What to Do if You Were Denied Home Insurance Coverage
Follow these steps to understand why your home insurance application may have been rejected.
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
Low-quality building materials
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, as you may find that your eligibility for home insurance is legitimate.
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.
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.
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 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 or deductibles 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. Your state’s local Department of Insurance may be able to help.