Why Are Home Insurance Policies Being Canceled more than ever before?
If you’ve recently received a home insurance cancellation notice, you’re not alone. Across the country, insurance companies are dropping policies due to increased risks, financial instability, and regulatory restrictions.
So, what’s causing this sudden wave of policy cancellations, and more importantly, what can you do to prevent losing your coverage? Let’s break it down.
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4 Major Reasons Insurance Companies Are Canceling Home Policies
1. Wildfires and High-Risk Zones
In recent years, wildfires have become more frequent and severe, especially in states like California, Colorado, and Oregon. As a result, insurers are reassessing their risk levels and pulling out of areas where wildfires are common.
If your home is located in or near a high-risk fire zone, your insurance company may choose not to renew your policy to avoid massive financial losses.
2. Rising Claims Costs and Inflation
The cost of rebuilding homes and paying out claims has skyrocketed due to:
- Inflation in construction materials
- Increased labor costs
- More frequent natural disasters
Because insurers must cover these rising expenses, many are canceling policies in high-claim areas to reduce their overall risk.
3. Claims History and Automatic Policy Cancellations
Many large insurance companies—especially big-box insurers like State Farm and Allstate—have started canceling policies if homeowners have filed two or more claims within three years, even if they were small claims.
This is an attempt to limit risk, but it can leave homeowners in a tough position.
4. Financial Pressure and Regulatory Restrictions
Insurance companies must remain financially stable, but in some states, regulators limit how much they can raise premiums.
When insurers can’t charge enough to offset the risks, they choose to cancel policies instead of absorbing financial losses.
How to Prevent Your Home Insurance Policy from Being Canceled
If you haven’t received a cancellation notice yet, here are a few steps you can take to help ensure your insurer keeps you covered.
1. Avoid Filing Unnecessary Claims
Frequent claims can raise red flags with insurance providers. If possible, pay for minor repairs out of pocket instead of filing a claim.
Tip: Some companies automatically open a claim when you call to ask about coverage, even if you don’t follow through. If you’re with a big insurer like State Farm or Farmers, don’t ask about a claim unless you’re ready to file.
2. Reduce Your Home’s Risk Level
If you live in a wildfire-prone area, taking proactive steps can help you avoid cancellation.
What to do:
- Keep trees and brush cleared around your property.
- Use fire-resistant building materials when possible.
- Follow local fire safety guidelines.
3. Bundle Your Home and Auto Insurance
Many insurance companies are canceling standalone home insurance policies while keeping bundled policies.
Tip: If you bundle your home and auto insurance, you may be seen as a lower-risk customer, which increases your chances of keeping coverage.
What to Do If Your Home Insurance Policy Is Canceled
If your policy is canceled, act quickly to avoid gaps in coverage. Here’s what to do:
1. Start Looking for a New Policy Immediately
Underwriters are overwhelmed with new applications, so waiting too long could leave you uninsured for an extended period.
2. Work with an Independent Insurance Agency
Instead of contacting one insurer at a time, work with an independent insurance agency that can shop multiple providers for you.
At Trailstone Insurance Group, we work with over 40 A-rated insurance companies, meaning we can help you find coverage even if your current provider drops you, and to get affordable home insurance quotes, click here.
3. Consider Specialty or Surplus Lines Insurance
If standard insurance companies won’t cover your home due to high risk, look into surplus lines insurance providers that specialize in insuring high-risk homes.
Final Thoughts: How to Stay Insured in a Changing Market
The home insurance market is evolving rapidly, and policy cancellations are becoming more common.
To keep your coverage:
✔ Avoid filing unnecessary claims.
✔ Take steps to reduce fire and disaster risks.
✔ Bundle your home and auto insurance.
If your policy has already been canceled, don’t wait—reach out to Trailstone Insurance Group today. We can help you find coverage before you’re left unprotected.
Stay proactive, stay informed, and keep your home insured.