More Americans are losing insurance coverage due to storms, lawsuits and other factors
Many Americans should start planning now for the growing possibility that their home-insurance provider won’t renew their coverage.
Damage from extreme weather, rising lawsuits and soaring costs of rebuilding have led some major insurance companies to stop renewing existing policies or issuing new ones. Homeowners in Florida, Louisiana and California have been particularly hard hit, but more homes across the country are at risk of losing coverage, say insurance companies.
And the cost of coverage is rising fast as companies are paying out more in claims. The national average for home insurance based on $250,000 in dwelling coverage increased 20% this year to $1,428 annually from 2022, according to Bankrate.
No matter what, home insurance isn’t something you should live without, say financial advisers. A standard policy typically covers the cost of replacement of the home and some of its contents in the event of damage or theft. Most mortgage lenders require borrowers to have home insurance.
When you don’t have home insurance and your home is destroyed by a fire, you don’t just lose your house and its contents. You may also have to pay for removing your home’s remains as well as the costs to rebuild it.
If you suspect you’re going to be dropped by your insurer or already have been, act quickly. Reduce the risks to your home and start researching other insurance plans, say insurance executives and financial planners.
Make your home more insurable
You may increase chances of having your policy renewed by your insurer if you make your home less risky to insure. You may also land a discount.
For instance, if you install fire alarms or a security system, you may shave 1% to 5% off your premium, said Jeffrey Brewer, department vice president at American Property Casualty Insurance Association.
A homeowner could also make the outside of their home more disaster resilient by clearing vegetation to create defendable space around your house if you live in a wildfire-prone region, he said. Installing safety devices that use smart technology, such as leak-detection sensors and smart thermostats, may also help you stay insured.
Taking proactive steps such as updating your roof, installing hurricane shutters and adding fire-resistant siding could mean the difference between your policy being renewed or not, said Shannon Martin, insurance analyst at Bankrate.
It’s possible your coverage won’t be renewed even if you make upgrades, especially in states such as Texas and North Carolina, Martin said. Insurance companies can nonrenew policies for many reasons outside a policyholder’s control, so control what you can.
Don’t wait…
If you’ve received a nonrenewal notice, first ask your agent why and if you might get the insurer to reconsider. If the insurer won’t renew your policy, don’t be shy in telling others about your situation.
In January, Josh C. Kline found out coverage for his roughly 2,000-square-foot home in the Laurel Canyon neighborhood of Los Angeles wasn’t being renewed due to the threat of wildfire.
Right away, Kline tapped his network to find a new insurer to replace the Farmers Insurance policy he had since about 2016. New neighbors shared the contact information for their agent at State Farm where Kline got a policy. (In May, State Farm stopped the sale of new home-insurance policies in California.)
“With catastrophe costs at historically high levels, reconstruction costs continuing to climb, and record-breaking inflation, loss costs in areas like the California home insurance marketplace continue to be challenging for insurers, requiring us to take actions to manage our risk exposure,” wrote Trevor Chapman, a spokesman for Farmers Insurance, in an email.
Kline advises others to act quickly when they realize they will no longer be covered.
“We barely got this taken care of before it would have been even more work to rectify,” Kline said.
Research less-known insurers…
As some brand-name companies have pulled back on coverage, some homeowners are turning to lesser-known insurers. Contact your state’s insurance department to determine which are still writing policies in your area, said Martin at Bankrate.
Be aware of ghost brokers who pose as insurance agents accepting money for fake insurance policies.
Have you been denied home insurance because of extreme weather? What steps did you take? Join the conversation below.
Before giving your private information to a company or broker you are unsure of, ask for their National Association of Insurance Commissioners, or NAIC number. Provide this number to the state for verification, said Martin.
You can also search for an insurance company’s reported complaint history directly with the NAIC by inputting the company’s name or NAIC number in its consumer insurance search tool.
Homeowners want to know their insurance company will be able to pay any claims they may need to file.
Look up the insurer’s rating with an agency such as AM Best, which specializes in providing financial strength ratings for insurance companies, said Caitlin Constantine, an insurance specialist. You can also check to see how long the insurer has been in business, which may be a sign of stability.
Check with your State…
If you can’t get private insurance, you may need to turn to your State.
Seek out FAIR plans, also known as Fair Access to Insurance Requirements plans, which are state-mandated property-insurance plans that provide coverage to individuals who are unable to obtain insurance in the regular market, said Loretta Worters, a vice president at the Insurance Information Institute, an industry trade group, also known as Triple-I.
All U.S. states have some form of FAIR plans, although they vary by state, she said. FAIR plans are typically more expensive and may have more narrowly defined coverage than plans you buy through private insurers.