Homeowner's Insurance

High-Risk Home Insurance

June 1, 2020 by

The decision to buy homeowners’ insurance for your home is both intelligent and prudent. You become ready and prepared for any eventuality of a mishap.

However, insurers deem some homes difficult to cover with insurance because of the associated risks such as higher chances of a disaster occurring.

To insurance companies, insuring a high-risk home is tricky, but it can be done. There are several strategies and avenues to exploit to insure your home if it’s high risk – including the FAIR Plan option.

But first, why can a home be deemed high risk?

What Makes A Home High-Risk?

Risk comes in two ways for home insurance:

  • The homeowner can be high risk, or
  • The property (home) can be high risk.

There are an array of reasons why a homeowner or a property — or both — can be considered high-risk.

What Makes A Home Risky?

Homes can be classified as high-risk because of several reasons which include:

  • Location in high-risk areas (such as violent weather, storm-heavy, frequent flooding, or high crime areas).
  • Age.
  • Structural issues with the home.
  • Is it a vacation home or vacant house?
  • Claim history of the home.

Sometimes it may not be the high-risk home, but the homeowner. Why?

What Makes A Homeowner High-Risk?

If you have had insurance issues in the past, or if you are having them now, you could be labeled as high-risk if you are/have:

  • Low credit score.
  • Previous claim history.
  • Criminal history.
  • Multiple mortgages.
  • Owning a home business.
  • Owning aggressive pets.
  • Lapse or interruption in coverage.
  • Previously uninsured or no history of insurance.

Here is a point to note:

Some of these factors may be unrelated to homeowners’ insurance. That is when the liability policy kicks in. If your past makes you appear high-risk to an insurance underwriter, the insurance company may find it difficult to offer you coverage.

Even when you’re high-risk, and difficult to insure, you can still get high-risk home insurance.

What Is High-Risk Home Insurance?

If you are having issues with getting homeowners insurance because you are deemed high risk, then you will opt for high-risk home insurance.

House flooded from Hurricane Harvey 2017 - Heavy rains from Hurricane Harvey caused many floods in Texas

Sometimes, High-Risk Home Insurance is known as Non-Standard Property Insurance.
High-risk home insurance is specifically designed to cover the following:

  • Homes
  • Condos
  • Cottages
  • Seasonal dwellings
  • Rental property, and
  • Tenants that are deemed high-risk and difficult to insure.

Note that homeowners’ insurance is not usually a requirement of the law. However, it is often a requirement from your mortgage lender.

If you are denied coverage because the home is deemed high risk, you will need to look into your state’s FAIR Plan.

What Does FAIR Plan Insurance Mean?

The FAIR plan is an abbreviation for Fair Access to Insurance Requirements (FAIR) Plan. It is a government-run program whose aim is to provide adequate insurance coverage for all homeowners – including those that are considered high-risk.

Mostly states with high-risk areas – have FAIR Plan guidelines.

In FAIR plan insurance, instead of one company taking on the risk of your home, multiple companies combine to “carry your risk”. Should some natural disaster or peril strike your – now insured – home, the participating companies will share the cost of the claim.

However, note that the FAIR plan is often considered as a last resort. You will only be eligible for the FAIR Plan insurance after you have been turned down by several homeowners insurance companies.

What To Do If Your Home Is High-Risk

If you or your home is considered high-risk, there are numerous courses of action you should try out including:

  • Consulting an insurance agent.
  • Talking to your neighbors.
  • Negotiating with a Homeowners Insurance Company.
  • Exclude certain perils from coverage.

Find An Insurance Agent

Find a professional insurance agent to guide you through finding home insurance for your high risk. Insurance professionals have access to good information that can prove to be invaluable to get your home insured.

The insurance agent may direct you to information and an insurance company that can help you insure your home.

Talk To Your Neighbors

An insurance agent may charge you, but your neighbors will not charge you for information.

Introduce yourself to your neighbors and ask who they are insured with and what the conditions are. Most likely, if your neighbors can find coverage for their home in the same area as yours, then you too can find coverage.

Neighbor conversation. Two smiling men breezily chatting near wooden wicket of rural house

The neighborhood or community association might be a good resource for insurers with history or business in the area.

Negotiating With A Homeowners Insurance Company

If you get a homeowner’s insurance company that is ready to listen to you, it is time to negotiate your way into obtaining insurance for your home. There are aspects you can negotiate on that can make your home more insurable.

  • Offer to take a higher deductible to ease the financial risk of the company.
  • Consider taking some disaster prevention measures to make your home more insurable, such as elevating the foundation, improving the siding, upgrading to walls that collect less moisture, etc.
  • Consider bundling your insurance.

Exclude Certain Perils From Coverage

If your restricted-breed of dog is the reason for you not to be covered, speak to your insurance company about cancelling your dog from the liability portion of your homeowners’ policy. Do the same for other perils that you can exclude.

However, not every insurance company will agree to this option, but it’s worth inquiring about.

If these steps fail to bear fruit, then you can consider the FAIR Plan option.

The FAIR Plan Home Insurance

The FAIR plan is a last resort. It does not provide comprehensive home insurance. Furthermore, it can be more expensive than standard private insurance.

What Does FAIR Plan Insurance Cover?

First of all, the FAIR Plan is the last resort for homeowners’ insurance. Second, as a last resort, it offers less coverage.

While a typical homeowners insurance policy will cover your home from more than 16 threats, the amount of coverage will reduce if you opt for a FAIR Plan.

The FAIR Plan provides coverage against the following:

  • Fire.
  • Windstorms.
  • Vandalism.
  • Riot.
  • Personal property (in some states).

In the FAIR Plan insurance, there’s no guarantee that your personal items will be covered. However, although it is not as comprehensive as normal insurance, it’s better than being uninsured.

Woman listening to music from a Hi-Fi stereo at home

How Do You Sign Up For The FAIR Plan?

Each state has its guidelines, rules, and restrictions for signing up into the FAIR plan home insurance. The following are some of the general qualifications your home needs:

  • Someone is occupying the house.
  • Compliance with local building codes.
  • No open insurance claims against the house.
  • Not having an unsecured pool.
  • Not owning a restricted dog Breeds like Rottweilers and Pitbulls.

You will check with your state to know what else may disqualify you from getting a FAIR plan.

Bottom Line

When your home is classified as high risk, you need to explore all the options named above, including the FAIR Plan option.
If everything fails and you cannot qualify even for the FAIR Plan, the only options may be to live in the home uninsured for some time, then make major improvements to qualify for insurance.