After a homeowners insurance non-renewal, homeowners have three options for getting covered: contest the non-renewal, apply elsewhere, or turn to a state-run carrier.
Homeowners Insurance Non-Renewals
The last few years have seen historically destructive wildfire seasons in California. As a result, increasing numbers of California homeowners have received non-renewal notices from their insurance providers – that is, they’ve gotten letters stating that their carrier will not renew their homeowners insurance policy. (It happens in Florida, too.)
While a non-renewal can happen for a number of reasons, the spate of wildfire-related non-renewals in California is tied to what’s known as a changed carrier appetite – in other words, the carrier is no longer interested in providing coverage to the homeowners in question because it has determined their risk exposure is too high.
So where does that leave homeowners? Let's look at what non-renewals are, outline options homeowners have for finding alternate coverage, and take a peek at life after a homeowners insurance non-renewal.
Insurance Non-Renewal vs. Insurance Cancellation
It’s important to note here that insurance non-renewals and cancellations are two different things.
A cancellation can only happen for two reasons once your homeowners policy has been in force for 60 days or more:
- You didn’t pay your premium.
- You misrepresented information or your application or committed fraud of some kind.
A cancellation can happen at any time during your policy, assuming one of those two things happens. The reason? If you don’t pay or commit fraud, you’ve breached the terms of your insurance policy, which is a contract between you and the insurer. The insurer is therefore within its rights to cancel the policy.
State law requires carriers to give homeowners a certain amount of notice if a policy will be non-renewed. In California, insurance companies must give homeowners at least 60 days’ notice if they plan to non-renew a policy. Non-renewals are different. They can happen only when an insurance provider or policyholder decides not to renew a policy when its term is up. If you’ve ever switched from one insurance carrier to another, you’ve non-renewed a policy.
And regardless of state, insurance companies can non-renew a policy for a number of reasons, including these:
- They no longer offer the coverage you were paying for.
- They are no longer licensed to offer policies in your state.
- You no longer fit in their acceptable risk profile.
That last one is the biggest bucket, as a lot of variables determine what an insurance carrier considers “acceptable.” It’s also the one that the California wildfire non-renewals fall into: after paying millions of dollars for wildfire-related claims, insurance companies are non-renewing policies in an effort to manage their overall risk exposure.
Of course, that may make sense for the insurance company. But what are homeowners supposed to do when their policy is non-renewed?
3 Options When Your Homeowners Insurance Is Non-Renewed
If your homeowners insurance is non-renewed, whether you’re in California or not, you typically have three options to regain coverage.
First, you can contest the non-renewal decision with your insurance provider.
To do this, contact your insurance provider and lay out the case for why you think the non-renewal was unjust. Of course, that means you have to have a case in the first place. Here are the two arguments most likely to work:
- Your house is not as risky as the insurer thinks it is. Many insurance companies rely on big data sets to create risk maps. In places with microclimates or great variation within a small geographical area, it’s possible that risk exposure varies considerably from block to block. If you can demonstrate to your insurer that this is the case, you may be able to justify a coverage renewal.
- You’ve taken steps to mitigate your risk exposure. In many cases, it’s possible to reduce your exposure to major risks with landscaping, roof modifications, and other updates to your property. (This is true in every region, regardless of the specific risks you face.) If you can demonstrate to your insurer that you’ve adequately mitigated your risk, they may be able to renew your coverage.
Of course, there’s no guarantee that contesting your non-renewal will be successful. In the case of what’s happening in California right now, the threat of wildfires is so great that it’s not likely any individual homeowner can demonstrate that their risk exposure is significantly less than that of their neighbors.
If contesting the non-renewal doesn’t work, your next option is to get coverage with another homeowners insurance provider.
If you can't get coverage through a private insurer, Californians can get insurance from the state’s FAIR (Fair Access to Insurance Requirements) insurer. The state-run insurer for Floridians is Citizens Property Insurance.
Both Citizens and FAIR insurance are considered insurance of last resort. It exists so that no homeowner, no matter how risky, has to go without insurance entirely.
But it’s important to note that, in California at least, FAIR insurance may not offer the same protections as a standard homeowners policy. Let’s take a quick detour into the nitty gritty.
California FAIR Insurance: What it Covers, What it Doesn’t
During normal times, FAIR homeowners insurance policies offer coverage ONLY for fire-related risks. That is, they can pay to rebuild or repair a house that’s damaged or ruined by fire. These policies do not include the other protections typically baked into homeowners insurance, including property protection for other perils (like wind) or liability coverage.
But in December 2019, California’s insurance commissioner, Ricardo Lara, ordered FAIR to start offering comprehensive homeowners insurance to policyholders. While this might sound like good news to those unable to find insurance elsewhere, the reality is more complicated.
Representatives from the FAIR program have reportedly claimed that the plan doesn’t have adequate resources to provide the protection of a comprehensive homeowners insurance policy. Its leaders have asked the courts to overturn Lara’s order. If the FAIR plan is required to provide the coverage anyway, it may face a serious financial strain.
For now, it’s unclear what will happen. Regardless of the court’s ruling, though, FAIR insurance should be available – in any state – as a coverage of last resort for certain types of catastrophic property damage.
What California Homeowners Can Expect Re: Insurance Non-Renewals
Non-renewals of homeowners insurance in California surged 10 percent in recent years, largely because of wildfire damage. Obviously, that’s put a lot of homeowners in the difficult position of having to find alternative coverage.
To offer some short-term relief, Commissioner Lara has asked insurance companies to refrain from issuing non-renewal notices through December 5, 2020 while he and other leaders work with insurance providers to find longer-term solutions.
But the moratorium doesn’t help those who have already seen their policy non-renewed. It also doesn’t offer any guarantee that insurance regulators and insurance companies will actually come to an agreement by next December.
Assuming you still have coverage, now is a good time to prepare for all potential outcomes:
- Get to know your wildfire risk exposure. Mitigate it as much as you can by creating defensible space and otherwise protecting your home and property.
- Educate yourself about insurance alternatives. If you are hit with a non-renewal next winter, you’ll be ready to find alternate coverage.
- Ask about insurance premiums if you’re in the housing market. Carrying insurance isn’t just an important way to manage your risk as a homeowner – it’s a requirement of most mortgages. If your dream home is in a wildfire hotspot, you could be looking at tens of thousands of dollars in premium each year, so be sure to factor insurance into your cost calculations.
Life After an Insurance Non-Renewal
The unfortunate truth of homeowners insurance non-renewals is that homeowners don’t have much control over a carrier’s changing appetite. If a carrier decides your home is too risky to insure, there may not be anything you can do.
If your policy is non-renewed, though, know that you do have options. You can seek coverage from another provider (including a non-admitted carrier) and you can seek coverage from your state’s FAIR plan.
On a more philosophical note, there may also be better alternatives for homeowners in the near future. While insurance providers can’t change the way weather events affect homes, we can use data more intelligently to better understand the risk each individual home faces.
That’s exactly what we’re doing at Kin: rather than relying on the big-picture data most traditional insurance companies use to evaluate risk, we consider thousands of data points unique to each individual property. Our models can therefore identify the subtle variations in risk that might make your neighbor down the street a risky bet while your house is perfectly safe.
Curious about whether we might have a policy for you? Apply in a matter of minutes to find out.