Consumer tip: Take action when home insurance is canceled or costs rise

A notice from your insurance company that your home insurance policy has been dropped may look like your largest investment is at risk. Unexpected jumps in the cost of coverage can put a strain on your budget. Problems with obtaining the right amount and type of insurance can also make selling your home more difficult. Changes in the insurance business across the country are making these problems more common for homeowners.

In response to severe weather events and natural disasters, some home insurance companies have gone out of business. In states like Florida and California, many insurance companies have stopped selling policies. Other companies have increased insurance rates to the point where homeowners cannot afford them. Homeowners face new decisions about insurance, and often have limited time to consider their options.

You choose your insurance, or your mortgage lender chooses for you — at your own expense

Your mortgage lender generally requires your property to be insured. If you stop paying for coverage or let the policy expire, your mortgage lender is allowed to buy the insurance and charge you for it. This is called forced insurance or lender-imposed insurance.

a Forced insurance policy It usually only protects the lender, not you. The cost to you can be twice what you regularly pay for insurance.

Under federal law, your mortgage servicer must notify you at least 45 days before charging you a forced insurance fee.

How to stay a step ahead of rising insurance costs

Your current insurance policy displays the renewal date. One to three months before this date, your insurance company must notify you if you decide not to renew your coverage. This gives you time to shop for another policy.

Even if the insurance company renews your coverage, the cost still goes up — for some properties, the increase can be $100 per month or more. About a month before your renewal date, your insurance company tells you the cost for next year.

Ask your insurance company to reconsider

When you receive notice that your coverage will not be renewed, contact your insurance agent or company to ask why. Depending on the situation, the insurance company may reverse its decision and renew your policy.

Shop for the right coverage

To avoid forced insurance, you need coverage that matches your property and any unique requirements. For example, your mortgage may require that you have a policy that covers certain risks, such as fire.

Typically, state insurance regulators approve companies that can offer policies to homeowners in their states. To purchase insurance policies, contact your state’s insurance department and find out which companies operate in your area. Find your state’s information through the National Association of Insurance Commissioners .

Choose insurance through your state’s FAIR plan

Most US states and the District of Columbia offer insurance programs called Fair Access to Insurance Requirements (FAIR) plans, or a similar program. FAIR plans provide coverage even in areas where insurance companies have decided not to sell policies. With FAIR plans, everyone can get a basic level of disaster protection. However, they usually cost more than a standard policy.

Notify your mortgage servicer

After you get your coverage, tell your mortgage officer about the change in insurance. You have the right to remove forced insurance once you obtain your insurance policy. Check out our guide on removing forced locking.

Be ready for change

Making home improvements, such as installing a fire alarm or security system, may increase the likelihood that your insurance company will renew your policy. This may also reduce cost. Other home improvements that reduce the risk of loss can help, such as strengthening your home’s roof or updating your plumbing, electrical or heating systems. Ask your insurance agent or company about options for your situation.

According to most forecasts, extreme weather phenomena and the natural disasters they cause are expected to intensify and spread to more areas of the country. Check out our tips for assessing your climate risk, and you can fill them out Your disaster checklist To keep track of your important financial information.

The CFPB continues to work with policymakers, monitoring the financial system and mortgage markets for stability.

• Problems with servicing your mortgage related to coercive insurance? You can file a complaint and we will send it to the mortgage company and we will get back to you.
• Do you think your insurance was wrongly canceled, and you’re not happy with what you’re hearing from your insurance company or agent? You can Make a complaint With your state’s insurance department.