ResalesWhat to Do If You Can"t Get Homeowners Insurance
Purchasing and keeping your homeowners insurance policy is increasingly
difficult these days. Premium costs are escalating at double-digit rates,
many companies" renewal policies are tightening, some companies aren"t even
selling new policies in some states, and if you live in a wildfire- or
hurricane-prone area, or have a history of numerous claims, getting
insurance is sometimes a complicated - and expensive -matter.
And that can make the whole home-buying process more difficult, especially
if you"re buying your first house.
One of the biggest triggers leading to these new restrictions and rate
increases is the emergence of mold lawsuits and the direction jury verdicts
and judicial interpretations are taking, according to the Insurance
Information Institute.
While damage from mold is specifically excluded from the standard homeowners
policy, it is covered if it is the result of a covered peril, like a pipe
that bursts causing water damage.
But now insurers say that if they are going to be asked, by juries and court
rulings, to pay for what isn"t covered, that consumers will suffer.
"Potential rate increases needed to cover the cost of mold claims threaten
to make home insurance coverage unaffordable for some and unavailable for
others. A crisis in the price and availability of homeowners coverage could
have far-reaching effects on home sales, and, as a result, the economy as a
whole," the III says in a topic paper on the mold issue.
Allstate has sought rate increases averaging almost 20 percent in 23 states.
And State Farm, the largest home insurer in the country, has stopped writing
new policies in a handful of states, including Texas, California, and
Louisiana.
Another factor that may keep you from getting a homeowners insurance policy
is a bad or borderline credit history.
Through the years insurers have found a person"s credit information to be a
highly accurate predictor of risk, according to the Insurance Information
Institute, a non-profit organization supported by the property and casualty
insurance business.
While insurers look at the same factors as lenders, they weigh each factor
differently.
"The biggest difference is that insurance risk scores look for stability,
but credit risk scores look for a reliable pattern," Craig Watts, a
spokesperson for Fair, Isaac, and Co., whose insurance risk scores are used
by about 300 insurers nationwide, told www.insure.com.
If you suspect your credit history is the reason you are denied insurance,
get a copy of your credit report and make sure it is accurate. Better yet,
review your credit reports before you apply for insurance or a loan.
Or perhaps your home, or one you are thinking about buying, is considered
high-risk, meaning it might be prone to hurricanes, windstorms, tornadoes,
or hail; is in a high-crime area; or has old plumbing, electrical or heating
systems that present a higher chance of property damage.
If two or more insurers won"t issue you a homeowners policy, there are
options. The III suggests:
That if you are buying a new home to ask your real estate agent, lender,
or builder for names of companies that write in the area.
That if you are purchasing an existing house to ask the previous owners
who insured the house.
Ask your current insurance agent or company representative for assistance.
If the problem does not stem from your home"s location, but its condition,
find out what you can do to remedy the problems and bring your home up to
insurable condition.
Contact the Institute for Business and Home Safety for information on
natural hazards, community land use and ways you can protect your property
from damage. It can be reached at www.ibhs.org.
Talk to your neighbors. Find out what through which company they are
insured. Talk to their agents about specific risks in your neighborhood.
Call your state insurance department. Usually it can provide you with
insurers in your area.
You may have to get insured through a state-run risk pool, operated by 29
states and the District of Columbia.
You can buy from an agency company that sells through agents, or a direct
writer company, in which agents represent several insurers. The most
important thing factors are the company"s reputation for service, its
financial stability, and the coverage offered.
If you are still unable to get insurance, find out if your state has a plan
known as shared market. FAIR Plans (Fair Access to Insurance Requirements)
are insurance pools that sell property insurance to those who can"t get it
in the standard market.
FAIR Plans can cost more and may provide less coverage than a typical
policy, but they offer protection that you would not have otherwise. About
12 states have some sort of a homeowners policy, including liability. In
California the plan covers brush fires, and in Georgia and New York they
provide wind and hail coverage for some coastal communities.
And in seven Atlantic and Gulf states, there is an equivalent program -
Beach and Windstorm Plans - that provide coverage against hurricanes and
windstorms.