Insurance

A cancellation notice from your insurance carrier can be a surprise. Even if you’ve paid your premiums on time, never filed a claim, and never made any changes to anything to affect your coverage, your insurance carrier can still refuse to renew your policy. In most cases, the insurance company isn’t required to provide more than a vague reason, if any at all.

There are many things which can affect your insurance coverage, and not all of them are within your control. Here are a few examples, as well as some ideas to help avoid them if possible.

Claims Filed Against Your Insurance
Claims which has been filed against your insurance company is a common reason for an insurance company to refuse to renew coverage. Even if the claims are made through no fault of your own, each claim paid against your policy elevates the level of risk you represent to the insurance company and lowers the profitability of your policy.

It’s tempting to use your insurance as a maintenance and repair policy, and file a claim against any damage; even it barely exceeds the deductible. This is something you should avoid. At the very least, it will raise your premiums, and more than two or three claims will almost certainly result in a cancellation of your policy.

Pets
This might be the most surprising reason for policy cancellation. But it’s not uncommon. Your furry friend can represent a significant risk to an insurance company. Claims from dog attacks tend to be expensive, and often result in lawsuits asking for damages beyond medical costs. Many insurance companies have lists of prohibited breeds, and will not hesitate to cancel your policy if you ignore the list. Additionally, many insurance companies will not provide coverage for exotic or dangerous animals. (Sure, that alligator that lives in the swimming pool might be a conversation starter, but you’re probably nothing more than the food he hasn’t caught yet to him.)

If you have a pet, be sure to discuss it with your insurance company. Be honest about breed, sex, and age. It may cost a bit more on your monthly premium, but not providing the information, or providing false information, can result in a dropped policy, as well as not having coverage if something unfortunate happens. And if you do happen to have an alligator in the swimming pool, a call to Animal Control is probably a good idea.

Claims Filed in Your Area
Insurance claims filed around your area can also affect your risk profile with the insurance company, even if none of those claims are filed against your policy. For example, if a significant number of homes in your zip code are damaged by fire or vandalism, the odds of your home being damaged increase, which creates a higher risk for the insurance company. In and of itself, this would typically result in a higher monthly premium, but it can also push your risk score over what the insurance company considers acceptable.

It’s important to start shopping for a new policy as soon as you’re notified of cancellation for this reason, as it may be difficult to find coverage. If you’re not already using an insurance broker, consider contacting one. A broker will often work with several different insurance companies, and will probably be able to locate coverage more easily.

Failure to Maintain or Repair the Property
This is another common reason for coverage to be dropped or declined, particularly with homeowner’s policies. Insurance companies employ people to do “drive-by” or “visual” assessments of properties, in addition to using other things (such as publicly available satellite imagery.) They are looking for stuff like overgrown and untended yards, recent damage which fails to be repaired, changes to the property which they are not notified about, storage of hazardous items, and other factors which represent an increased risk. Most of the time, you’ll be notified by the insurance company if an issue is found, and will be given a chance to repair or correct the problem.

You can avoid this by maintaining the property, and repair any damage wholly and quickly. For example, be sure to replace any roof tiles or shingles that are damaged or missing, keep the yard maintained and free of trash or junk, and trim any tree limbs which might damage the home if they were to break.

Using the Property as a Rental
Typically, a homeowner’s policy will specifically exclude the use of the home as a rental property, and may also ban the taking of boarders or tenants. It’s something that happens so much that, chances are, you were asked about it when you applied for coverage. If you do rent the property out and fail to inform the insurance company, they will almost certainly drop you if they find out. Moreover, your insurance may not cover losses or accidents in this case.

If you decide to use a property as a rental home, or even to rent a room in your house out, contact your agent and discuss changing your insurance coverage before putting up a for-rent sign. The chances are that you won’t have to make any significant changes, but you may need to address some things. Also, by contacting the insurance company first, you can get at least an idea of the new premium, which may change the amount of rent you need to charge.

Commercial Use of a Residence
More and more people work from home. But bringing home your laptop and sending a few emails over the weekend, or working as a consultant from a home office will generally do not create issues with your insurance policy. However, running an auto-repair shop in your garage or a machine shop in your basement without notifying the insurance company can result in your policy being canceled or non-renewed. And, in many cases, if you’re running a commercial business out of your home and an accident occurs, that accident may not be covered by your insurance.

If you’re going to be running a business out of the home, contact your agency or broker and discuss policy options with them. Depending on what you’ll be doing, you may not have to change your policy at all, but the only way to be sure is to check with the insurance company. Also, keep in mind that may be required by local laws to have specific insurance if you are running a business out of your home.

Take Aways
Because there are so many things that can affect your insurance coverage, one of the most important things you can do is to contact your agent or insurance company at least once a year and ask for a policy review. Take the time to walk through your policy, your coverage, and your options, and consider changes. Listen to the advice of the agent you speak with, since they will almost certainly have a complete understanding of what coverages you do and don’t need, and the best way to put the pieces together. If you bundle your insurance, be sure to review the benefits and conditions of doing so. It might save some of your premiums, but it’s also possible to wind up with a higher homeowner’s premium if you have a fender bender.

It’s not always possible for you to keep from getting dropped by your homeowner’s insurance carrier. But there are things you can do to minimize the chances of that happening. Be honest, communicate changes, and keep your premiums paid, and chances are you’ll never have a problem. Keep in mind that as long as you’re not costing them money and represent a low risk, they want your business, and will do what they can to keep it.

In Florida, home insurance is a contract between you and the insurance company. You should review the terms of these contracts carefully because the courts strictly construe them in the event of a breach by either side. Some facets of the agreement may be unclear. For example, you may have essential or even valuable documents whose value is far higher than “the weight of paper and costs of facsimile” spoken of in the policy. Without an express provision spelling out your coverage, you might find yourself out of luck if anything happens.

The extent of property coverage is written broadly to the benefit of homeowners. The scope of liability coverage is written to be equitable, especially in cases of medical care. However, a Public Adjuster recommend maintaining a digital archive of receipts for all purchases in the event of a loss. All of your coverage likely has a small deductible and a cap limit on coverage. Depending on the policy, you may receive emergency accommodations and other premium services.

What is Specifically Covered by Homeowners Insurance

In Miami, the majority of policies will cover damages that fall under what is termed as the 16 common perils: explosions, the rare riot from civil unrest, vandalism and unprovoked mischief, theft, lightning or fire, windstorm or hail, volcanism, smoke, aircraft, vehicles, falling objects, weight of ice, sleet or snow; accidental water overflows from various plumbing, HVAC, and fire protection systems; sudden and unintentional cracking, tearing apart, bulging or burning of these systems and steam systems; breaking of pipe and other systems; and damages from artificially generated electrical currents.

Structure of the Home

Your insurance covers the foundation of a home typically. This is everything that could hypothetically be transferred to a new foundation (walls, flooring, roof, doors, etc.). Another language covers the foundation of the home itself and the variety of ecological elements of sustaining a safe foundation. Additional coverage is generally provided for garages, gazebos, and sheds, even if they are detached from the home.

Personal Belongings

The property coverage provisions are multifaceted. Homeowners have the incredible flexibility to makes claims on personal property, no matter where in the world it may be located, just because of owning the property. Coverage for those who live on the property is limited to what is actually on the property. For guests, coverage is limited to what they possess on the property during their stay. For more specifics, speak with your Public Adjusters.

Personal belongings include the full range of appliances, furniture, clothing, jewelry, sports equipment, watercraft, firearms, silverware, and much more. Owners should inquire about special coverage for expensive jewelry, artwork, and other items that may be difficult to appraise. Trees, gardens, and shrubbery, are also covered in the event of any of the 16 perils; except in the case of disease or wind damage. And as mentioned earlier, it is a great idea to maintain a digital archive of your possessions. Storing such an inventory list of receipts, videos, and photos, in a cloud data storage account is optimal.

Liability

The liability coverage provisions of the policy protect the policyholder and their cohabitating family members (including pets) from civil liability in cases of bodily injury or property damage, where they are culpable. Coverage includes the costs of litigation and damages (within the express cap limit). Liability coverage travels with the policyholder and their cohabitating family members, globally. It is limited to torts that occur outside of the home, where the covered signatories and family are the accidental trespassers.

This means that any negligent conduct that incurs injury against a third party. Ultimately this careless action falls upon the shoulders of the insurance company. Naturally, the insured has to weigh the costs associated with the premium, and potential rate hikes if they are determined to be a higher risk for whatever reason. It thus might be cheaper to pay out of pocket for a white carpet stained by a glass of wine spilled at a friend’s home. You have to consider the insurance company paying a reduced rate in such a situation because of comparative negligence. However, if your dog bites someone at your home, and they have significant medical bills that you cannot readily cover, this would be a good time to rely on your insurance.

You may also benefit from something called no-fault medical coverage, that is, however, if an injury occurred at your home. No-fault medical coverage avoids the costly litigation required to debate the nuances of who is responsible for an injury. The injured party submits the medical bills directly to the homeowner’s insurance policy without having to file a liability claim. Of course, like other forms of liability coverage, this type of claim does not cover injuries to the signatories and their cohabitating family members. In such a case, the non-covered parties must rely on separate health or pet insurance.

Additional Living Expenses (ALE)

As mentioned earlier, there are certain situations where your insurance company may provide emergency services. One of the primary reasons is to help families who have lost their home (either permanently or temporarily). Additional Living Expenses (ALE) typically limits the duration and costs associated with paying for: hotels, restaurants, and other extraordinary expenses that you do not usually incur. Also, ALE typically pays for the lost income, only if it results from damage to a rental unit (as anticipated by lease or affidavit of prospective renewal).

Miscellaneous Protections

Many insurance policies offer a greater variety of additional protections, some with a less universal appeal. These include, but are not limited to debris removal following any of the 16 perils, family grave markers or mausoleums, identity fraud and unauthorized credit card charges, green reimbursement, and loss assessment. Most of these are pretty obvious on their face. However, “green reimbursement” is a novel concept that allows policyholders to rebuild with green materials and to upgrade buildings with energy efficient replacements. Loss assessments are often necessary for calculating the extent of damage before reimbursement is made. It is beneficial in a residential claim, due to the potential for high fees.

What is Not Expressly Covered by Home Insurance

You will need to buy special premiums to cover earthquakes and floods if you live in areas prone to these disasters. Policies do not cover normal wear and tear, fungi, corrosion, animals and pests, negligence on your part in failing to make repairs, nuclear hazards, power failures, wars and other acts by the government, among other things.

References

Insurance Coverage Information
CPA Journal