What Qualifies a House As “High-Risk?”
When private insurance companies decide that a house will cost them more money in paying out claims, they will refuse to underwrite a policy for it. There are four main reasons why a house might be uninsurable:
It’s in an area with extreme weather, like tornadoes or hurricanes.
The surrounding area has a high crime rate.
The house is in poor condition.
Too many claims have been made on the home.
In the case of homes built in areas prone to weather-related damage, there may be little you can do to remedy the situation. There may be some updates you can make to the house and property in order to reduce the amount of potential damage. This could include keeping trees trimmed, installing storm shutters, and repairing the roof.
In many situations, such improvements are useful and will protect your home. However, there’s always the chance that the home is directly in the path of the storm and totally destroyed. This is why insurers are less likely to insure homes in areas that have a history of extreme weather events.
A home in an area prone to vandalism and crime is hard to insure because the insurance company assumes it will have to pay out insurance claims to the property owners. Having a security system in place may help you get a home insurance policy with private insurers, but you’ll pay more for your basic property insurance than homeowners in safer neighborhoods.
When a home is considered high-risk because of its condition, in most cases, this is an obstacle that can be overcome with some time, money, and sweat equity. The underwriting association will tell you what needs to be fixed in order to be insured, so it’s just a matter of getting it done. You can opt to DIY if you’re Chip and Joanna Gaines wannabes, or you can hire pros who may get it done faster.
The final reason a house might be high-risk could be something totally unknown to you and beyond your control. Insurance companies have access to the Comprehensive Loss Underwriting Exchange (CLUE), which has records of all claims against a house. If they determine that there have been too many in too short a time span, they will not give you a policy.
How to Find Insurance for High-Risk Homes
So, what do you do if you find yourself wanting to buy a home that’s in a high-risk area? Or what if, after making a claim following a recent windstorm, you were dropped by your insurance? Before you start looking into FAIR plan coverage, there are a few things you can do to see if getting standard insurance is an option.
Call your current homeowners insurance carrier. When buying a new house, see if your current insurance company will work with you on this new home. Also contact the insurance companies you have your auto and life insurance policies with.
Ask around the neighborhood. In either instance, a new home or your current one, your neighbors may be in the same situation. Talk to a few of them to see which insurance policy they use.
Talk to an insurance agent. Agents have many resources available to them that may be able to help you find a policy through the private insurance market. Typically, they’ll have large networks with many connections, which could lead them to finding a local or specialty insurance carrier that will work with you.
Negotiate with a homeowners insurance company. A little negotiating can go a long way. You can ask for a higher deductible or offer to go above and beyond what they require for repairs or upgrades to ensure the home’s safety and security. It never hurts to ask and offer options that are mutually beneficial.
Once you’ve exhausted all of these options without success, it’s time to consider a FAIR plan policy. Go to your state insurance commissioner’s website to find the phone number of the FAIR plan association in your state. Contact them to begin the application process.
