Why You Might Be Refused Home Insurance and What to Do About It

Home insurance is a vital protection for homeowners who want to safeguard their property and belongings from unforeseen events.

However, not everyone can easily get home insurance coverage. Sometimes, insurance companies may refuse to offer you a policy or cancel your existing one for various reasons.

This can be frustrating and stressful, especially if you have a mortgage that requires you to have home insurance.

image of a home.
Insured Home in Ontario [PHOTO COURTESY OF ZIPPO INSURANCE]
In this article, we will explain some of the common reasons why you might be refused home insurance and what you can do to overcome this challenge.

READ MORE: How Much Is Home Insurance in Iowa? Best Companies and Tips

Reasons for Home Insurance Refusal

Insurance companies assess the risk of insuring a home based on several factors, such as the location, condition, value, and claims history of the property.

If they find that the risk is too high, they may decline to insure your home or charge you a higher premium.

Some of the reasons why your home insurance application may be rejected are:

1.Non-payment

If you fail to pay your premiums on time, your insurance company may cancel your policy for non-payment.

This is one of the most common and avoidable reasons for home insurance refusal.

To prevent this from happening, you should always pay your premiums on time and set up automatic payments if possible.

1.Frequent claims

If you file too many claims in a short period of time, your insurance company may view you as a high-risk customer and drop you from their coverage.

Filing home insurance claims often could also cause your premium to increase significantly.

To avoid this, you should only file claims for major losses and pay for minor repairs out of your own pocket.

 

2.Insurance fraud

If you intentionally lie or omit information on your application or claim, your insurance company may accuse you of insurance fraud and cancel your policy.

Insurance fraud is illegal and can have serious consequences, such as fines, lawsuits, and even criminal charges.

To avoid this, you should always be honest and accurate when applying for or filing a claim.

3.Underwriting issues

If your home does not meet the underwriting standards of your insurance company, they may refuse to insure it or cancel your policy.

For example, if your home is in poor condition, has structural defects, or lacks safety features, your insurance company may consider it unsafe or uninsurable.

To avoid this, you should maintain your home regularly and make any necessary repairs or improvements.

4.High-risk factors

If your home is located in an area that is prone to natural disasters, such as floods, earthquakes, wildfires, or hurricanes, your insurance company may refuse to insure it or charge you a higher premium.

Similarly, if your home is in a neighborhood that has a high crime rate, your insurance company may consider it more vulnerable to theft or vandalism.

To avoid this, you should look for insurance companies that specialize in high-risk areas or purchase additional coverage for specific perils.

What to Do if You Are Refused Home Insurance

If you are refused home insurance by one company, don’t give up hope.

There are still some steps you can take to find another insurer or lower your risk profile.

Here are some tips to help you get home insurance coverage:

1.Shop around

Different insurance companies have different underwriting criteria and risk appetites.

If one company rejects you, another one may accept you. You should compare quotes from multiple insurers and look for the best coverage and price for your needs.

You can use online tools like Insurify to compare home insurance quotes side by side and customize your policy.

2.Improve your credit score

Your credit score is one of the factors that insurance companies use to determine your premium and eligibility.

A low credit score may indicate that you are more likely to default on your payments or file claims.

To improve your credit score, you should pay your bills on time, reduce your debt, and check your credit report for errors.

3.Reduce your claims frequency

As mentioned earlier, filing too many claims can make you a high-risk customer and increase your premium or lead to cancellation.

To reduce your claims frequency, you should only file claims for major losses and pay for minor repairs out of your own pocket.

You should also review your policy and understand what is covered and what is not. You should avoid filing claims for things that are excluded or have a low deductible.

4.Make your home safer

Another way to lower your risk and premium is to make your home safer and more secure.

You can do this by installing smoke detectors, fire extinguishers, burglar alarms, deadbolts, and other safety features.

You can also upgrade your plumbing, electrical, heating, and cooling systems to prevent leaks, fires, or other damages. Some insurance companies may offer discounts for these improvements or require them as a condition for coverage.

5.Consider a FAIR plan

If you still can’t find home insurance coverage from the standard market, you may consider a FAIR (Fair Access to Insurance Requirements) plan.

A FAIR plan is a government-sponsored program that provides basic home insurance coverage for high-risk properties that are otherwise uninsurable.

However, a FAIR plan is usually more expensive and less comprehensive than a standard policy, so you should only use it as a last resort.

You can contact your state’s insurance department or FAIR plan administrator to find out more about this option.

Conclusion

Home insurance is an essential protection for homeowners who want to safeguard their property and belongings from unforeseen events.

However, not everyone can easily get home insurance coverage.

Sometimes, insurance companies may refuse to offer you a policy or cancel your existing one for various reasons, such as non-payment, frequent claims, insurance fraud, underwriting issues, or high-risk factors.

If you are refused home insurance, you should not panic. There are still some steps you can take to find another insurer or lower your risk profile.

You should shop around, improve your credit score, reduce your claims frequency, make your home safer, or consider a FAIR plan.

By following these tips, you can increase your chances of getting home insurance coverage and peace of mind.

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