High-risk homeowners insurance

If you live in a home that is considered “high-risk”, you may have expensive rates or a difficult time getting coverage. A home could be considered high-risk if it’s in a natural disaster-prone area or if it has a frequent claims history.

Kara McGinley

Kara McGinley

Published October 13, 2020

KEY TAKEAWAYS

  • Insurance companies may consider your home high-risk if it has structural issues or if it’s located in an area that experiences extreme weather or high crime rates

  • Insurance companies may consider you to be high-risk if you’ve filed numerous claims in the past or have a low credit score

  • If you’re repeatedly denied coverage, shop around or consider making modifications to your home. If you’ve exhausted all other options, see if your state offers a FAIR Plan

A homeowners insurance company may consider you “high-risk” for any number of reasons: maybe your home is located in a high-risk area that experiences frequent natural disasters, or maybe you have a low credit score or history of claims. If you or your home are considered high-risk, that can lead to a higher policy cost and may make it difficult to obtain homeowners insurance.

If you’re struggling to find coverage due to your home’s high risk, you have a couple options: you can get coverage through a specialty carrier that covers risks that standard insurance companies won’t cover; or you can look into your state’s Fair Access to Insurance Requirements (FAIR) Plan, which is insurance for homeowners who have been repeatedly turned down for coverage on the private market.

IN THIS ARTICLE

What factors do insurance companies consider high-risk?

Homeowners insurance companies may consider you high-risk because of your claims history, or because the plumbing, electrical, or various systems in your home are old.

During underwriting, insurance companies gauge how likely you are to file a future claim in order to determine the financial risk of insuring your home. For example, if your home is in an area with a high property crime rate, that may make it difficult to get coverage with certain insurers since the probability of break-ins and theft are high. There are several factors insurance companies use when classifying you or your home’s level of risk, including:

You own an older or historic home

Your house may be considered high-risk if it’s older since it may not be up to code or may contain vintage features that cost more to rebuild.

Your home is located in a high risk area

If your home is in an area that experiences severe weather — like tornadoes, hurricanes, or wildfires — it may be considered high-risk. Insurers also take crime rates into account when determining your coverage, rates, and how insurable you are. A home may be considered high-risk if it’s in an area of the country that experiences high property crime rates.

The age of your roof

Insurers take your roof’s age and quality into consideration, and may potentially turn you down for coverage, charge you higher rates, or exclude your roof from coverage if it doesn’t pass inspection.

Structural issues

Your home may be considered high-risk if it has structural issues like old electrical or plumbing, or if its foundation isn’t up to code.

You use the property as a vacation home

Insurance companies consider vacation homes high-risk because they are left vacant for long periods of time, leaving them vulnerable to break-ins and severe damage if a natural disaster strikes.

Your credit score is low

Insurers look at your credit score to help determine how likely you are to pay your premiums on time or file a claim. If you have a low credit score, insurers will consider you high-risk since your credit score is indicative of your ability to make a timely insurance payment and your likelihood of filing a homeowners insurance claim.

Claims history

If you’ve filed multiple claims in the past, an insurance company will likely consider you high-risk.

Certain dog breeds

Some insurance companies may consider you high-risk if you own a dog that they consider to be a high liability risk, like a pit bull or rottweiler.

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What to do if your home is considered high-risk

If you and your home are considered high-risk and you can’t find coverage, don’t panic. Every insurance company is different, and just because one insurance company classifies you as high-risk doesn’t mean other carriers will. Be sure to shop around different insurance companies in order to find coverage that is right for you and your home.

If you’ve shopped around and been denied coverage multiple times, there are a few steps that may be worth taking.

Talk to your neighbors

If you live in a high-risk area, your neighbors likely had the same issue when shopping for insurance. Consider talking to your neighbors and find out how they got an insurance policy.

Make improvements to your home

Replacing a roof can be expensive, but if your old roof is the only thing standing in the way of you and a homeowners insurance policy, it’s probably smart to replace it so you can qualify for coverage.

Consider a surplus carrier

Surplus carriers specialize in coverage for risks that are rejected by standard homeowners insurance companies, but they’re typically expensive. However, surplus carrier policies may be a good option if you need insurance and can’t find coverage with an admitted carrier.

Contact your state’s insurance department

Your state’s insurance department can be a valuable resource when shopping for homeowners insurance. You may find that your state offers last-resort coverage programs, like a Fair Access to Insurance Requirements (FAIR Plan), that you may qualify for.

What is a FAIR Plan?

A FAIR Plan is last-resort coverage for homeowners who do not qualify for home insurance in the private marketplace. FAIR Plans are designed for homes in high-risk areas where obtaining coverage is more difficult. In order to qualify for a FAIR Plan, most states expect you to exhaust all other options, and may even require proof that you’ve been rejected multiple times from different carriers.

FAIR Plans don’t offer as much coverage as a standard homeowners insurance policy, and typically end up costing more. FAIR Plans also only offer named-peril policies, meaning the only hazards that you are protected from are the ones explicitly outlined in your policy. On the other hand, standard homeowners insurance policies are typically “all risks” policies, meaning you're covered from everything unless it's specifically excluded. If you can’t get any other form of homeowners insurance coverage, a FAIR Plan may be a good idea until you can qualify for coverage in the private marketplace.

Learn more about FAIR Plans here

Which states are considered high-risk for homeowners insurance?

Communities in states along the Atlantic and Gulf Coasts are often deemed the most high-risk due to the high probability of hurricane and windstorm damage, and certain carriers may even exclude damage from wind damage from tropical storms. In addition to FAIR Plans, seven Atlantic and Gulf Coast states offer special Beach and Windstorm Plans that are meant to fill in the coverage gaps for homes in coastal communities where hurricane and windstorm damage is often excluded from policies.

As wildfires continue to ravage the Western United States, more insurance companies are rejecting coverage for homes located in fire-prone areas, particularly in parts of California. Like most states, California has a FAIR Plan of its own that provides crucial fire insurance for the most high-risk homes.

Insurance Editor

Kara McGinley

Insurance Editor

Kara McGinley is an Insurance Editor at Policygenius. She previously worked as a freelance writer and a copywriter for various startups. Her work can be found in Teen Vogue, The Culture Crush, Mask Magazine, and more.

Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.

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