Homeowners need insurance, but what happens when an insurance company denies you coverage?

If you own a home, you’re going to want to insure it. It’s not just to comply with your mortgage lender if you have one—homeowners insurance is a safeguard against catastrophic financial ruin. It protects you from loss due to factors outside your control, like property damage from a windstorm.

But what happens when a primary insurance provider denies you coverage? Getting home insurance is a little more tricky when you can’t use traditional routes, but it can still be done! This article will shed light on why some homeowners are denied insurance and what they can do to get insurance. 

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Why Was I Denied Homeowners Insurance?

Homeowners insurance companies may deny you a policy for many reasons. But whatever the specific reason, it’s likely something indicating you or your property are high risk

What does high risk mean? High risk means a high probability of you making a claim. For example, if you own an older home, you’re more likely to file a claim to cover repairs. The risk for the insurance company is that it will pay more for your damages than it gets in return via premium payments. The higher the likelihood you’ll make a claim, the higher risk you pose to the insurance company.

What Do I Do Now?

Find Out Why You Were Denied

The first step is to understand why you were denied coverage. As we said, there are so many reasons you could be denied coverage. Most insurance agents will give you at least some information as to why you were denied.

Here are some common reasons:

  • Roof is older than 20 years
  • Old electrical system 
  • Water damage
  • Low-quality building materials
  • Mold damage
  • Aggressive dog breed
  • Poor credit score
  • Two or more claims in the last three to five years
  • Home is in a high-risk area for natural disaster
  • Home is vacant for part of the year
  • You run a business from your home

Take Corrective Action

Although it is common for people to be denied coverage for reasons beyond their control, it’s just as often something within their control. If you’re denied coverage because of the condition of your home, there is a high probability you can fix the issue. Be sure to ask the agent about corrective action that would help you get an insurance policy

It may cost some money upfront to correct the problem, but once you do, you’ll find a policy more quickly. You’ll likely get a better rate, too. Not to mention, you’ll be protecting and investing in your property. 

Go Local

If the reason you were denied has to do with your location, be sure to speak with your neighbors about the home insurance companies they use. You can also ask the previous homeowners which company they used. Your real estate agent may also have ideas for you. 

If the reason you were denied has to do with the property or how you use it, speak with a local insurance company. Smaller, local companies are usually able to service higher-risk homes and complicated policies more quickly than a larger company. 

Go International 

You can also look into surplus line insurance, which specializes in insuring high-risk situations. Most surplus line insurance companies operating in the U.S. are based in Great Britain. These companies do not need a license to work in your state and are not subject to the same risk regulations that standard insurance companies must abide by. 

The main drawback of surplus line insurance is the expense: these policies will cost more than your standard homeowners policy. However, these policies are incredibly agile. They’re able to incorporate non-standard risk and special underwriting. 

As a final note, surplus line insurance can be used for flood insurance in addition to your standard homeowners insurance policy. For some policyholders, a surplus line policy is more advantageous than the Federal Emergency Management Agency (FEMA) flood insurance program.

Look for a FAIR Plan

If all else fails, there are Fair Access to Insurance Requirements (FAIR) Plans. Created in the 1960s, these plans allow people in high-risk areas access home insurance. This option works best for people living in areas at high risk for floods, earthquakes, wildfires, and hurricanes.

FAIR Plans are by your state insurance department but are part of the National Flood Disaster Program. Some states do not offer a FAIR Plan, while some states have more than one FAIR Plan. Because of this, each plan differs significantly when it comes to the fine print. 

Though the fine print may differ, there are some general similarities:

  • Windstorm damage coverage
  • Riot or civil unrest damage
  • Vandalism and theft coverage
  • Higher premiums than typical plans

Lastly, FAIR Plan coverage is not guaranteed. Homeowners may be required to invest in home improvements to repair and protect their homes. If they do not comply, they may be denied coverage.

Frequently Asked Questions

What if I Have Too Many Home Insurance Claims?

If you’ve made two or more homeowners insurance claims in the last few years, you’re going to have some difficulty finding insurance coverage. But all is not lost! While many large companies have strict thresholds for too many claims, not every company has such stringent requirements. Spending some time reviewing different companies will give you a clearer picture of what’s available to you. 

How do I fight a denied home insurance policy?

There isn’t an appeals process to being denied home insurance coverage. However, you can ask about the reasons why you were denied and see if there are options available for remediation. Shopping around for a policy elsewhere may solve the problem (see above). If all else fails, speak with your state’s department of insurance about your options. 

Can I still get PMI if I’ve been denied homeowners insurance?

Private Mortgage Insurance, or PMI, is different from property insurance. You pay PMI when the downpayment on your home is less than 20 percent. It’s meant to protect your lender. You’re ensuring your mortgage payment gets paid, even if you default on your loan.  However, your loan requirements will include carrying adequate insurance to protect the value of your property. If you cannot find an insurance company willing to offer you a policy, you may be able to walk away from the purchase. Otherwise your options remain the same: Fix the problems causing denial of your policy Go to a local insurance company Try surplus line insurance Use your state’s insurance program  Chances are very high that you’ll be able to find a policy and move into your new home. 

Getting In Touch with Your FAIR Plan Administrator

State Phone Number
Alabama (334) 943-4029
California (213) 487-0111
Connecticut (860) 528-9546
Delaware (215) 629-8800
District of Columbia (202) 393-4640
Florida JUA (850) 513-3700
Florida Windstorm Und. Assoc. (904) 296-6105
Georgia (770) 923-7431
Hawaii (808) 531-1311
Illinois (312) 861-0385
Indiana (317) 264-2310
Iowa (515) 255-9531
Kansas (785) 271-2300
Kentucky (502) 425-9998
Louisiana FAIR Plan (504) 831-6930
Louisiana Beach Plan (504) 831-6930
Maryland (410) 539-6808
Massachusetts (617) 723-3800
Michigan (313) 877-7400
Minnesota (612) 338-7584
Mississippi (601) 981-2915
Missouri (314) 421-0170
New Jersey (973) 622-3838
New Mexico (505) 878-9563
New York (212) 208-9700
Ohio (614) 839-6446
Oregon (503) 643-5448
Pennsylvania (215) 629-8800
Rhode Island (617) 723-3800
South Carolina (803) 737-6180
Texas (512) 899-4900
Virginia (804) 358-0416
Washington (425) 745-9808
West Virginia (215) 629-8800
Wisconsin (414) 291-5353

Final Thoughts

It’s scary when you’re denied homeowners insurance, but there’s no need to panic. Many options are available to you, even when a major provider can’t help. It may take a little more time, but you’ll also come out with better insurance coverage in the end. 

And don’t forget to use Insurify to browse customized quotes and explore your policy options. The perfect plan for you has never been easier to find!

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Updated April 29, 2020

J.J. Starr is a financial copywriter and enjoys helping readers find the information they need. In addition to her background in banking and financial advising, she is also a poet with an MFA from New York University. She lives in Amherst, Massachusetts. You can learn more at jjstarrwrites.com.