Insurance Lecturer — North Carolina state law allows for five different types of basic insurance plans, with different exclusionary coverage offered on the side.
The first three types of insurance coverage, HO-1, HO-2 and HO-3 are different home insurance policies that go up in steps of what types of damage are covered from policy to policy.
HO-4 and HO-5 are policies that protect those living in condominiums or apartments and need homeowners or renter’s insurance.
North Carolina state law does provide homeowners with a safety net of protection once they have purchased one of these five insurance policies.
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The state has an Insurance Guaranty Association fund set aside in case an insurance company should become bankrupt and cannot afford to cover claims for policy holders.
Of course this fund can only be used in the case of an insurance company’s bankruptcy and will not accept claims just because the insurance company will not pay.
Another important law set up in North Carolina is the FAIR and Beach plans. While most states have a FAIR plan that protects those who have had several unsuccessful attempts at obtaining insurance, the Beach Plan also protects those living in and around the coasts and islands of North Carolina.
Often times those who live in coastal areas have difficulty obtaining insurance. The Beach Plan helps these homeowners in designated coastal counties find affordable insurance plans.
Keep in mind that the FAIR and Beach Plan will usually offer basic insurance coverage to those homeowners who have not found an insurance company elsewhere.
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Most often basic insurance coverage will include fire, wind and vandalism, but liability or other specialty insurances will not be covered. For those living in coastal areas, it is important to discuss whether hurricane insurance is covered in these basic Beach Plans before signing up for coverage.
The rational through the state of North Carolina is that since homeowners insurance in the state of North Carolina is not required, companies are allowed to cancel or non-renew insurance policies.
Different from many states, though, is that a policyholder is allowed to cancel a policy mid-policy if they are not satisfied with the insurance. This requires 30-days of written notice to the insurance company before the cancellation will take effect.
Cancellation by an insurance company is allowed within the first 60 days for nearly any reason in North Carolina, as long as the insurance company sends a 10-day written notice.
Cancellation is only allowed mid-policy if the holder has not paid the premium, if there was a misrepresentation of insurance needs, or if the risk of the home has changed substantially since the policy was first acquired.
Mid-policy cancellation still requires a 30-day notice to the policy owner, in order for the policy owner to obtain other insurance.
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North Carolina state law also allows for non-renewal of a policy if the insurance company feels like there is sufficient reason to non-renew. The company is still required to send a 30-day notice before the end of the renewal period.
Reasons for non-renewal of cancellation of a policy are often too many claims, as the state of North Carolina allows for insurance companies to cancel policies because of excessive claims.
Excessive claims are not clearly defined and could mean three claims of minimal amounts over a two or three year period or large claims within one year.
Keep in mind while you are searching for homeowners insurance in the state of North Carolina that state law also allows for insurance companies to use credit history and credit reports to determine whether or not you are eligible for homeowners insurance.
This means insurance companies throughout the state can obtain your credit reports when you apply for insurance to determine if you have previous non-payment issues or a poor credit score that may make you a risky customer.
