Homeowners Insurance Denial: What to Do
Homeowners in areas prone to natural disasters are facing a tough situation. Insurance companies are either raising rates or flat-out refusing to offer coverage. If your homeowners insurance has been canceled or you’ve been denied, figuring out your next steps is critical.
Insurance providers are responding to increased risk by reducing coverage.
Why is this happening?
The rise in extreme weather events, like wildfires, hurricanes, and hail storms, is causing these issues. When insurance companies see a high chance of needing to pay out claims, they may deny coverage or hike up premiums.
What Does Standard Homeowners Insurance Cover?
Before dealing with a denial, it’s important to know what standard homeowners insurance typically protects. These policies usually cover:
- Dwelling Protection: This covers the structure of your home. If something damages your house, like a fallen tree, this coverage helps pay for repairs (after your deductible is met).
- Personal Property Protection: This covers your belongings. If a break-in occurs, this portion helps pay for replacing stolen items, though it usually has limits. Consider extra coverage for valuables, such as jewelry or artwork.
- Liability Protection: This covers costs resulting from injuries on your property. If someone is hurt at your home, this helps cover medical bills and other expenses.
It’s crucial to understand that standard policies don’t cover everything, such as flood damage. Some other things not typically covered include damage from earthquakes, mudslides, mold, or pest infestations. Also, if you haven’t kept up with home maintenance, the insurance company might determine they aren’t responsible for certain damages.
Reasons for Insurance Denial or Cancellation
There are common themes as to why coverage might be denied or dropped:
- Claim History: A history of claims is a primary reason for denial, indicating a higher-than-average risk or a bad financial decision on the part of an Insurance company.
- High Risk of Natural Disasters: If your property sits in a high-risk zone for natural disasters, like hurricanes, wildfires, or hail, that may be a red flag to providers. An increasing number of homeowners in these areas have faced non-renewal or cancellation.
- Age or Condition of the Home: Older properties, especially those with outdated electrical or plumbing systems, might not qualify for standard policies. Failed home inspections that don’t get fixed is another reason for coverage denial. Also, certain features that could be dangerous, like non-fenced pools or wood-burning stoves, can raise concerns.
What to Do If You’re Denied Coverage
If you’re having trouble getting homeowners insurance, here are some solutions to consider:
- Find out why: Ask the insurance company for the specific reasons for the denial. They are legally required to give you these reasons so you can address it. You will usually receive an adverse action notice. If the reason is within your control – like outdated wiring – make necessary changes and reapply.
- Ask for recommendations: Speak with your neighbors and see which insurance companies they use. Someone locally may have a good recommendation.
- Shop Around: Rates and requirements differ, so explore multiple options. Your state’s insurance department can provide a list of companies operating in your area.
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Explore Alternative Policies:
- State-sponsored options: Many states have programs to provide coverage when private insurers refuse. They’re often designed for high-risk properties.
- HO-8 insurance: Older homes (40+ years) can sometimes get an HO-8 policy. This is a modified plan covering specific issues.
- Surplus lines policy: You may qualify for coverage from a surplus lines insurer, though this usually comes with limited benefits and a high deductible.
What to do if a claim gets denied
Even with a policy, you might encounter problems when filing a claim. If your claim is denied:
- Review the denial notice and your policy. See what the denial is based on. Make sure covered elements should be included.
- File an appeal. Contact your insurer and ask for a review. Provide additional documentation, such as photos or a home inventory, to support your claim.
- Consider professional help. Hire an insurance professional or attorney.
- File a complaint with your state’s insurance department if you believe you’re being treated unfairly.
Dealing with a denied homeowners claim can be stressful. Careful planning, shopping around for the right coverage, and knowing your rights are the best ways to protect your biggest asset.
