How to Qualify for High Risk Home Insurance

Sep 7, 2022

6

min read

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home is the most significant investment of your life and the most valuable asset. Thus, you would want to protect it from the potential risk through home insurance. But, sometimes, the risk is too high for your insurer to cover, and they consider your home an increased risk.

Securing home insurance for a high-risk home can be challenging, but it's not impossible. You need to make extra efforts and plan to qualify for the insurance. Thus, knowing what factors contribute to a high-risk home, what insurance policies are available, and how to find the right insurance policy for your high-risk home is crucial.

This article covers everything you need to know to qualify for insurance despite being a high-risk home.

Insurance Policy Cartoon — Source: rawpixels.com (Freepik)

What Is a High-Risk Home?

The insurance companies assess the potential risk of the home and homeowners before qualifying for insurance. Based on the risk, they determine how likely the homeowner will make claims and how much loss the house may face. The insurance company considers it a high-risk home if there is a high possibility of claims and a high insurance payout.

Factor That Makes Home Owner High Risk

High Claims

If you have made several claims in the past, then the insurance company may deem you a high-risk homeowner. It's important to note that it is not just the number of claims but the severity of the claims. Thus, you are considered a high-risk homeowner if you have made several severe claims.

Low Credit Score

If your credit score is less than 600, an insurance company may consider you high risk as you possess an increased risk for default in insurance premiums.

Aggressive Pets

Pet breeds such as pit bulls, rottweilers, and german shepherds are deemed high risk due to the likelihood of injuring the guests and family members and damaging the home property. Thus, the insurance company classifies you as a high-risk homeowner if you have aggressive pets.

Home-Based Business

Most homeowners companies do not cover the home-based business's property and risk. You will need to purchase a business policy to protect a business property. This is because your business liabilities are high for the home insurance policy to cover.

Criminal Record

If you have any criminal record, the insurance companies may classify you as a high risk, particularly if you have committed a crime related to arson and property destruction. The recent criminal record will have a more significant impact than the criminal offense committed years ago.

Factor That Makes Home High Risk

Home Features

Your home features might also pose a risk for the insurance company. It might be considered high risk if your home has a swimming pool, trampoline, trees, or wood-burning stove. It's due to the increased likelihood of accidents and, thus, the insurance claims are higher.

Age of Roof

If your roof is old and has not been renovated, there is a high chance of your home being classified as a high-risk. This is because your roof is the first line of defense against rain, snow, and hailstorm. If your roof is not well maintained, it becomes more susceptible to damage posing a risk to the insurers.

Old Run Down Neighborhood — Source: brgfx (Freepik)

High-Risk Area

Your location also has a significant role in posing a risk to the insurer. It is deemed a high-risk area if you live in an area prone to natural disasters, extreme weather conditions, and high crime levels. Apart from this, if your home is far from a fire station or fire hydrant, this may also classify your home as a high-risk home.

Vacant Home

If the house is a vacation home or is vacant for a more extended period, it's riskier for the insurers. Since the house is empty, there is no one to ensure the house's safety, which may increase the risk of loss.

Age of Home

If your home is older or historical, it may be classified as a high-risk home. Old houses will require frequent home repairs and maintenance, thus posing a high risk of high claims payout.

Structural Issues With Your Home

If your home has structural issues such as a cracked foundation, leaky roof, outdated electrical system, old plumbing, broken windows, or damaged chimney. In such a case, your house is a high-risk home to the insurance company.

Claim History

The insurance company will also look for the property's claim history and your claim history. If several claims have been made for the property, the insurance company may deem it a high-risk property.

What Are The High-Risk Area Categories?

Tornado Hitting House — Source: macrovector (Freepik)

High Crime Area

Living in an area with high crime rates, such as vandalism and theft, is considered a high-risk area by the insurance company. This is because since the crimes are frequent in your area, there are high chances for the claims and payout. As a result, it may result in higher premiums or denial of coverage. For instance, the rates for homeowners insurance are most elevated in Florida, Texas, Louisiana, and Mississippi due to the high crime rates.

Wildfires

Most of the southwest, midwest, and western United States usually experience drought due to the wildfire. Places in California, Arizona, and Florida have a high chance of wildfires yearly. Thus, the houses in these regions have difficulty finding insurance coverage since they are deemed high risk.

Flood Plain

If you live near the flood plain, your home has a high risk of flooding. Thus, the insurance company is reluctant to provide the coverage and may charge you high premiums. You are regarded as high risk if you live in the flood plain in Louisiana, Florida, and Mississippi.

Hurricane or Tornadoes

There are high chances of hurricanes and tornadoes if you live on the coastline. The state of Florida, Texas, and North Carolina have high chances of being hit by hurricanes and tornadoes. Thus, the insurance company considers these areas as high risk.

Earthquake

The earthquake poses massive damage to houses and properties. If you live in earthquake-prone areas such as California and Alaska, your insurance company might consider you high risk.

How to Buy High-Risk Homeowners Insurance?

High-risk homeowners have a hard time securing insurance for their homes. It might require extra effort, but you can protect your high-risk home from potential risks with the proper steps. Here are some steps you can take to buy high-risk homeowners insurance:

Assess the Risk to See if the Risk Can Be Controlled.

Some risks that the insurance policy deemed as high risk can be controlled. Thus, determine why your insurance coverage was denied and see if you can solve it or not. For instance, if the insurance company denied your insurance due to the swimming pool, you can fence the pool to minimize the risk and qualify for insurance coverage.

Talk to the Neighbors

If your house is in a high-risk area and has been denied for the same reason, it's better to talk to the neighbors about their insurance policy. Chances are that they have found a solution to the problem, and inquiring about it can solve yours too. Talk to them about their insurance policy, research about it, and apply for the same.

Talk to the Realtor

It's better to consider the insurance options before you purchase the house. You can ask your realtor to recommend insurance options as they have more experience selling homes in that area and have a link with the insurance providers.

Find an Insurance Agent

If you have difficulty finding insurance on your own, you can find an insurance agent to help you. These agents have experience and knowledge about the industry and have an extensive link to national and local insurance companies. They can negotiate with the company for you and find the best deal.

Contact Your State Insurance Department

Some state plans help homeowners secure insurance. For instance, seven Atlantic and gulf states have state plans called beach and windstorm plans that cover the homeowners against hurricanes and other severe windstorms. Likewise, programs in Alabama and North Carolina offer fire coverage. In New York, the coastal market assistance plan helps homeowners get coverage if the insurance is rejected several times. But, it's important to note that these plans only offer specified coverage.

FAIR Plan

Fair Access to Insurance Requirements (FAIR) Plan is a government-initiated program that aims to provide adequate insurance coverage for all homeowners. It gives fair access to the homeowners having trouble insuring their property as the insurance providers deem them high-risk homeowners.

However, the FAIR plan should be a last resort after you have exhausted all other options for insurance, as it has limited coverage and cost more than standard homeowners insurance. The typical insurance policy covers your home from more than 16 threats, but the FAIR plan only covers fire, windstorms, vandalism, and riot. Also, there is no guarantee that your items will be covered.

Alternatives to FAIR Plan

Non-standard Home Insurance Policy

Non-standard home insurance policies are for those homeowners denied the standard home insurance policy. Generally, high-risk homeowners are refused the standard insurance policy as the insurance company does not want to cover them due to the high risk. But, there is a niche insurance policy targeted at high-risk homeowners. Few companies offer this policy as they tend to run on the pricier end. However, it's worth considering as the FAIR plan alternative.

Surplus Lines Policy

Surplus lines policy is an added insurance policy to cover the high risk that the insurance company is reluctant to cover. You can opt for these policies with the home insurance policy so that the insurer has shared risk. For instance, if you live in a flood plain with a high risk of flooding, you can buy separate flood insurance.

Reduce Your Coverage

Most of the time, the insurance companies deny the coverage since there is a potential for high liability. For instance, if you own an aggressive pet like a pit bull, the insurance may deny the coverage as it is reluctant to cover the liability coverage in case the pit bull bites someone. In such cases, you can negotiate with your insurance company to sell the insurance policy without liability. There is no guarantee that the insurance company will accept it, but it's worth trying.

Renovate Your Home

The house's structural issues and state are the primary reasons for the insurance denial. Then, it would help if you renovate your home to qualify for the homeowner's policy. You can repair roofs, fix old pipes and electrical systems, and install storm shutters to increase the chances of qualifying for the standard home insurance policy.

Best High-Risk Home Insurance Providers

All State

Allstate is one of the nation's most popular high-risk home insurance providers. It offers comprehensive coverage and add-on options for high-risk homeowners, and its service is available in all 50 states.

It offers the following potential optional coverage options:

Water backup
Green improvement reimbursement
Identity theft restoration
Yard and garden
Scheduled personal property
Electronic data recovery
Business property
Musical instruments
Sports equipment

Liberty Mutual

Liberty Mutual offers a wide range of discounts to high-risk homeowners. Since high-risk homes are expensive to insure, the discounts offered can help lower the monthly premium. As part of the coverage, it also covers the expenses of the place you must stay if you have been displaced.

It offers the following potential optional coverage options:

Water damage
Identity fraud expense
Earthquake damage
Wind and hail damage
Hurricane damage
Personal property replacement cost

State Farm

State farm allows you to customize your home insurance policy with the add ons coverage you require. This helps high-risk homeowners to negotiate coverage on high-risk homes as needed.

It offers the following potential optional coverage options:

Earthquake
Sewer or drain backup
Wildfire
Identity restoration
Sinkhole collapse
Special computer coverage
Business property
Loss assessment

Amica

Amica is one of the oldest insurers and offers add-on coverage to cover high-risk homeowners. Also, Amica offers business equipment and work liability coverage to people with home-based businesses and those who work from home as an add-on to your home insurance policy to cover their business property.

It offers the following potential optional coverage options:

Water backup and sump overflow
Identity fraud
Business property at home
Catastrophic (earthquake, flood)
Increased liability coverage

Progressive

Progressive offers comprehensive insurance policies for high-risk homeowners. It also provides various discounts and add-on insurance policies to cover your house against floods, earthquakes, landslides, sinkholes, and mudslides.

It offers the following optional home insurance coverage options:

Water backup
Defamation of character
Flood
Earthquakes, landslides, sinkholes, and mudslides
Increased liability coverage

American International Group (AIG)

American International Group ( AIG) offers home insurance policies as companion policies. If you have an existing AIG policy, you can opt for the home insurance policy. It provides extra coverage for high-risk homeowners and historic homes built before 1945.

It offers the following potential optional coverage options:

Water damage protection
Severe weather readiness
Unlimited building ordinance coverage
Food spoilage
Landscaping coverage
Loss assessment coverage
Green rebuilding cost coverage
Lock replacement coverage
Equipment breakdown coverage

Conclusion

The insurance companies are hesitant to take on the high-risk houses with high chances of claims and payout filed against them. Thus, insuring high-risk homes can be challenging for homeowners. But, while it may be hard, it's not impossible. Fortunately, some programs and strategies can be adopted to insure high-risk homes. After all, your home is your most valuable asset, and you must protect it at any cost.