Reasons Why Your Homeowner's Insurance Might Get Cancelled

Insurance for homeownership or "homeowners insurance" — protects you financially against your house and property losses. The insurance usually covers losses associated with fire, theft, vandalism, flooding, and more.

But even if you have coverage, there's still a chance your homeowner's insurance may get canceled.

Here's why:

Change In Circumstances

Often, homeowners insurance gets canceled when the insurance company discovers that the homeowner has purchased a new home. Whether the new homeowner's insurance is more expensive or does not offer the same level of coverage, the insurance company may refuse to renew the policy.

Non Disclosure Of Information

Another reason homeowners insurance might get canceled is that the insurance company discovers that the homeowner has failed to disclose important information. For example, they may cancel the policy if you do not tell them about a second home you own or have purchased a new home without telling the insurance company.

Changes In The Property

Yet another reason homeowners insurance might get canceled is when the homeowner makes changes to the home. For example, if the homeowner has remodeled their home or added a pool, the insurance company may cancel your policy.

The insurance company may also cancel the policy if the homeowner fails to pay their premiums.

Moving Out Of Your State

If you move out of your state, your policy might be canceled. Many state insurance departments have a list of companies licensed to sell policies in that state. If your policy had been canceled by that company, another company might not allow you to reinstate it in that state.

Opening New Lines Of Credit

If you apply for new lines of credit, such as a credit card, an auto loan, or a mortgage, your lender might require you to have your insurance through a carrier that your bank or lender works with. Most lenders require that you have insurance for a set amount, and if you don't, they may terminate your policy. Similarly, Your insurer might cancel a policy if your credit score goes down. A lower credit score means you're more likely to file claims, and insurers don't like that.

Fail to pay your premiums

Paying your premiums on time is very important to your insurance company. Insurance companies can cancel your policy if you fail to pay your premiums on time. Be sure to send any payments that the insurance company requires before the cancellation date.

Growing equity

If your mortgage balance is lower than your home's value, your home's equity is growing. Lenders prefer to see homeowners hold at least 20 percent of a home's value in cash reserves. If you hold 30 percent or more in cash, your insurer might cancel because that means you're too financially secure to need insurance.

Final words

Many insurers allow you to set up a payment plan to avoid having to cancel your policy. You can set up an automatic payments method from your checking account or set up payments through your bank. This way, you will be able to keep your policy for a long time.