Reasons why your homeowners insurance may be cancelled

Homeownership insurance or "homeowner's insurance"-financially protects you from house and property damage. Insurance usually covers losses related to fire, theft, vandalism, floods, etc.

But even if you have insurance, your homeowners insurance may still be cancelled.

The reasons are as follows:

Situation changes

Usually, when the insurance company discovers that the homeowner has purchased a new house, the homeowner's insurance will be cancelled. Whether the new homeowner’s insurance is more expensive or does not provide the same level of coverage, the insurance company may refuse to renew the policy.

Non-disclosure of information

Another reason homeowners insurance may be cancelled is that insurance companies discovered that the homeowners failed to disclose important information. For example, if you do not tell them that you own a second home or bought a new home without telling the insurance company, they may cancel the policy.

Property changes

Another reason homeowners’ insurance may be cancelled is that the homeowner has made changes to the house. For example, if the homeowner remodels their house or adds a swimming pool, the insurance company may cancel your insurance policy.

If the homeowner fails to pay the premium, the insurance company can also cancel the policy.

Move out of your state

If you move out of your state, your policy may be cancelled. Many state insurance departments have a list of companies approved to sell insurance policies in that state. If your policy has been cancelled by that company, another company may not allow you to reinstate the policy in that state.

Open a new line of credit

If you apply for a new line of credit, such as a credit card, car loan, or mortgage, your lender may require you to purchase insurance through a carrier that works with your bank or lender. Most lenders require you to purchase a certain amount of insurance. If you don't do this, they may terminate your policy. Similarly, if your credit score drops, your insurance company may cancel the policy. A lower credit score means you are more likely to file a claim, which insurance companies don't like.

Failed to pay your premium

Paying premiums on time is very important for your insurance company. If you fail to pay the premium on time, the insurance company can cancel your policy. Be sure to send any payment required by the insurance company before the cancellation date.

Growing equity

If your mortgage balance is lower than your home value, your home equity will increase. Lenders prefer to see that the host has a cash reserve of at least 20% of the value of the house. If you hold 30% or more of cash, your insurance company may cancel it because it means you are financially too safe and do not need insurance.

Final words

Many insurance companies allow you to make a payment plan to avoid canceling your insurance policy. You can set up an automatic payment method from your checking account or set up payment through your bank. In this way, you will be able to keep your policy for a long time.