Many consumers pay little attention to clauses in their home insurance policy; it never occurs to them that their policy could be voided. As a policyholder you have the responsibility to understand the policy clauses and make sure that they cannot be used to void your home insurance. The purpose of home owners insurance is to cover damage to your home and personal property for the exposures and problems named in the policy, and for liability for injuries and property damage that you or your family (and pets) cause to other people.
Read Your Policy
There are circumstances that can result in your home insurance policy being voided. First of all, read and make sure you understand the plan clauses. There may be clauses or limitations that could void portions or all of your coverage. Failure to report claims in a timely manner, non-compliance with your carrier, and deficient protection of the property from further loss are all examples of these conditions.
Cancellation for Non-payment
When the payments on any insurance policy are not made, chances are that it will be revoked. Depending on your history with them the company may choose not to reinstate the policy. If you are asked by another provider if you have been cancelled previously for non-payment, answer truthfully. This will not prohibit you for obtaining insurance, but it can mean that you do not qualify for a discount for continuous coverage.
Your home owners policy will invariably be cancelled for material misrepresentation. Be clear that misrepresentation is something you need to avoid. If you were deceitful on the application, and the insurance carrier ever discovers it, they are likely to cancel your coverage, maybe without informing you. It may even happen that you will continue paying premiums on a voided home insurance policy. Another example of misrepresentation is using your home for a business not specifically included in the policy. Make sure you read your policy carefully to learn what these circumstances are.
Has Your Property Changed?
When your property no longer meets their underwriting criteria—for whatever the reason—an insurance company may raise your premiums, cancel or refuse to renew your homeowners policy. Be aware that all homeowners insurance is automatically void if the home is vacant. Make sure to have a rider attached to your policy which ensures continuing coverage during a period of vacancy. Other criteria include age of the building, zoning changes, or increase of liability exposure. (Does your child have a new tree house or elaborate play gym?)
Fraudulent claims are not just material for cop shows. Insurance companies can unearth secrets that you thought no one would ever find. They really could know you try to damage an item to get insurance coverage or have it replaced. Fraudulent claims are a definite ground for voiding or canceling your home owners coverage.
There are other types of fraudulent claims: if you declare value of an item higher than actual worth, the carriers’ expert investigators may decide to appraise that item. They will know if your claim is valid. And, if they find out that you are overpricing, they could choose not to pay out at all. And in cases of suspicious fire or flood, the coroner may cause the insurance company to investigate for arson, which is amazingly a rather common case of insurance fraud. Lastly, if the company finds that you have made a large number of claims on your homeowner policy, their investigators might be sent to check if these claims are really valid.
It is clear that as an insurance policy holder you will be responsible for any violation of the clauses in your policy. Remember that if your homeowners policy is voided due to material misrepresentation or fraudulent claim, you will have very little chance of obtaining insurance again.