understand if you’re coping with this problem.
When Home Insurance Drops You: Cancellations and Non-Renewals
Home insurance cancellation laws vary by state. But generally, there are two ways an insurer can stop doing business with you, and a few ways they can force you to buy insurance elsewhere.
We’re talking about:
- Cancellation
- Non-renewal
- Prohibitive pricing
- And exiting the state market
Home Insurance Cancellation Explained
Homeowner’s insurance companies cannot cancel a policy during the contract unless the insured makes certain mistakes.
Insurers can cancel your home policy if:
- You do not pay the premiums (your monthly insurance bill)
- Material misrepresentations on the policy application
Failing to make a payment is self-explanatory. But let’s pause for a moment, and explain the term “material misrepresentations,” in terms of insurance.
Material Misrepresentations on an Insurance Application
Cornell University Legal Information Institute defines material as, “important information, generally significant enough to determine an issue.” In plain language, we’re talking about a fact that matters to the insurer, something that makes a major difference in their choice to insure a person or property. When you hear the word “material” in insurance, think “it matters.”
Some examples of material misrepresentation include:
- Not reporting your claims history
- Misrepresenting the purpose or use of the property
- Describing the property in an untruthful way
Let’s explore each of these points.
Failing to Report Your Claims History
Claims history is a huge issue for insurance companies. It’s crucial that you’re direct and honest when applying for homeowner’s insurance. All US insurers share databases of claims, so they will find out the truth!
Suppose you’ve had three fires at your home in the past five years and you do not disclose this on your application for home insurance. When the insurance company discovers this claims history, they will likely cancel your policy. They could offer you a new policy with a much higher premium. Or, they could choose to avoid your business altogether.
Misrepresenting the Purpose or Use of the Property
This issue is becoming more common in the era of high-cost rentals, short-term rentals, and the Work From Home movement.
Know that:
- Rental properties do not qualify for a traditional homeowner’s policy
- Short-term rentals — like Airbnb — do not qualify for a homeowner’s policy
- And certain high-risk businesses should not be run from your home without telling your insurer
For instance, if you run a boxing gym in your basement, and don’t disclose it on the application for home insurance, the insurer will probably consider this a material misrepresentation once they discover the truth. From the insurer’s perspective, contact sports are high risk, and you could be sued for an injury occurring on your property.
So be sure to tell your insurer about changes in the way you use your property and get a landlord policy or short-term rental policy if needed.
Those are the broad strokes of insurance cancellations, when an insurer can stop doing business with you during the policy period.
Now, let’s talk about non-renewals.
Home Insurance Non-Renewals Explained
Non-renewals are not cancellations. Usually, when a homeowner says, “my home insurance company dropped me,” they’re talking about a non-renewal.
Non-renewals occur when an insurer decides they will not enter into a new contract with you, once your current contract is over. They will notify you in writing several months before your current policy expires.
Insurance companies can non-renew your policy for a long list of reasons, like:
- Multiple smaller clams
- One or more expensive claims
- Unsafe behaviors, or illegal behaviors at the property
- Material misrepresentations
- Wildfire zone changes
- Criminal charges or criminal activity at a property
- Changes in underwriting/appetite for risk
- Leaving the market entirely
Those last two points are probably most significant in 2024-2025. Many property insurance companies are changing their underwriting guidelines, others are leaving certain states entirely.
Currently, Florida and California consumers are coping with tremendous upheaval in their insurance markets. Major insurers have left both states entirely. And yes, they have a right to do so! Some would argue they have a responsibility to do so, if continuing to do business in a state or region would cause bankruptcy, because then state governments and taxpayers would find themselves paying claims.
Some home insurance companies cite climate change and changing weather patterns, others claim a threat of insolvency — that is, going broke after paying too many claims — while others seem to find the most unusual reasons to leave a market, drop or non-renew their clients.
This author, by the way, endured this very situation earlier in 2024. The home insurance company dropped her — after a 15 year relationship — because her driveway is now deemed too steep and narrow for a firetruck.
And we should mention another, more indirect, way an insurer can “drop” you. Although it’s not a cancellation or non-renewal of a policy. We’re talking about purposely prohibitive pricing.
Prohibitive Pricing in Home Insurance
If a home insurance company wishes to drop you but cannot find a legitimate reason on paper to do so, they will offer you a very unattractive price for your next policy. If you’re accustomed to paying, for instance, $1,000 every year for home insurance, and suddenly receive a renewal price of $8,000, this is what’s happening.
In this way, insurers can encourage you to voluntarily shop for new home insurance elsewhere.
The good news is this: there is hope for most consumers! Shopping for new home insurance in a market like this is never fun, but you do have some choices available, and many states now offer FAIR plan coverage options.
If you’ve been dropped from home insurance for any reason, you have a very small window of time to find a new policy. This should be your highest priority, especially if you have a mortgage.
Check with Your Current Insurers
In the spirit of unbiased information, we suggest you reach out to your current insurer (even if they’re dropping you, and for whatever reason.) They may be willing to insure your property if you make some changes, like replacing a roof or installing a sprinkler system. Or, they may move you into a more expensive risk rating group. That means you’ll still have insurance, but it will cost more.
Even if they’re wholly unwilling to insure your home, they may have “sister companies” to recommend, or they might recommend a competitor who is likely to insure your property. The bottom line is this: check with your insurance company before shopping elsewhere.
Assuming that fails, check with other insurers with which you currently do business. Your auto insurer, for instance, might be willing to provide you with a home insurance quote. Again, be honest with them about your situation.
Try Einsurance.com
If those options fail, we suggest you try our handy online quoting tool at Einsurance.com. We aim to provide a match between insurance companies and consumers. We work with hundreds of property insurance companies all over the US, even in the most challenging markets in California and Florida.
Our matchmaking service makes it easy for consumers to choose between all the insurers who are willing to insure a property. We can almost always help you find insurance. Even if your insurance coverage was “dropped,” non-renewed, cancelled for non-payment, or cancelled for a material misrepresentation, we can introduce you to a property insurance company who wants your business.
Now, there are a few instances where consumers need to find non-traditional homeowner policies. These are called “FAIR Plan” policies, and they vary among the states.
FAIR Plan Coverage Options
FAIR Plan insurance coverage exists to cover properties which are difficult to insure. These plans are monitored by individual state insurance boards, and they are a community effort among insurance companies that wish to do business in a given state.
Put another way, if an insurance company wants to do business in your state, they make an agreement that says they cannot only “pick the cherries” of good, low-risk properties. They must also insure more challenging properties, and they do this collectively though the state FAIR Plan.
A property that was once easy to insure might become a FAIR Plan property if:
- Several dangerous wildfires occur in the area
- Major storms or other problems cause tremendous damage and expensive claims
- Civil unrest and riots make your neighborhood unsafe
Fun Fact: FAIR Plan policies originated in California, when riots, civil unrest and brush fires caused many home insurers to non-renew policies in specific neighborhoods. This left homeowners unable to find the insurance they needed to satisfy their mortgages.
FAIR Plan Coverage Options Explained
FAIR Plan policies are not the same as traditional homeowner policies.
These policies provide enough fire coverage to appease your mortgagee (the bank or financial institution to which you make a mortgage payment.)
And you can buy additional FAIR Plan riders to cover the usual perils associated with an HO policy, like damage from:
- Wind
- Hail
- Lightning
- Smoke
- Civil unrest & riot
- Malicious mischief
However, FAIR Plan policies do not offer any sort of liability coverage for a homeowner. And they won’t offer the “bells and whistles” of a homeowner policy, which covers perils like theft.
FAIR Plan policy prices are on the rise in 2024 and 2025. These may not be the most affordable options when compared to a homeowner policy, especially if a consumer then needs to buy more liability coverage or riders. Ultimately, think of a FAIR Plan policy as a last-ditch, emergency effort to get property insurance.
And this leads us to the final question we’ve been asked by consumers lately, “Can I Live Without Home Insurance?”
“Can I Live Without Home Insurance?”
There is no law in the US that says a consumer must carry homeowner’s insurance.
However, if you have a mortgage — if you make a payment to a bank for your home — then NO, you cannot live without home insurance. You must have homeowner insurance or a FAIR Plan policy.
It makes sense that mortgage contracts require home insurance, because if a home were to burn down, the bank would still get paid for the loan.
If you own your home outright, you can legally choose to live without homeowners insurance. However, it is a very stressful way to live, imagining at any time that a fire, lightning strike or plane crash could leave you homeless.
We do not suggest that you try to live without home insurance. It’s a bad idea, and only proper in the absolute worst financial situations.
Before making that drastic choice, visit Einsurance.com and try to get some quotes. We will do our best to match you with affordable home insurance, even if your insurer dropped you, for whatever reason.
