What to Do When an Insurer Won’t Renew Your Homeowners Policy

Your

homeowners insurance

policy protects what is probably your largest investment. However, in recent years, US insurance providers’ exposure to risk has grown amid an increased frequency of catastrophic events, population migration into high-risk regions, and inflated rebuilding costs. 

As a result, insurers have been more carefully managing their exposure and the potential for financial losses by taking steps including increasing premiums and discontinuing some home insurance policies.

What is exposure management in home insurance? 

Exposure management is “the practice of identifying and analyzing loss exposures and taking steps to minimize the financial impact of the risks they impose,” according to the International Risk Management Institute (IRMI). 

You might receive a letter from your insurer saying your policy is not up for renewal due to exposure management. It means they will not continue your coverage because it is no longer profitable to do so.

Florida, in particular, is seeing a surge in nonrenewals because of severe weather and increased instances of contracting and litigation scams. For these reasons, insurers are practicing exposure management by raising premiums and denying coverage for some residents there, says Ken Gregg, CEO of Orion180, a homeowners insurance provider serving independent agents in the Southeastern US. 

Damage from natural disasters such as tornadoes, hurricanes, severe storms, wildfires, and floods totaled $92 billion in 2021, bringing the total amount since 2017 to $400 billion, according to a report from the Insurance Information Institute (III). Since the 1980s. average insured natural catastrophe losses have risen almost 700%, the report says.

The III attributes the recent surge largely to more people moving into risk-prone areas. As the population in these regions grows, insurers face an increased risk of larger and more frequent claims that could exceed their capacity to pay them, resulting in rate increases and policy nonrenewals. 

Why was my homeowners insurance policy not renewed?

The nonrenewal of your policy ultimately comes down to your insurer managing its exposure. Your provider most likely determined that you and your home are too much of a liability.  

 Here are a few specific reasons your home insurance provider may have chosen not to renew your policy: 

• Claim history: If you have too many claims on your record, your insurer may decline to renew your coverage. For instance, if you have two fire-related claims, you may see a 60% increase in premium. After the third claim, your insurer may choose not to drop you because of the risk that you’ll file another one, according to Insurance.com. 
• Location: Insurers could determine coverage eligibility based on where you live. For instance, before the wildfire insurance law in California, many homeowners there saw nonrenewals due to increased occurrences of fire-related damage. 
• Hazardous home: If an inspection determines that your home is unsafe due to potential fire hazards and tenuous structure, your insurer could refuse to renew your policy unless you address those issues. 
• Roof issues: An older roof could leave you at risk for policy nonrenewal. The typical roof’s life expectancy is around 30 years, according to Insurance.com. However, insurers may not reinstate your coverage if your roof is older than 20 years old. Many will give the policyholder a notice of nonrenewal. That notice gives homeowners time to address the roof issue before their policy expires, according to Steve Rivera, personal lines practice leader at The Liberty Company Insurance Brokers. 
• Pets: If you adopted a pet during your coverage that insurance companies usually blacklist, you might be at risk for nonrenewal since aggressive, large breeds pose a liability risk. 
• Bad credit: In some states, insurance companies use insurance-based credit to determine your likelihood of filing a claim. While denial of coverage is a low possibility in this instance, you may see higher rates. 

7 ways to get homeowners insurance after nonrenewal

It can be frustrating to have your policy denied. However, you have certain rights as a policy holder that your insurer must respect. 

Depending on your state, your insurer must provide you with a certain number of days’ notice and explain the reason for nonrenewal before they drop you. Contact your provider’s consumer affairs division or your state’s insurance regulator if you believe your policy is being wrongly terminated. 

Ensuring your home is paramount to protecting yourself from financial hardship. Here are seven steps you can take to get coverage after a nonrenewal. 

Step 1: Speak with  an independent agent 

While your insurer should give the reason for the nonrenewal through a written notice, speaking with an insurance agent could give you more clarity. An independent agent could help you understand any changes in exposure and what to do moving forward, according to Jason Bataille, division growth leader at World Insurance. 

“A knowledgeable agent with proper geographically specific carriers would normally be able to provide you with options and limit the downside of reduced coverage or increased price,” Bataille says.

Step 2: Take efforts to mitigate your risk

If your insurer chooses not to renew you because of a failed inspection, be sure to address those issues and take steps to fortify your home against damage. 

You may also consider purchasing extra coverage to protect your investments, such as flood insurance or earthquake insurance. Having additional coverages is especially important if you live in a high-risk area. 

Step 3: Gather and compare home insurance quotes

The III recommends obtaining quotes from at least three different companies. Consider asking friends and relatives for recommendations. You can also contact your state insurance regulator to provide you with rates and complaint ratios of major insurers.

To compare quotes, know what’s going into each policy’s coverage to make the best apples-to-apples comparison. A standard homeowners insurance policy will include dwelling, personal belongings, liability protection, and additional living expenses coverage. Ensure any additional coverage you want is included in your quote.

Step 4: Look into discounts

If you are a high-risk homeowner, obtaining cheaper rates from other insurance companies may be more of a challenge. Taking advantage of discounts is key to curtailing your premiums. While discounts will most likely be automatically applied to your quote, speak with your insurance agent about lesser-known discounts you may qualify for. 

Here are some of the most common home insurance discounts: 

• Multi-policy discounts: Receive a discount for bundling your homeowners insurance policy with another insurance product, usually auto insurance.
• Home safety discount: You may be eligible for a discount if you’ve installed devices like burglar alarms or smoke detectors.
• Wind mitigation discounts: Fortifying your home’s structure and roof against wind-related damages can qualify you for wind mitigation discounts, says Gregg. Doing so is especially important in Florida, where hurricane events are frequent and damaging.

Step 5: Research the trustworthiness of the company

To ensure you get the best value, research the trustworthiness of an insurance provider. An insurer’s financial strength, rated by independent agencies, can help you determine if it can pay a claim when you need it. AM Best assigns insurance companies letter grades from A+ to F. Providers rated below a “B” is considered not financially stable and unable to pay claims reliably.

You can also check a company’s trustworthiness by looking at customer satisfaction. JD Power’s home insurance customer satisfaction survey ranks major insurance companies on a 1,000-point scale.

Step 6: Finalize and purchase your policy

Once you’ve selected the right policy, ensure all your information is correct before signing. Note that your insurance company may require a home inspection to ensure your application’s replacement cost coverage and property information are accurate.

You also want to know how you will be paying your insurance premiums. You usually pay your insurance premiums to your homeowners insurance provider or mortgage lender. You’ll pay your premiums in full or recurring payments through your homeowners insurance company. If you have a mortgage lender, you may have to pay premiums with your monthly mortgage payment through an escrow account.

Step 7: Consider your state-sponsored insurance program

If it is difficult to get coverage from a private insurer, consider looking into your state’s Fair Access to Insurance Requirements (FAIR) Plan if it has one. The FAIR Plan is a state-sponsored program that provides coverage to high-risk homeowners.

These plans are usually found in states with a high risk of natural disasters such as wildfires and hurricanes. It usually offers less coverage than a standard homeowners insurance policy. However, it might be your only option for coverage, according to Rivera. 

“Purchasing insurance after being non-renewed can prove to be a cumbersome exercise due to the number of providers available,” says Rivera. “Enlisting the help of a broker is a huge lift to policyholders seeking a broad array of options in the marketplace.”