Understanding homeowners insurance can be overwhelming, especially when you may be considered “high-risk.” It’s important to breakdown this information into steps. First, defining what homeowner insurance is and why it’s needed. What factors lead you as a high-risk homeowner, and the alternatives to qualify for coverage on the market. Being a high-risk homeowner does not mean you are not qualified for homeowners insurance. Obtaining high-risk homeowners insurance tends to be a little trickier due to the liability attached to it. Don’t worry. This article explores your options, provides tips and tools on how to save.
What does high-risk homeowners insurance mean?
Homeowners insurance is a form of property insurance that covers loses and damages to an individual's home. It also provides liability coverage against accidents on the property. Although personal finance or work history seem unrelated to home insurance, consider the liability portion of an insurance policy. The liability coverage activates if you are deemed responsible for damage or to others or their property. Suppose your past seems "riskier," such as a low credit score or criminal history. In that case, you may be denied coverage or have a higher cost. Each home is evaluated and can be considered "riskier" than others per insurer. For example, perhaps your home is located in a natural disaster zone, experiences extreme weather, or has structural damage. These homes will more likely file insurance claims due to weather or structural damage. Insurers also evaluate the individual's financial history that contributes to the policy decision. For example, if a homeowner has a history of filing claims, has a criminal record, or a low credit score can lead you in the "high-risk" category.
How do insurance company’s decide your home is high-risk?
Here are a few factors that can make a homeowner considered high risk.
Zip Code/Area: Location is a massive indicator of risk. For example, a home in Florida may have a higher risk due to hurricane frequency, which will affect your home insurance rates. Or, if you live in the western United States, you may experience wildfires or earthquakes.
The number of claims: If you have a history of a high number of insurance claims, rather than your home, you are deemed riskier to insure.
Structural Problems: If you have an older home, the roof or foundation may be weaker that needs repairs. These homes have higher insurance claims.
Low Credit Score: To an insurer, this can indicate you may not be responsible. It is essential to pay your bills on time and stay financially accountable.
Aggressive pets: These pets are seen as a risk for a possible cause for property damage and are factored in your homeowner profile. Vacancy: Despite being a vacation home or a second home, if you are not in the house often, you may not be able to spot damage and keep tabs on structural issues, which leads to higher risk.
If you read this and say yes to any of the factors that deem you “high-risk,” you have options. There are insurance companies that specialize in profiles that are considered “high-risk or you may look into your state’s Fair Access to Insurance Plan (FAIR), which is insurance offered to homeowners who’ve been repeatedly turned down for coverage. Read on to learn more about the different ways to obtain high-risk homeowners insurance and get a policy that works for you.
Zip Code/Area: Location is a massive indicator of risk. For example, a home in Florida may have a higher risk due to hurricane frequency, which will affect your home insurance rates. Or, if you live in the western United States, you may experience wildfires or earthquakes.
The number of claims: If you have a history of a high number of insurance claims, rather than your home, you are deemed riskier to insure.
Structural Problems: If you have an older home, the roof or foundation may be weaker that needs repairs. These homes have higher insurance claims.
Low Credit Score: To an insurer, this can indicate you may not be responsible. It is essential to pay your bills on time and stay financially accountable.
Aggressive pets: These pets are seen as a risk for a possible cause for property damage and are factored in your homeowner profile. Vacancy: Despite being a vacation home or a second home, if you are not in the house often, you may not be able to spot damage and keep tabs on structural issues, which leads to higher risk.
If you read this and say yes to any of the factors that deem you “high-risk,” you have options. There are insurance companies that specialize in profiles that are considered “high-risk or you may look into your state’s Fair Access to Insurance Plan (FAIR), which is insurance offered to homeowners who’ve been repeatedly turned down for coverage. Read on to learn more about the different ways to obtain high-risk homeowners insurance and get a policy that works for you.
What to do if you are a high-risk homeowner:
If you are considered "high-risk" by one insurance carrier, it doesn't mean you are deemed high-risk for all. Shop around different insurance companies to find the right insurance coverage for you and your home. If you shopped around and are still being denied coverage, then consider the next steps. Talk to your neighbors about their coverage. Given they are in the same zip code and have dealt with shopping around, could you find out how they obtained insurance? Considering making the necessary updates to the home. If it is a structural issue, such as a roof, it may be worth replacing it for you to qualify for coverage and save in the long run. Contact your state's insurance department for resources. You may be eligible for the FAIR plan, a last-resort coverage program designed for homes in high-risk areas where obtaining coverage is challenging. Because FAIR Plans do not cover as much, they end up costing more. Suppose you're unable to accept any other homeowners insurance. In that case, a FAIR Plan is a good option until you can qualify for coverage on the market.