Cancellation

Insurers can terminate your home insurance policy without your consent in three ways: non-renewal, rescission, and cancellation. The latter occurs when the insured or the home insurance company terminates coverage before the expiration date of the policy. Cancellation is different from non-renewal in that non-renewal occurs within 30 days of the plan's expiration date. Policyholders have the ability to drop their house insurance policies at any time. For instance, homeowners may end their coverage when they move or switch insurance companies. Insurers also have the ability to cancel policies, but they are much more restricted in when and why they can do so.

Insurer-Initiated

In the first 60 days of your agreement, your provider can terminate your coverage for virtually any reason. During this initial period, insurers evaluate the risk you represent in order to determine whether to issue you coverage. If your provider decides to cancel your coverage during this time, the company will refund your initial premium payment. Once the initial 60-day period has expired, your carrier can only cancel your plan for the following reasons:

1. The risk the insurer originally accepted has increased.
2. The insured failed to pay the premium by the due date.
3. The insured obtained the service through misrepresentation or fraud.

The provider must mail you a cancellation notice at least 30 days in advance of the cancellation date unless the plan is being canceled for non-payment. In that case, the insurer must provide a notice only ten days in advance of the cancellation date. The written notice your provider sends must indicate why your coverage was canceled and inform you of your right to appeal the decision. Some states also require the notice to explain your eligibility to obtain government-sponsored home insurance for high-risk properties.

Policyholder-Initiated

You can drop your coverage at any time, but most home insurers require policyholders to provide written notification of cancellation at least 30 days in advance. Your carrier will then refund the unused portion of your premium at the short rate. The short rate is less than the actual amount of the unused premium to account for the provider's costs in creating the plan. If you decide to drop your plan, make sure your new protection is in effect before you end your old policy.

Avoiding Cancellation

Because of the spate of natural disasters the U.S. has experienced lately, home insurers are more likely than ever to cancel coverage suddenly, particularly for policyholders who file too many claims. To avoid this happening to you, follow these tips:

• Don't file small claims. If your claim exceeds your deductible by $200 or less, pay for the damages out of pocket.
• Stay with the same company. Insurers tend to give preferential treatment to long-time customers.
• Take out multiple policies. Your provider is less likely to drop your coverage if doing so would jeopardize the auto, health, or life insurance policies you also carry with the company.
• Keep your house well-maintained. Keeping your house in good condition and installing certain safety and security features will help you avoid excessive claims and possibly even qualify for discounts on premiums.