By Michele Lerner, April 27, 2022 at 5:30 a.m. EDT
The Washington Post
Most homeowners assume that once they have a homeowner’s insurance policy, they don’t need to worry about future coverage. But some homeowners are surprised when their insurance company sends them a nonrenewal notice — or when their premiums spike above an affordable level. We asked for advice from two insurance experts, Angel Conlin, a Tampa-based chief insurance officer at Kin, a home insurance company, and Ken Gregg, chief executive and founder of Orion180, a home insurance company based in Melbourne, Fla. Both answered via email and their responses were edited.
Q: What are some reasons that a homeowner will have their homeowner’s insurance not renewed?
Conlin: Recently, many homeowners have seen insurance cancellations because insurance companies are getting in financial trouble or the underlying risk has increased faster than their ability to adapt their pricing to that risk. This could be because regulations are slowing things down or because sometimes insurers just don’t know how to adapt to something unknown.
Beyond that, insurance companies can nonrenew a policy for several reasons. For example, an insurer might decide it no longer wants to sell a certain type of coverage, change its risk profile for a policy or even leave the state. When that happens, a set of their policyholders may no longer be eligible for coverage, so those policyholders get nonrenewal notices.
Gregg: Reasons can vary, and there’s no one-size-fits-all approach when it comes to protecting your home. Sometimes an insurer decides not to renew because your home no longer fits their risk profile. This can be many different things, such as you’ve filed too many claims or maybe your credit score takes a dip — that’s also a concern and makes an insurance company reevaluate the renewal of your homeowner’s policy. There are also other variants, like having an aggressive pet that bites. If the insurer sees you as a high risk, and they do not offer an exclusion to mitigate that high risk, they’re less likely to renew your policy. In today’s tight insurance marketplace, risk appetite is more discerning, and if you become a greater risk, it can push them beyond what they’re willing to take on. They can also decide not to renew based on their exposure concentration limitations.
Q: How common is this?
Conlin: For some insurance providers, nonrenewals are more common when the homeowner files multiple avoidable claims and/or has incomplete repairs to their home, but that really depends on the insurer. Risk and offerings don’t usually change very frequently, though, so responsible homeowners shouldn’t be too worried about nonrenewal unless they live in a catastrophe-prone area.
If a homeowner does live in a catastrophe-prone area, taking initiative to harden their home against the elements goes a long way in keeping it attractive to insurers. As an example, homeowners in Florida or Louisiana can make sure they have appropriate windstorm mitigations (like new shingles or shutters) to protect their home from damage and minimize their risk of nonrenewal.
Gregg: It’s more common than most people think. There has been an uptick of nonrenewals in the market, especially in some of the housing markets that have exploded post pandemic, through the Southeast and in the Gulf. There’s also been a rise in what we call “carrier abandonment,” which are insurers pulling out of certain states and heading for what they see as greener pastures.
Carriers in those regions have taken consecutive losses over the past few years from severe storms. When this happens, they don’t renew the homeowner’s policy, forcing homeowners to find new coverage options.
Q: What can homeowners do to make sure their insurance policy will be renewed?
Conlin: There’s not much homeowners can do if their insurance company changes its risk profile or leaves the state. But they may reduce their chances of getting a nonrenewal notice if they perform updates that strengthen their home, like updating their plumbing, putting on a new roof or replacing old wiring.
Homeowners who perform routine maintenance and updates typically have fewer claims because they’ve reduced their chances for damage. We give our members guidance on different types of risk mitigation and how that can translate to premium savings for them. Some also opt for a higher deductible to discourage themselves from making smaller avoidable claims.
And if someone is buying a home, they should be sure to request a copy of its claims history from the Consumer Loss Underwriting Exchange (CLUE). Knowing the details of their home’s claim history can help them mitigate their own chances for trouble in the future.
Finally, it’s also a good idea to communicate with your insurer. Staying in contact tells your insurance provider that you’re committed to taking care of your home. Provide them with proof of repairs and inspections regularly and in a timely fashion to keep them up to date on your home’s condition. Make sure you’re regularly reviewing your home information on your policy and informing your insurance company about any changes or incorrect information to keep your home in good standing.
Gregg: Keep your home in good repair; you should conduct routine maintenance checks, and don’t let little problems turn into big ones. The best defense is a good offense. Take care of your credit. The more you build yourself up, the less likely you’ll be seen as too high of a risk, and the more likely your premiums will be lower. You might also consider carrying a higher deductible. This can discourage people from filing small claims. It’s important to remember that you can be proactive.
Q: How can a homeowner decide when they should make an insurance claim and when they should pay out of pocket?
Conlin: Homeowners should always notify their insurance company in the event of a loss that might result in a claim, regardless of whether they’re seeking payment. This is actually a requirement in most home insurance policies. They can best understand their policy coverages, though, by simply asking their insurance company to explain them. Get your agent or customer service representative to walk you through your declarations page so you know what’s actually covered.
For example, normal wear and tear is usually excluded from homeowners’ insurance policies. If your insurer concludes that your damage stems from everyday use, then there’s a good chance a claim would be denied.
More generally, though, homeowners will probably want to file a claim when the cost of repairs is more than their deductible — especially if they experience a total loss. That’s essentially why they buy insurance: to pay for repairs they couldn’t otherwise afford. But if the cost is less than their deductible, they’d be paying that amount out of pocket anyway, and filing an unnecessary claim would typically increase their premium.
Homeowners can also feel pretty safe if they haven’t filed a claim for approximately three years. Most insurance companies pay particular attention to the last three years of loss history on a CLUE report and may consider a claim an isolated incident if there aren’t others in that time frame.
Gregg: While this can seem like a daunting question, we can simplify this. If your claim is much higher than your deductible, you should file the claim. That’s why you bought insurance in the first place, for an unforeseen event. Use this rule whether there’s partial damage, such as tree damage to part of the home, or if there’s a total loss like a fire. But if the claim is smaller than your deductible you shouldn’t file the claim. These are generally smaller accidents or routine maintenance and repair. Most think, “Oh, my insurance would be good for that.” Better to save that arrow to slay the big dragon than use it for something small and run the risk of your carrier not renewing your policy or increasing your premium. There’s also something to be said for the frequency of claims. Most carriers will handle your risk if you only file a claim every three years.
Q: Any other advice?
Conlin: Remember: Your insurance company is there to help. If you aren’t sure whether to file a claim, ask. While you’ll probably need to report any loss, most insurers won’t force you into a claim or stop you from filing one. Ask a lot of questions until you’re comfortable with the likelihood of the claim being approved.
Gregg: There’s been a prolonged period of misrepresentation surrounding insurance. Insurance exists to protect what is generally your most valuable asset, your home. Some commercials make it seem like carriers will fix the slightest problem, when in reality most things you see on television would most likely not be covered by a standard policy. Even when your claim is legitimate, and the carrier pays the claim, this is going to cause your premium to go up. You should always weigh the cost of claims versus repair.