It is not uncommon for homeowners to receive notices of cancellation while significant claims are pending. This is because the claim itself may have no relationship to the insurance company’s decision to terminate coverage or to not renew the insurance policy. The difference between cancellation and non-renewal is the non-renewal occurs at the end of the policy period, while cancellation occurs during the period of coverage.
The cancellation usually occurs because an individual has done something contrary to the underwriting guidelines of the company, which triggers a right of the company to cancel you. Most of the time, the insurance company will notify you of the offending condition and provide you an opportunity to remedy it. Examples include a failure to pay your premium, a modification of the home, or a failure to take steps to properly maintain the home. Some companies also fear liability issues, and will terminate coverage if they learn, for example, that you now have a trampoline or have introduced a dangerous animal to the home.
Pending Claims Are Separate From Notice of Cancellations
Regardless when you receive your notice of non-renewal or intent to cancel, these will have no impact on your pending claim. Property insurance policies are typically driven by the effective date of the coverage. If the loss occurs during the policy period, you are covered, even if the claim remains unresolved at the time of termination. With sinkhole claims, for example, it often takes time to evaluate and repair the home, and cancellation could occur some time while this is in process.
Insurance Property Claims Cannot Be Grounds for Nonrenewal or Cancellation of Policy
There are limitations that apply to an insurance company's ability to terminate or not renew coverage. For example, the filing of a sinkhole claim or payment on a partial sinkhole loss cannot be the basis to not renew or cancel coverage. The act of doing so may act to create a separate, statutory basis for litigation between the insured and the insurance company.
Please contact Corless Associates if you have any questions regarding the lines between insurance nonrenewal and pending claims at 813-498-1623 or, toll free: 877-517-5595.
