Homeowners can update or purchase a home insurance policy any time of the year, but there’s a risk in waiting until hurricane or wildfire season to do so. During the lead up to a natural disaster, your insurance company may impose a moratorium on new and existing insurance coverage in areas where damage is likely. In other words, you may not be able to update or purchase coverage if you wait until just before a storm.
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A moratorium on homeowners insurance is when insurance companies stop issuing or updating policies because of the high probability of property damage, like during a wildfire or riot, or in the days leading up to a hurricane.
Moratoriums help insurance companies avoid overextending themselves by taking on more financial risk than they can afford. Without the ability to impose these restrictions, insurers may not have enough to pay out its existing customers’ claims.
Once an insurance company enforces a moratorium in a state or region, the following will apply:
Existing policyholders won’t be able to modify or change the coverage in their policy
Existing policyholders won’t be able to switch insurance companies
Anyone else won’t be able to purchase a new insurance policy through the insurer
For this reason, it’s a good idea to not wait until hurricane or wildfire season to make changes to or purchase insurance coverage. Once your insurance company issues a moratorium, you won’t be able to update or purchase coverage until after the moratorium is lifted.
Insurers don’t place moratoriums on flood insurance, but there’s a caveat
Flood insurance policies normally aren’t subject to moratoriums, whether purchased through the National Flood Insurance Program or a private flood insurer. But most policies come with a waiting period before your coverage becomes active. The waiting period for NFIP flood insurance is 30 days, while private flood insurance policies often have a waiting period of two weeks or less.
When do insurance companies issue moratoriums?
It’s common to find out about a moratorium after you’ve already applied for homeowners insurance. At that point, the insurance company will likely inform you that you’re not eligible for coverage until after the threat has passed.
In the case of a hurricane, for example, insurance providers usually issue an insurance moratorium on affected areas 24 to 48 hours before impact, and end it only after the hurricane has made landfall. Insurers may also issue moratoriums during a wildfire, earthquake, or riot.
“Insurers issue moratoriums that stop new business once a storm’s path is viewed as likely to cause damage,” says Fabio Faschi, former property and casualty team lead at Policygenius. “A reputable independent agent will be able to see which insurers have halted new business and which haven't, and they'll have more insight as to what areas a storm or hurricane may impact.”
3 ways to protect your home during an insurance moratorium
If you weren’t able to purchase coverage or update your policy in advance of a storm, a moratorium can put you in a tough spot. If you find that your house is underinsured during a moratorium, there are a few things you can do to both limit your chance of a loss and improve your chances of a successful claim.
Stormproof your home
In the days before a major storm or natural disaster, make sure to take the following steps to reduce the likelihood of expensive damage to your home.
Trim dead tree branches
Secure outdoor furniture, trash cans, flower pots, and any other loose items that could become projectiles
Install plywood panels over glass windows or doors
Seal outside wall openings, like vents, outdoor outlets, and any other locations where pipes or cables go through the wall
Clean gutters and direct downspouts to facilitate water drainage away from your home
You’ll also want to make sure you have an updated inventory of your personal belongings. This is essentially a checklist of everything you own, along with its estimated value and any additional documentation (like receipts or photos) that could improve your chances of a successful claim.
Follow these steps after the storm threat has passed.
Contact your insurer and file a claim. After a natural disaster, make sure to file a claim with your insurance provider in a timely manner. Keep in mind you might need to pay a separate hurricane deductible depending on your state. Since your insurer will most likely be bombarded with claims in the aftermath of a big storm, so be sure to gather documentation and evidence of the loss as soon as you’re capable of doing so.
Document the damage before making temporary repairs. Once you and your family are safe and the storm has passed, document the damage with photos and videos before you attempt to clean anything up or make temporary repairs.
Keep track of your additional living expenses. If your house is severely damaged and you’re not able to live there for the time being, your insurance company may reimburse you for things like hotel stays and restaurant meals until you’re able to return to your home. Make sure to hold onto your receipts while you’re on the road.
Update your insurance coverage. Once the storm has passed, it’s time to start preparing for the next one, which means talking to an insurance agent about either purchasing additional insurance or increasing your existing coverage limits. A licensed expert at Policygenius can help you do this.
Insurance companies typically lift moratoriums once the disaster threat has passed. In the event of a hurricane moratorium, the binding restriction would most likely be lifted once the storm has already made landfall and passed through the affected area. An earthquake moratorium, on the other hand, might only be lifted after the last tremor or aftershock has passed, which can often come days after the initial event.
What is a moratorium in insurance?
A moratorium is when an insurance provider stops issuing or updating policies because of the likelihood of property damage and losses, like during a wildfire, earthquake, or riot, or in the days leading up to a hurricane. Moratoriums can be issued for entire states or specific ZIP codes, depending on how widespread the event is expected to be. The moratorium is lifted once the threat has passed.
How do moratoriums impact insurance companies in California?
Over the past few years, California insurance regulators started placing moratoriums on insurers, not policyholders, in certain counties and ZIP codes with high wildfire risk. These moratoriums prevent insurance providers from canceling existing policies or issuing nonrenewals in certain areas. In other words, these binding restrictions are intended to protect the customers, not the insurance companies. The current moratorium is set to expire on December 25, 2022. If you’re a California resident, check here to see if your ZIP code is part of the moratorium.
Pat Howard is a managing editor and licensed home insurance expert at Policygenius, where he specializes in homeowners insurance. His work and expertise has been featured in MarketWatch, Real Simple, Fox Business, VentureBeat, This Old House, Investopedia, Fatherly, Lifehacker, Better Homes & Garden, Property Casualty 360, and elsewhere.