Navigating the Storm: What to Do When Your Home Insurance Costs Surge or Gets Cancelled

Home insurance is a critical safety net for homeowners, protecting their most significant investment. However, the insurance landscape is changing rapidly, making it increasingly challenging for homeowners to secure affordable and comprehensive coverage. In light of extreme weather events and natural disasters, some insurance companies are either going out of business or hiking up their prices. This blog post aims to guide you through the steps you can take if you find yourself facing a sudden increase in insurance costs or, worse, a cancellation of your policy.

The Mortgage Lender's Role

Your mortgage lender generally requires your property to be insured. If you let your insurance policy expire or stop paying for it, the lender has the right to purchase a policy on your behalf and charge you for it. This is known as "force-placed" or "lender-placed" insurance. However, this type of insurance usually only protects the lender and can cost you twice as much as a regular policy. Federal law mandates that your mortgage servicer must notify you at least 45 days before charging you for force-placed insurance.

How to Stay Ahead of High Insurance Costs

To avoid surprises, keep an eye on the renewal date of your current insurance policy. Your insurer should notify you one to three months before this date if they decide not to renew your coverage. This gives you ample time to shop for another policy. Even if your insurer renews your coverage, be prepared for the cost to increase.

What to Do If Your Coverage Is Not Renewed

If you receive a notice stating that your coverage won't be renewed, the first step is to contact your insurance agent or company to find out why. Depending on the circumstances, they might reconsider their decision.

Shopping for the Right Coverage

To avoid force-placed insurance, you need a policy that aligns with your property and any unique requirements, such as specific risks like fire. Contact your state's insurance department to find out which companies are operating in your area. You can also look up information through the National Association of Insurance Commissioners.

State's FAIR Plan

Most U.S. states and the District of Columbia offer insurance programs called Fair Access to Insurance Requirements (FAIR) plans. These plans provide coverage even in areas where insurance companies have decided not to sell policies. However, FAIR plans typically cost more than standard policies.

Notify Your Mortgage Servicer

Once you've secured your own coverage, inform your mortgage servicer about the change. You have the right to remove force-placed insurance once you have your own policy.

Stay Prepared for Change

Making home improvements like installing a fire alarm, security system, or updating your plumbing can make it more likely for your insurer to renew your policy and might even lower the cost. Stay updated on your climate risk and keep track of your important financial information.

Conclusion

The changing landscape of home insurance is a growing concern for homeowners across the country. By staying informed and taking proactive steps, you can navigate through these turbulent times and secure the best possible coverage for your home.

This blog post is based on information provided by the Consumer Financial Protection Bureau. For more details, you can visit their official website.