For homeowners, having house insurance is essential.

However, a provider can decide to discontinue an existing policy after the policy's original term has ended, an action known as non-renewal.

Non-renewal differs from cancellation in that non-renewal occurs only after the plan's term has ended, while cancellation of a plan takes place before the term ends.

Why a Provider Might Decide to Cease Coverage

An insurer could decide not to renew an agreement for a variety of reasons. A policy holder might have filed a number of claims, too many for the provider's preference. A company also might decide that it needs to reduce the number of policies it writes in a certain location.

Additionally, carriers have been known to not extend policies in areas prone to natural disasters like tornadoes or hurricanes. Whatever the reason, the company essentially has determined that covering the plan in question is no longer cost-effective.

If a carrier does decide to not renew a plan, the company must provide a notice within a certain time period as determined by state law. The company also must explain its reason for the action.

What You Can Do

Find Out Your Rights

If your insurance company does not renew your agreement, the first step you should take is to call your state insurance department to find out what your rights are in such a matter. For example, in Florida, a carrier must wait 90 days after repairs are made on an existing claim before it can issue a non-renewal letter. If you believe that your provider did not act fairly in its decision, you can file a complaint against the company. You also might have justification to get a hearing.

Take a Deep Breath, and Do Not Panic

While receiving one of these letters might be surprising and somewhat stressful, the good news is you most likely will not have to pay a higher premium with a competitor, something that is common if a policy is canceled. Use the opportunity to shop for a better plan. There is still a great deal of competition within the industry and by collecting multiple quotes, you should find some great discounts on a new offering.