Finding yourself unable to get homeowners insurance can be frustrating. If an insurance company considers you or your home a high risk, it may deny your application for coverage or nonrenew your existing policy. Fortunately, there are steps you can take to maintain coverage on your home. Here’s what you need to know about getting homeowners insurance for a high-risk home.
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What are my options for high-risk homeowners insurance?
If one company considers you or your home too risky to insure, your best next steps are to shop around with other companies and contact your local Fair Access to Insurance Requirements, or FAIR, plan, if your state has one. If these measures fail, you may have to obtain a surplus lines policy to avoid being uninsured.
Why shop for high-risk insurance with multiple companies?
Obtaining and comparing quotes from multiple home insurance companies is a great way to find the insurer whose services align with your needs.
Each insurance company evaluates your rate factors a little differently. Some are more willing than others to insure homes in areas with extreme weather, wildland fire risks or high crime rates. Some are more accepting of customers with prior insurance claims.
Just because one insurance company considers you too risky, it does not mean that every other company will feel the same way.
Whether you shop online, by phone or in person, quotes are free and usually only take about 10 to 15 minutes to prepare.
If you’re not sure where to begin, consider asking neighbors about their insurance providers. If you live in a high-risk area, this will help you find companies willing to insure homes with risks similar to your own.
It also often helps to work directly with an agent, rather than trying to do it yourself online. A licensed insurance agent can answer your questions and talk you through options that you may not otherwise know about.
FAIR plans and other state resources
More than 30 states and the District of Columbia have FAIR plans, which provide homeowners insurance to those unable to obtain it in the open market.
Though the eligibility guidelines and coverage options vary by state, FAIR plans typically provide the bare necessities of home insurance, and not much else. For example, they often lack the personal property and liability coverages included in standard homeowners insurance, and FAIR plans typically also protect against fewer perils.
However, if you’re in a pinch, a FAIR plan may provide the minimum protection you need for a year or two. If you can avoid claims, this may be all the time you need to begin qualifying for coverage from standard homeowners insurance companies.
Whether your state has a FAIR plan or not, you can also contact your state’s insurance commissioner for assistance. Your insurance commissioner’s office can often help you find additional local insurance resources and field your complaint if you believe you received your high-risk insurance designation in error.
When to consider a surplus lines policy
If you or your home are too risky for your state’s FAIR plan, you may have to consider a surplus lines insurance policy. Surplus lines providers tend to cover risks that standard insurance companies won’t accept, including unique older homes and homes in extremely high-risk settings.
In general, surplus lines tend to come with higher premiums and deductibles than standard insurance. Surplus-lines providers are also generally not subject to as much state oversight as mainstream insurance companies.
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What makes a home high risk for insurance?
An insurance company may classify your home as high risk and either nonrenew your existing policy or deny your application for new coverage for a variety of reasons, including some that are beyond your control.
The most common reasons homes are declared high risk include:
- A homeowner filing multiple insurance claims within a short amount of time
- Multiple recent home insurance claims for a single location, regardless of ownership
- A home’s exposure to extreme weather, wildland fire or crime
- Poor maintenance and upkeep, such as roof deterioration or unsafe electrical, plumbing or heating
- Use of home for purposes other than full-time residence, such as a vacation home
Excessive claims are a particularly common cause for high-risk home insurance designations.
If you file one claim, your home insurance company is likely to increase your future rates in the form of a surcharge. A second claim within two or three years may get your policy nonrenewed, which is an insurance company's decision to stop insuring you when your current policy term expires.
If you need to insure a home you plan to buy, a claim filed by your future home’s current or prior owner may also impact your insurability and rates.
Most insurance companies report claims to the Comprehensive Loss Underwriting Exchange (CLUE), an industry database powered by LexisNexis.
When you request a quote, insurance companies usually pull a CLUE report that contains data about any prior claims you may have filed. If you’re applying for insurance on a home you plan to buy, the CLUE report will also pull claims data for your potential new property.
Even if you’ve never filed a homeowners insurance claim yourself, you may get dinged with a higher rate or have your application denied if the property's current owners have filed too many recent claims.
Similarly, if you are purchasing a home in a high-risk area, an insurance company may charge a high rate or deny your application, even if you have no prior insurance claims.
How can I avoid high-risk insurance?
The best ways to avoid high-risk home insurance include refraining from filing claims for inexpensive losses and researching the insurability of a home you’d like to buy as soon as possible.
Filing two $1,000 home insurance claims within a two-year period is often more likely to get your homeowners insurance non-renewed than filing one $5,000 claim over five years.
Though it may take a bite out of your wallet, covering small claims out of your own pocket is likely to save you money in the long run by helping you avoid surcharges and nonrenewal. To save money now, consider increasing your deductible to the highest amount you can reasonably afford.
Meanwhile, when you start to get serious about putting an offer on a home you’d like to buy, start researching its insurance history. You can’t access the seller’s CLUE report, but you can ask their real estate agent to obtain a copy of it for you.
As an alternative, you can obtain a quote for a future insurance policy on the home. If a licensed insurance agent runs the quote for you, they can usually tell if the property’s claims history or locational risks may make it difficult to insure.
If the property does have recent claims activity, ask the seller to provide documentation of any repairs, including receipts and inspection certifications. This information may help you qualify for coverage or get a lower rate by showing your insurance company that the home's prior damage has been fixed.
Do I have to get homeowners insurance?
There is no state law that requires you to carry homeowners insurance, but lenders typically require it for mortgages, with specified amounts of coverage.
Since lenders are typically also listed as loss payees on insurance policies, they are informed of policy changes. If your policy is canceled or lapses, a lender will typically obtain a replacement policy through a process known as forced placement. Force-placed policies tend to cost more than those you can buy yourself and often only offer limited coverage.
Even if you don’t have a mortgage, homeowners insurance can be an economical way to protect your financial investment in your home.
However, when you own your home outright, you can get as little insurance as you please, or none at all. Just be mindful that, if you don't have insurance, the costs of a potential mishap or disaster can devastate your finances.
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