5 Reasons an Insurance Company Could Cancel Your Policy and What to Do
Too Many Claims, Home in Disrepair and Other Reasons
“Help! My Insurance Company Said They Are Going to Cancel Me!”
If your insurance company says that they are going to cancel your policy, you may have options to save your policy from being canceled. The most important thing to do is act quickly. Once an insurance company notifies you they are going to cancel you, you have very limited time to get things back on track. Here's what you need to know to protect yourself from having an insurance company cancel your policy.
Insurance companies are businesses, and very often people think that insurance will always be there. If you don't meet the conditions of an insurance company, they could cancel your contract. Insurers deal in risks, and being able to assess risk and avoid losses is part of how they survive as a business. Unfortunately, people have situations and circumstances that often fit outside the norm; your insurance company may cancel you for non-payment, or insurance companies may find a situation too risky and decide to cancel your policy.
Here are some tips to help you if an insurance company is going to cancel your policy and what you can do.
Can You Stop the Insurance Company From Cancelling You?
There’s nothing worse than experiencing the feeling and threat of being canceled. It's not only upsetting, but it can be embarrassing. If an insurance policy is canceled, you may have trouble finding insurance later, or have to pay more for insurance in the long run because it will impact your insurance credit score. Fortunately, there are cases where an insurance company may start off intending to cancel you, but with some negotiation and explanation, you might be able to make them change their mind.
To figure out if you can get them to continue to insure you, let’s look at some of the reasons an insurance company might cancel you, and some suggestions on how to negotiate with the insurance company representative in each circumstance.
How Do You Make an Insurance Company Keep You As a Client?
Although there is no sure way to make an insurance company keep you as a client, you can show them that you are working with them and offer suggestions to try and change their mind about canceling you.
Top 5 Reasons an Insurance Company Might Cancel You
Here are the top 5 reasons an insurance company might cancel or not renew your policy. Click through on the links for more information on what you can do about it.
- Too many claims
- Home in disrepair or requiring maintenance or renovation
- Non-Payment of policy or too many missed payments
- Criminal Record, false declarations, or “moral hazard”
- Change in a situation (also known as a material change in risk)
What Can I Do When I Have Too Many Insurance Claims?
You have to put forth a strong argument to get an insurance company to continue to insure you if you have a claims frequency. One of the things you should do is review the claims you have had for yourself. Make your own analysis of your situation by answering these questions:
- How much was each claim worth?
- What was the nature of each claim?
- Were they related? For example, were they all water damages, or fires? Were they totally unrelated incidents?
- Did the claims all occur at the same address?
- Has anything changed that makes you “less risky”? Did you have a problem you weren't aware of that has since been fixed (example: home repair)? Have you had a change in lifestyle, job, or personal situation? Did you upgrade an alarm system?
How to Fight to Keep Your Insurance: Present Your Case
The best argument is when you can prove things have changed.
- Perhaps you have now moved to a new area, and it was only in the old area that the claims happened? Think about every aspect of the claims you have had, and see if there is something you can point out that shows the insurance company your “risk” has improved or is now eliminated.
- Point out any factors that may have changed, including change of residents in the household, reasons that you may be more stable (change of jobs, change of location, etc.)
- Make sure the information they have about you on file is accurate. Sometimes people make mistakes!
Give proactive solutions that reduce or eliminate the risk of future claims.
- If nothing has changed or “improved”, consider ways to improve the situation. Were you robbed twice? Perhaps offer to install an alarm system.
- Were all your claims under $1000, or $5000? Perhaps ask the insurance company if they would consider letting you take an even higher deductible, this way the risk they are concerned about starts to diminish. It is also a way of showing them that you are willing to take on added risk and responsibility yourself.
- Ask the insurance company if there is a policy that they could offer as an alternative, for example, if all the claims came from water damage, perhaps they have a policy they can offer you that does not include water damage? That would allow you to have basic insurance coverage, rather than no insurance or high-risk insurance.
Does Loyalty Matter With Insurance Companies?
Every insurer is different, and the ratio of how much the insurance company has paid out in your claims vs. how much they have been able to collect in premiums from you will come into play. It doesn’t hurt to show the insurance company how stable and loyal you are. This is particularly helpful if you were insured for many years prior to the unfortunate claims incidents and were claims-free with the same insurer before that.
Showing an Insurance Company Your Value
- Point out how long have you been with the insurance company
- Figure out how much premium have you paid them over the years. Not only for the policy in question but for all others (example when you combine policies like: Home policy, car policy, business policy, etc )
- If you have referred friends or family, make sure and point that out too. Everything helps.
- Let them know you are willing to take on more risk by taking a higher deductible if you can.
Finding Options – How to Apply for Insurance When You Have Two or More Claims
Once you have all the facts, it is also an option, and strongly recommended, to consider applying for insurance with other insurance companies, agents and/or brokers. Remember that you have to look out for yourself and your best interests. Do not leave your financial security in the hands of one person. Every insurance company offers its products in different ways, it is unlikely the person you are speaking to always has the authority to have made the decision. Make an effort in your situation to learn more about the people who work in insurance in order to understand who you are speaking to. While you wait for their review of your proposal or case, you should check other options, especially if you’re being told you might lose your insurance coverage.
Although insurance companies will use similar resources to verify claims history, CLUE is a good example of one, the way an insurance company will assess risk is different. You see examples of this often when you get a quote with one company, and it is much higher than another. The reason for this is in the different ways that each insurer works their rates and assesses risks. The same may be true in how they will analyze your situation.
Don’t Give Up!
Not every insurance company has the same underwriting guidelines, and if you have a solid presentation, you may find another insurance company to help you. Working with a broker who deals with several insurance companies, not just one, may also be very informative and helpful. You can check this article to learn more about the differences in dealing with a broker, agent or service representative. The most important thing is to have the facts and in turn to be honest about your situation.
Make sure you try all possibilities, letting your insurance get canceled or leaving yourself uninsured even for a day is a huge risk and financial burden to you. Fight to keep your home and assets insured.
How Long Will it Take For the Insurance Company to Review My Situation?
Never leave this to the last minute. It can often take several follow-up calls, or days for the right person to be able to review the case. If you get refused after you’ve presented your case, then you can ask to have your case escalated to a supervisor or senior person at the insurance company for review. This could take more time. The fact that you are taking control of your situation and interested in protecting your insurance coverage by presenting a thorough review is a plus.
We have all heard the saying, “Luck is when preparation meets opportunity,” it’s no different with insurance. Make sure your case was presented to the proper people, with a little “luck” you may be able to negotiate some policy terms that will help you stay insured and protected, and show the insurance company that you can be a “good risk” after all.
NAIC. "A Consumer's Guide to Home Insurance," Page 12. Accessed Feb. 7, 2020.
FICO. "About Insurance Scores." Accessed Feb. 7, 2020.
Insurance.com. "What to Do if Your Homeowners Insurance Is Cancelled." Accessed Feb. 7, 2020.
United Policyholders. "Mid-Term Cancellations by State." Accessed Feb. 7, 2020.
Independent Insurance Agents of Texas. "Policy Cancellation and Nonrenewal." Accessed Feb. 7, 2020.
Rocky Mountain Insurance Information Association. "How to Avoid Non-Renewal on Your Homeowners Insurance Policy." Accessed Feb. 7, 2020.
United Policyholders. "Dropped by Your Insurer? Where to go for Help in California." Accessed Feb. 7, 2020.
CFPB. "Comprehensive Loss Underwriting Exchange." Accessed Feb. 7, 2020.