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Two of the largest property insurance companies in the country, Allstate and State Farm, recently stopped selling new home insurance policies in California. Farmers Insurance did the same thing in Florida, and now says it will limit the number of homeowner policies it writes in California.
The three insurers cite financial losses from claim payouts for catastrophes like wildfires, floods and hurricanes as one of the reasons for halting new coverage in two of the biggest states. But generally, it's getting tougher for homeowners around the country to obtain or keep coverage. As insurers pull out of states they deem risky or tighten their policy-writing standards, homeowners are being left with fewer options. Here's what to do if an insurer stops selling new home insurance policies in your state or chooses not to renew your coverage.
1. Contact Your Insurance Company
If your home insurer declines to renew your policy—or cancels it outright—reach out to the company to see what can be done, if anything, to maintain your coverage.
Nonrenewal happens when your coverage is close to expiring, while cancellation can occur at any time. One reason for nonrenewal might be that you live in an area that's now at a greater risk of being ravaged by disasters like wildfires or floods. Generally, your insurer notifies you a certain number of days—30 or 60 days, for example—before your coverage is set to end.
When you contact the company, ask what's behind the move. For instance, do you live in a disaster-prone area?
Once you've gotten an answer about why your policy isn't being renewed, consider taking these steps:
- Find out what you can do to keep your policy intact. For instance, you might be able to "harden" your home to better protect it from wildfires, which may persuade your insurer to maintain coverage. This might involve, say, installing a more fire-resistant roof or retrofitting your home with fire-resistant windows.
- Look around for new coverage. Even if your current insurer indicates it'll reverse the nonrenewal decision, having another option in your back pocket is a good idea.
- Check out your state's FAIR (Fair Access to Insurance Requirements) plan. FAIR plans sell coverage to people who otherwise aren't able to get coverage.
- Contact your state's insurance regulator if you feel that you're being treated unfairly. You can find a list of state insurance regulators on the website of the National Association of Insurance Commissioners.
It's worth noting that while an insurer can refuse to renew your policy, the company can't cancel it if your coverage has been in effect for more than 60 days. The only exceptions to this rule are if you failed to pay the premium, committed insurance fraud or misrepresented yourself on your insurance application.
2. Shop for New Insurance
If you're facing nonrenewal of a home insurance policy or running into dwindling coverage options in your state, you might need to shop for new coverage. Here are some tips for nailing down a new home insurance policy:
- Investigate the options. Are you unclear about which home insurers are still operating in your state? If so, reach out to your state's insurance regulator. The regulatory agency should be able to provide a list of home insurers licensed to do business in your state.
- Compare insurance quotes. You can compare homeowners insurance rates online through marketplaces such as Gabi, a part of Experian, or through an insurance broker. Brokers sell insurance from an array of companies. The Insurance Information Institute recommends obtaining quotes from at least three insurers to fully compare prices and coverage.
- Focus on more than price. The cheapest home insurance might not be the best for your needs. Among other things, you'll want to weigh the types of coverage that are available, the menu of discounts, the range of deductibles and the company's reputation.
- Know what your mortgage company requires. If you took out a mortgage for your home and are still paying it off, the mortgage lender typically demands that you carry home insurance. In some cases, the home insurance premium is paid through your mortgage escrow account.
3. Look Into Government Plans
Every state offers some form of a FAIR plan, which is considered a "last resort" option for securing home insurance. Some states operate a single plan, while others have several plans run by different insurers. Still other states have what are known as "assigned risk" plans, which are similar to FAIR plans.
The National Association of Insurance Commissioners warns that these plans cost more than traditional coverage and provide scaled-back protection.
Coverage under FAIR plans differs from state to state. However, a plan should at least sell dwelling coverage. Typically, coverage for personal belongings and other structures on your property is optional.
Keep in mind that personal liability and loss-of-use coverage normally aren't available from FAIR plans. Personal liability coverage protects you if you're at fault for someone else being injured on your property or someone else's property being damaged. Loss-of-use coverage pays for living expenses when you can't occupy your home while it's being repaired or rebuilt after an insured incident.
The Bottom Line
It can be frustrating if your home insurer doesn't renew your policy or home insurers are no longer selling coverage in your state. Keep in mind, though, that you've got some options if you're stuck in this kind of insurance dilemma. A different insurance company or FAIR plan may provide the coverage you need. And, because insurance carriers may be allowed to use your credit-based insurance score when setting the price of your coverage, it's best to keep your credit in good shape in the event that you need a new policy. Check your credit score and credit report regularly, making adjustments as necessary to improve your score.