What can you do if you can't afford to repair your home to the home insurance company's standards?

Rejected for Home Insurance: Now What?

by E. E. Kane

Finding affordable home insurance is difficult these days. If your home needs major repair as a result of normal wear and tear not covered by insurance, "affordable" may slip out of your reach, and a policy may be unobtainable. What can you do if you can't afford to repair your home to the insurance company's standards? There are solutions.

Get a Quote for Repairs

Let's say you need a new roof, because yours is showing signs of deterioration, and your home insurance company will not write your insurance unless you do something about it. You assume that you will need a new roof rather than repairs, but have you checked? Get some estimates before you shop for another insurer. A roof is one area that every insurance company will be uptight about, because delaying repairs would cause further damage to the home. It's in your best interest to repair the problem first.

It doesn't cost anything to get some quotes. At the very least, you can get a rough estimate through online calculators, both for the repair in question and the cost of a loan, including what the monthly payments would be. Now that you have an actual number to work with, you can make better decisions about your next step. Will a loan or slightly higher insurance premiums be more affordable?

Question the Company's Decision

Ask the insurance company if there is any way to reverse the decision. Can they exclude coverage for that part of the property until you can make the repairs? If you have an agent, this is where he should go to bat for you if there is any question about the validity of the need for repairs.

Start Shopping

Look first for local agents, both independent and bound (to one company) who carry properties like yours. A company that carries mobile homes, older homes and farm properties may not blink twice at yours. Ask for recommendations from friends and neighbors with a history of similar issues.

Do you belong to a group or association? Groups like the AARP often offer discounts to members who buy insurance with the company they sponsor.

Companies have different criteria for evaluating risk. Don't stop looking after one or two standard companies have rejected you. Keep in mind that an insurance company who agrees to cover you can back out within the first 60 days, so it is best to be up front about your situation to avoid that merry-go-round.

Should I use a HELOC for home remodeling and repairs?

Rejected, Again and Again…

If standard companies stipulate you must make repairs to obtain coverage, or reject your property outright, here are your options:

  1. Surplus Lines carriers (also called Excess lines or the Non-admitted market) are companies that provide coverage for high-risk properties. Coverage through Surplus Lines carriers is a viable option for this scenario, and the price of premiums may be just as affordable as a standard company.
  2. State approved insurance pools are available for high-risk properties. Some states offer the FAIR plan, (Fair Access to Insurance Requirement). Either way, this option involves the state assigning high-risk properties to standard insurance companies, which share the cost of any loss.

Your agent or your state's department of insurance can give you contact information for either of these resources.

Lower the Premium

Finding a company who will cover your home is the first hurdle. You may now have to face paying higher premiums with the new company. For lower premiums, try tweaking the policy:

  • Raise the deductible as high as you dare. However, compute the difference in premiums with a higher deductible, and whether the difference in savings is sufficient.
  • You may shave off several hundred dollars if you also buy auto and other lines of insurance with the same company.
  • Try changing to coverage that covers just the basic perils of fire, lightning, wind, hail, etc., and doesn't include all the bells and whistles. An Actual Cash Value loss settlement repairs or replaces on a depreciated basis, compared to Replacement Cost, which repairs or replaces for what it would cost new. Some standard companies will take a high-risk property with these changes in coverage, while insuring the contents of the home for replacement value.

Were you able to lower your premiums? Be sure to bank the difference in what you were previously paying, and use the savings toward necessary repairs that your policy won't cover.

Take the Next Step:

E. E. Kane is a husband-wife writing team residing in rural Missouri. They spend the majority of their spare time remodeling their gently-aged farm house, but they would rather be writing a novel, spinning poetry, or watching birds.

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