My Homeowners Insurance Was Just Canceled. Here's Why, and What I Plan to Do About It

I own a second home/investment property in the Orlando, Florida area. And as is the case with many investment properties, there have been several curveballs thrown my way in the three years since I bought it. For the latest curveball, I received a notice a few months ago from my homeowners insurance company that my policy will not be renewed upon its expiration in May.

Fortunately, as a financial planner, I have experience with helping people navigate situations like this. Here's why my policy isn't being renewed this year, what I'm doing about it, and how this actually turned out to be a blessing in disguise.

Why is my homeowners insurance not being renewed?

First, if this happens to you, don't panic. Insurance companies decide not to renew policies for a variety of reasons, and while it can certainly be a pain to have to find new coverage, a non-renewal notice isn't the end of the world.

While there are very specific reasons an insurer must abide by to cancel a policy during a term, the reality is that in most states an insurer can choose to non-renew your homeowners insurance policy for any reason, if it provides the proper notice and a reason in writing.

Here are a few common reasons for non-renewal (keep in mind insurance laws vary by state):

• An excessive claim history (especially related to natural disasters)
• A significant decline in your credit score
• Change in use of the property
• Failure to maintain the property
• You have a poor history of making on-time payments
• You are convicted of a crime
• The insurer stops doing business in your area

The last one on the list is what happened in my case. Several home insurers have recently decided to exit the Florida homeowners market, and mine (Progressive) happens to be one of them. There are a few good reasons, including the abundance of costly natural disasters in the state. Plus, Florida is a highly litigious market -- in fact, only 9% of all U.S. homeowners insurance claims come from Florida, but a staggering 79% of the homeowners lawsuits in the U.S. come from the state. While it's certainly an inconvenience for me, I don't necessarily blame any insurer for wanting to head for the exit with numbers like these.

What to do next

The next steps depend on whether you use an insurance agency or if you bought your policy directly. I used an agent, and they did the shopping on my behalf and provided me with a quote from another insurance company.

Having said that, it's always a smart idea to get more than one quote when shopping for any type of insurance. Even if you used an insurance agent to buy your policy and they provide you with a new quote, I'd still suggest getting at least one other quote before committing. Not only do different companies offer different rates, but they also may offer unique discounts for features like alarm systems, fire monitoring, and for bundling your homeowners with other types of insurance.

It could also be a good time to check your coverage and deductibles to see if you could save money. If your homeowners premium has increased sharply in recent years, choosing a higher deductible could significantly reduce your cost.

A non-renewal could end up being a good thing

If you're like most U.S. homeowners and simply allow your homeowners policy to renew year after year, getting a non-renewal notice could actually be a net positive. Sure, it creates uncertainty and can be time-consuming to deal with, but if it finally motivates you to shop around for insurance, it could help you save money.

In my case, I was pleasantly surprised when my agent sent me a quote from another insurer that came in about $900 cheaper per year for the exact same level of coverage (and this was significantly less than the other quotes I obtained). Of course, this won't happen in every situation, but shopping around for a new insurer can end up being a better problem than you might think.