The Risk of Canceling Flood and Hurricane Insurance

Written by: Christy Rakoczy

Flood insurance premiums are rising for many people throughout the United States as a result of recent events including an overhaul in the federal flood insurance program as well as devastating hurricanes such as Hurricane Sandy.  Hurricane insurance premiums have also increased significantly and continue to go up as a result of massive devastation caused by recent storms. The increasing expenses associated with insuring your home against flood and hurricane damage have led many people to consider whether they should keep these policies or whether it makes sense to cancel.

If you are considering canceling your flood or hurricane insurance coverage, it is important to be aware that there are some very serious risks associated with this decision. You need to consider these risks carefully to decide if you are willing to gamble by leaving your home unprotected.

Risks of Canceling Flood and Hurricane Insurance

For homeowners with a mortgage, flood and hurricane insurance may be required by your bank or lending institution. If you are required to have insurance coverage and you cancel the policy on your own, the bank or mortgage lender may secure an insurance policy for you and force you to pay for it. The cost of the insurance policy that the bank or lender acquires may not be affordable to you as the lender does not necessarily look around for a good deal on insurance coverage. If you don’t pay, however, this could be considered the equivalent of not paying your mortgage and your home could be in jeopardy. As such, before you even think about canceling a hurricane or a flood insurance policy, you need to speak with your mortgage lender to see if that is a viable choice for you.

If you are able to cancel because you don’t have a mortgage or because the lender approves the cancellation, you are still taking a huge risk by going uninsured. Your regular homeowner’s insurance coverage is not going to pay for damage that is caused by a hurricane or that is caused by a flood. This is why you need a special policy in the first place.  If you have cancelled that policy and a disaster happens, then you will not have any insurance coverage to pay for damage to your property, damage to your home or destruction of your home.

This means that if a storm or a flood comes through and destroys your home and possessions, you’ll be left with nothing and get no financial recompense to help you to rebuild your life. Unless you are able to afford to replace all of your possessions and start from scratch on rebuilding your home on your own, this could cause you to suffer financial disaster.

Before you take on the risk of being left with 100 percent of the costs to cover losses caused by a hurricane, you need to decide if this is a chance you want to take. While high flood and hurricane insurance premiums may make you tempted to cancel your policy, you don’t want to end up homeless because your house has been destroyed and there is no money to rebuild.


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