What to do if you're denied home insurance

Don't give up the fight if an insurer denies you homeowners insurance coverage. Instead, shop around at other companies.

“Each carrier has its own set of underwriting guidelines,” says Alaina Hixson, Nashville, Tennessee-based director of sales and operations at The Churchill Agency, an independent agency offering home, auto and life insurance nationwide.

So, the fact that one company has rejected your application doesn't mean all others will follow suit.

You can also contact an independent insurance agent or broker with the expertise to find companies that offer coverage to homeowners in your situation.

Also, if your application has been rejected for reasons related to its current condition, it’s possible that making repairs or upgrades to your home will be enough to get an insurance company to reverse its position and offer you coverage.

Finally, if you simply can't find coverage anywhere, chances are good that your state offers help getting home insurance, either through a FAIR plan or a state-backed homeowners insurance company.

Options for high-risk home insurance

If you can’t get home insurance coverage through a regular insurer, you have several alternatives available to find coverage.

Non-standard home insurance companies

Some insurance companies cater to homeowners whose home insurance requirements are classified as non-standard. Homes falling into this category might include those that:

  • Have non-standard construction elements, such as timber framing or a flat roof
  • Are located in areas prone to damaging weather or vulnerable to crime
  • Are empty for a period
  • Are vacation homes

A home also can fall into this category based on the owner’s personal history, such as someone who has declared bankruptcy or has a history of criminal convictions.

HO-8 and other policy options

HO-8 policies are also known in the insurance industry as modified form coverage. This type of policy is typically used for homes built at least 40 years ago or that have been named historic landmarks.

An HO-8 policy provides much of the coverage found in a typical homeowners insurance policy but also has specific provisions that address the aging nature of the home. These policies typically offer actual cash value coverage instead of replacement cost coverage.

Another type of policy – the HO-7 form – is used to insure mobile homes and manufactured homes.

State FAIR plans

Some homeowners simply can’t find coverage in the traditional insurance marketplace. For those in such situations, most states offer coverage through a particular type of insurance plan known as shared market or assigned risk.

The primary types of shared-market plans are FAIR plans and beach and windstorm plans.

FAIR -- Fair Access to Insurance Requirements -- plans emerged in the 1960s and were explicitly intended to give homeowners a way to get insurance when their home was in a high-risk area.

Although these plans provide crucial protection to homeowners who can’t obtain coverage through the traditional insurance market, they have drawbacks.

“This option only provides limited coverage on the home and is not an ideal choice,” Hixson says.

Every FAIR plan covers losses due to:

  • Fire
  • Vandalism
  • Riot
  • Windstorm

In addition, around a dozen states have FAIR plans that offer standard homeowners insurance, including liability. States also may include other types of coverage in their FAIR plans, such as wildfires in California and wind and hail coverage for some communities in Georgia and New York.

You must meet certain conditions to qualify for a FAIR plan, such as making necessary home improvements or repairs.

In seven states along the Atlantic and Gulf coasts, beach and windstorm plans are offered to homeowners who live in areas at high risk for hurricane and windstorm damage.

States with these plans include:

  • Alabama
  • Florida
  • Mississippi
  • New York
  • North Carolina
  • South Carolina
  • Texas

Reaching out to your state insurance department can help you determine if one of these plans is available or if the state knows other insurers who might help get you coverage.

FAIR plans offer less coverage than traditional home insurance coverage and can sometimes be costly.

“Utilizing the FAIR Plan should be a last resort, as it only provides restricted coverage for your home,” Hixson says.

However, she adds that this coverage “may be necessary if no other carrier will insure your property and you have a home loan” since most lenders will require you to carry homeowners insurance.

What makes a home high-risk?

Insurance companies look to their guidelines for underwriting when determining whether a home is too risky to insure, Hixson says.

“If a home does not fit those guidelines anymore, the company will no longer accept that risk,” she says.

She cites the example of a company that decides to stop writing policies in locations deemed to be at higher risk for fires.

"They may stop providing coverage in that area due to the possibility of increased claims exposure," Hixson says. "Too many claims and certain types of claims may also be cause for policy refusal at renewal."

What can you do to avoid needing high-risk insurance?

Some factors are out of your control, but you can do many other things to make a property more insurable.

For example, making repairs and upgrades to the home can help. Hixson says insurance companies may give an insured homeowner time to fix damages or reduce liability before refusing to renew coverage.

“Overhanging trees or not having handrails on steps are common instances of this,” she says. “In these cases, the insured can provide proof of repairs and give the company enough confidence to underwrite them.”

Keeping up the maintenance of your home is another crucial step you can take to prevent your home from slipping into the high-risk category, Hixson says.

Do I have to have homeowners insurance?

In most cases, you will be required to carry homeowners insurance. If you have a mortgage, your lender will almost surely require you to carry an adequate amount of coverage, for example.

You could skip purchasing homeowners insurance if you own your home free and clear. But doing so is a significant mistake. 

For many people, their home is their most valuable asset. Without adequate homeowners insurance, you could face uninsured losses that amount to hundreds of thousands of dollars – or even more – should disaster strike. 

Homeowners insurance also offers liability coverage that can protect you if you injure someone or you damage their property and are held responsible.

Sources

Frequently asked questions: High-risk home insurance

What would make a home uninsurable?

A home can be deemed uninsurable for several reasons. For example, perhaps the home is in such disrepair that it is too dangerous for people to live there.

You will also likely be unable to secure insurance coverage if the home has been damaged by flooding, fire or another event and has not been restored to a condition that makes it safe to live in.

What happens to your mortgage if you can't get home insurance?

If you have a home loan, you will need homeowners insurance coverage. if you can’t get coverage through the traditional market, you might have to buy more expensive, less robust coverage through a shared-market option.

If you fail to get coverage, your lender will likely purchase insurance to cover the home. This is known as force-placed coverage, and it can be costly.

Is it hard to get insurance after being dropped?

If your insurance company cancels your coverage, it will be harder to get a new policy.

Hixson says that typically, maintaining coverage with a company that already insures you is the “most advantageous choice” if your home is deemed a higher risk to insure.

Therefore, she encourages homeowners to work with their company to avoid being dropped if possible.

“A cancellation often provides a 30-day notice before the policy ends, and a non-renewal period is commonly several months prior,” Hixson says. “Utilize this time to work with your agent and determine if the termination of the policy can be prevented by making repairs or other corrections.”

If your insurance company plans to drop you and you can’t change the company’s decision, consider working with an independent insurance agent who can help you find the coverage you need.

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