What to Do if You’re Rejected for Homeowners Insurance

Reasons Why You Can Be Rejected for Homeowners Insurance

Common reasons you might be turned down for home insurance include:

• High-risk location: In regions prone to extreme weather such as wildfires or hurricanes, concerns about costly claims could keep insurance companies from issuing you coverage. You may also have trouble getting home insurance if your city has a high crime rate, which may increase the risk of burglary or vandalism.
• High-risk home: Does your home have outdated plumbing, heating or electrical systems? These risks can make fire or water damage more likely, which may make insurers reluctant to insure your home.
• Too many claims: When you apply for home insurance, the insurer typically checks the LexisNexis C.L.U.E. (Comprehensive Loss Underwriting Exchange) database, which includes insurance claims on your home from the past seven years. Having too many claims in that time period could make it difficult to get homeowners insurance.
• Previous payment problems: Have you ever had your home insurance canceled for nonpayment? A history of failing to pay your premiums to prior insurance carriers could make it difficult to get coverage.
• Credit history: Insurance companies in most states may check your credit-based insurance score when you apply for homeowners insurance. A poor credit-based insurance score alone typically won't keep you from getting insurance, but in combination with other risk factors, it could tip the scales against you.

Learn more: How Do I Get Homeowners Insurance With Bad Credit?

What to Do if You're Rejected for Homeowners Insurance

If you're turned down for homeowners insurance, take the following steps:

1. Find Out Why You Were Rejected

Contact the insurance company to learn why you were denied home insurance. It's possible the insurance company's decision was based on inaccurate information. The problem may also be something you can remedy by taking action to reduce your risk.

2. Address Your Risk Factors

If the insurer believes your home is too risky to insure, ask if there are things you can do to reduce the risk. For example, if outdated plumbing and electrical systems are the issue, find out whether replacing or upgrading these systems would make your home insurable.

3. Shop Around for Coverage

Your neighbors, your home's previous owners, your real estate agent or your mortgage lender may be able to recommend insurance companies that sell policies in your location. If your home is new, the builder may have suggestions. You can also contact your state's department of insurance for a list of insurance companies that sell home insurance in your area.

When comparing home insurance policies, be sure to get quotes for the same type and amount of coverage from each company. You can get quotes by visiting insurance company websites, contacting an insurance agent, or working with an insurance broker or independent insurance agent who sells coverage from several carriers.

Learn more: How to Compare Home Insurance Policies

Is Homeowners Insurance Required?

Homeowners insurance isn't required by law, but if you have a mortgage, your lender usually requires it to protect their interest in the home. Mortgage lenders typically require you to carry home insurance that covers 80% to 100% of the cost of rebuilding your home. Without homeowners insurance, you'd have to pay for repairs yourself while continuing to make your mortgage payments.

If you don't have homeowners insurance, your mortgage lender can buy home insurance and make you pay for it. This is known as force-placed insurance or lender-placed insurance. Force-placed insurance usually costs significantly more than regular home insurance and typically protects only the lender, not the homeowner.

Learn more: Do You Have to Have Homeowners Insurance?

Alternatives to Traditional Homeowners Insurance

If you've searched for home insurance through traditional insurance carriers with no luck, you have a couple of other options for finding coverage.

State Insurance Plans

State-mandated home insurance plans provide a last resort for homeowners who can't get coverage elsewhere. In most states, these are known as FAIR (Fair Access to Insurance Requirements) plans. Other states have plans with words like "Beach" or "Wind" in the name, reflecting the risks in those areas. Florida and Louisiana each have a state-run insurance company called Citizens Property Insurance Corp.

State home insurance plans are designed to cover the most common risks homeowners face in that state—wildfires in California, for example. They usually cost more than standard home insurance and provide more limited coverage, although this can vary by state. For instance, unlike standard home insurance, FAIR plan insurance generally includes dwelling coverage, but not liability or loss of use coverage, and you typically need to buy separate coverage for personal possessions and freestanding structures on your property.

Tip: Adding a difference in conditions (DIC) policy can fill gaps in your state home insurance plan. Check with an insurance agent or your state department of insurance for information about DIC policies.

Surplus Lines Carriers

Surplus lines insurers, also known as non-admitted or excess and surplus (E&S) insurers, sell policies for homes that can't get homeowners insurance elsewhere. Because these companies are taking on extra risk, insurance from surplus lines carriers typically costs more than standard home insurance.

You're taking on a bit more risk when you buy E&S coverage too. If an admitted insurance carrier runs out of money, state guaranty funds kick in to pay customers' claims. That won't happen if a non-admitted carrier runs out of money, so it's crucial to check the company's financial stability before buying a policy. You can get E&S coverage through insurance brokers who work with these companies.

Learn more: How Much Homeowners Insurance Do You Need?

The Bottom Line

If you're rejected for home insurance, know that you have options. Making your home safer, shopping around and exploring options like FAIR plans and E&S coverage could help you find the protection your home needs. Keeping your credit in good shape could help, too.

Many of the factors that impact your consumer credit score also affect the credit-based insurance score that insurers may review when you apply for coverage. Actions such as bringing late accounts current, reducing debt and paying bills on time could help improve both types of credit scores. That could make it easier to get homeowners insurance and even help you qualify for lower premiums. You can check your FICO^® Score^Θ and Experian credit report for free to see where you stand.