What is high-risk homeowners insurance?
High-risk homeowners insurance is a type of insurance for homes in high-risk areas, as well as homes or homeowners that have been classified as being at high risk for filing a claim. Not all insurance companies offer high-risk home insurance, however, so homeowners may need to turn to specialized insurance companies for coverage.
Location isn’t the only reason a home may be considered high-risk. Other factors can affect your risk level, such as your claims history, the age of your home, and your credit score.
“With most standard options, if you have two or more claims in a five-year period, you will be ineligible to start a new policy with that carrier,” says Dominic Frey, an insurance professional at Hitchings Insurance Agency.
“Other minor factors that can impact your rate and eligibility are the presence of trampolines, pools, wood stoves, and dogs,” Frey says.
Learn More: Types of Homeowners Insurance: Which One Do You Need?
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What makes a home high-risk?
A few factors can contribute to a home being considered high-risk, such as:
Home age: Some homes, especially older ones, may pose a higher risk for electrical or plumbing issues and have more general wear and tear, landing them in the high-risk category.
Home location: Homes located in areas with high crime rates or severe weather are often classified as high-risk. For example, high-risk homes can be found in areas with a lot of theft and vandalism and in areas prone to hurricanes, windstorms, or tornadoes.
Structural issues: Old homes may have structural issues, such as an old roof or cracks in the foundation. These issues increase the likelihood of damage to the home, making it more risky and expensive to insure.
What makes a homeowner high-risk?
Several factors can cause a homeowner to be eligible only for a high-risk homeowners insurance policy, such as:
Claims history: A homeowner with a history of insurance claims is considered more likely to file additional claims in the future, making them a high-risk customer.
Credit score: Insurance companies may take your credit score into account when determining whether to insure your home. Insurers typically consider people with low credit scores as more likely to miss premium payments or file claims, which can make them riskier to insure.
Home use: Vacation homes and ones that aren’t regularly occupied have a different risk profile than primary residences. For example, a vacation home may be more likely to be damaged or vandalized when it’s not in use, making it riskier to insure.
Amenities: The presence of certain amenities, such as a pool or trampoline, can increase the possibility of accidents or injuries and affect a homeowner’s risk profile.
Animal ownership: Certain dog breeds — such as pit bulls, rottweilers, dobermans, labrador retrievers, and German shepherds — can result in a homeowner being considered high-risk. These breeds are generally viewed as being more likely to bite or cause property damage.
Read More: Does Getting Home Insurance Quotes Affect Your Credit Score?