Sometimes a home can have traits that make insurance companies see it as high risk. This doesn’t mean you can’t get home insurance, but it may make high-risk homeowners insurance a necessity.
To be clear, there isn’t a standard high-risk insurance product in the industry. Let’s take a look at some of the reasons a home might get classified as high risk and what your insurance options are if your home ends up in that category.
What makes a home high-risk?
The main reason for classifying a home as high risk is that the property somehow fails to meet an insurance company’s underwriting guidelines.
Essentially, insurance companies can’t offer coverage to every home. The cost would be astronomical if they did! So they create underwriting criteria to help them fairly evaluate each home and homeowner that applies for coverage.
Underwriting guidelines are unique to the insurer, so what’s high risk for one may hit the sweet spot for another. However, there are characteristics and circumstances that are common concerns for insurance companies and that might make high-risk homeowners insurance more likely. We’ve grouped them into several categories below.
Location-related risks
Location is a major factor in determining how risky a home is to insure.Extreme weather is often the issue, as homeowners along the coast or in areas susceptible to wildfires already know. But other location risks, like being in an area known for crime, can make a home high risk.
Structural concerns
An insurance company might decide your home is high risk if it appears to have structural issues. For example, homes with old roofs that need replacing or outdated electrical systems may be considered high risks.
Home amenities and features
Some amenities can put homes in a high-risk category, especially if the amenity is also an attractive nuisance. A pool, for instance, is often a source of accidents, so some insurance companies refuse to cover homes that have one. Others may offer a policy but only when certain safety measures are in place.
A lack of features may also mean you need high-risk home insurance. Homes without fire alarms, security systems, or wind mitigation may fall outside of some insurers’ underwriting guidelines, as can homes that lack central heating or cooling units.
Occupancy issues
Vacant properties, like seasonal or second homes, can see more damage when they experience fires, vandalism, and or leaks because there’s no one around to stop things from getting worse. As a result, some insurance companies don’t cover vacant homes.
Homeowner characteristics
Insurance companies don’t just look at your property when you apply for coverage. They also consider traits unique to you, like your claims history. In some states, insurers can use a credit-based insurance score as one part of their criteria for deciding whether to offer coverage, in combination with other factors.
How to get high-risk homeowners insurance
Owning a home that falls outside of many insurers’ underwriting criteria limits your ability to get covered. Here are some options to consider if you need high-risk home insurance.
Standard coverage with endorsements
You may be able to get the coverage you need through a standard HO-3 policy with add-on coverage called endorsements. Some insurance companies might exclude coverage in their base policy for, say, certain breeds of dogs but let you add the coverage back in through an animal liability endorsement.
Other types of home insurance policies
You might try talking to your insurance agent about other types of home insurance policies. For instance, an HO-8 policy is often a good choice for people with older homes. If your home is vacant for long periods, then you might want to look into dwelling fire insurance, like a DP3 policy.
Coverage from excess & surplus carriers
Excess and surplus line (E&S) carriers are not licensed by the state, which usually means they have more flexibility in what types of homes they offer coverage to. This often makes them a good resource for homes with unusual features, exceptionally high values, or location-related risks.
Insurer of last resort
Should all else fail, your final option may be home insurance from the insurer of last resort in your state. An insurer of last resort, sometimes called a Fair Access to Insurance Requirements (FAIR) plan, is a state-run organization designed to make sure people can get insurance when they struggle to get coverage from private insurers.
Not every state has an insurer of last resort, but they are fairly common in states prone to natural disasters.
Some FAIR plans only cover specific perils, like wildfire or windstorm. If that’s the case, then you may need a difference in condition policy that covers the perils the FAIR plan excludes.
Tips for reducing high-risk home insurance premiums
Not only is a risky home more difficult to insure, but the premiums are usually higher than average. Here are some tips to help keep home insurance costs down.
Improving home safety
Doing what you can to lower your risk often translates into less expensive coverage in the long run. Installing locks, a security system, and even better lighting can contribute to fewer claims and lower premiums.
Proper maintenance and updates
Similarly, keeping your property in good shape can also lower premiums. Regular home maintenance should include major systems like roofing, wiring, and plumbing.
Bundling policies and other discounts
Ask your insurer about any potential discounts you may qualify for, such as discounts for bundling home and auto policies, minimizing claims, and installing safety features in your home.
