Here at Covered, we want EVERYONE to get the insurance coverage they need to protect their homes, cars, and financial futures. It’s our biggest and best dream. It’s literally the reason we get up every day. So we don’t love it when people are declined for coverage.
That’s right. You can be declined for insurance coverage. It happens more often than you think.
Why do carriers decline to offer homeowners insurance coverage for certain people and homes? It can happen for many, many reasons. We’ve covered the seven most common ones below.
Because we’re here to help, we’ve also offered up some ideas for what you can do if you’re declined coverage. So without further ado: Get informed, and get covered already.
#1 Claim History
In this case, the reason for the decline could be caused by you or the prior owner of your home. Basically:
- If YOU have a history of making frequent and/or large claims on your homeowners insurance policy, carriers may view you as a high-risk customer. Insurers do a cost-benefit analysis when accepting any customer. If you’re likely to cost them a lot over the course of your relationship, you’re not exactly viewed as a great investment.
- If the PRIOR OWNER of your home had a history of making frequent and/or large claims against the house you want to insure, carriers may view the home as a high-risk property. For example, if your home has seen several consecutive water damage claims, that’s not exactly confidence-inspiring for prospective carriers.
#2 Lapse(s) in Coverage
Blame the actuarial data for this one. That data clearly shows that people who maintain continuous insurance over the years are less of a financial risk for carriers. This holds true for car insurance as well as homeowners insurance. So if you’ve had one or more lapses in coverage, that could be the reason for the decline.
#3 Insurance Score and Credit History
Your insurance score is tabulated in part by looking at your credit history. If you have bad or questionable credit, you’re likely to have a bad insurance score. And in insurers’ eyes, your insurance score is an indicator of the likelihood that you’ll submit a claim. The statistics show that people with poor insurance scores are more likely to file claims.
#4 Age of Dwelling
Some insurance carriers are wary of insuring older homes. Older homes tend to have outdated plumbing, electrical wiring, and appliances, as well as aged, damage-prone roofs. Also, they’re more likely to be constructed of either sub-par or hard-to-replace materials. At minimum, your older home could earn you higher rates on your homeowners insurance. Worst-case scenario, it could be a reason for a carrier to decline coverage entirely.
#5 Failure to Maintain Property
When homeowners fail to properly maintain their property, insurers begin to envision all sorts of potential problems. Liability is increased. Safety becomes a more significant issue. Prevention of potential issues — specifically, issues that may lead to future claims — falls by the wayside. If homeowners aren’t willing to do the work to maintain their homes, why should insurers trust they’re a good investment?
In some situations, insurance carriers may even REQUIRE homeowners to make certain home repairs. These are not suggestions; compliance is mandatory. Failure to comply is likely to result in cancellation of coverage.
#6 Type of Construction
Regardless of the age of your home (see #4 above), if the way it was constructed seems too dicey to insurers, that, too, could lead to a decline. They may be worried about the home’s ability to withstand fire, wind or water damage, or other perils and hazards. Examples of problematic construction may include those charmingly flammable wood shake shingles, wood-frame construction, manufactured or modular homes, and trailer homes.
#7 Loss Exposure
What risks or hazards is your home exposed to? When they make their decisions about whether to insure a home, insurance carriers look at your home in the context of its overall exposure to (i.e., risk of) loss. Insurers may consider a wide range of potential loss exposures. Examples include:
- Distance to fire department — For example, do you live in a rural area that’s far, far, far from the closest fire department? If yes, the risk increases that you won’t get the help you need in time to save your home from a fire.
- Brush score — Does the amount of brush surrounding your home leave it at high risk for wildfire damage?
- Flood zones — Is your home located in an area prone to flooding?
- Coastal property — Is your home located along the coast in an area susceptible to high winds, hurricanes, or other severe storms?
- Trees — Do you have a large, old, and/or diseased tree overhanging your home that may fall on it?
- Crime — Is your home located in an area with high crime rates, increasing your risk of theft or vandalism?
- Hail — Has your neighborhood experienced frequent hail storms and damage?
- Wood-burning stoves or fireplaces — You may find them charming. Your insurer won’t. In their eyes, wood-burning stoves and fireplaces increase your home’s risk of fire, period.
What Can I Do If I’m Declined?
First of all, don’t panic. Just because you’ve received one decline doesn’t mean you’re doomed. Consider these options:
- Get more quotes from different carriers. Maybe you didn’t cast a wide enough net. If that may be the case, get more quotes. Different insurers have different risk thresholds.
- Talk to your insurance agent or advisor. You may be able to find out why you were declined. In some cases, it may be possible to make changes or repairs that mitigate their concerns. If not, your agent or advisor may be able to help you identify possible reasons, or identify other carriers you may want to try.
- Talk to ANOTHER insurance agent or advisor. A second perspective may be helpful. In addition, another agent or advisor may offer different relationships and recommendations.
- Talk to your realtor. If you’re trying to insure a new home and you’ve been declined, they can likely find out which insurance carrier previously insured the home.
- Talk to your neighbors. If the reason for your decline had to do with location-based loss exposures, your neighbors may have experienced similar issues. Find out who their insurers are, as well as any actions they may have taken to mitigate the loss exposure in question.
- Make necessary repairs. If a lack of home maintenance was the reason for the decline, start fixing the issues. If you can prove that you’ve mitigated them, carriers may change their tune.
- Talk to your state’s insurance department. They may have more ideas and options for you.
Got declined? Want to talk to an insurance expert to better understand why? Just give us a call at (303) 302-9927 or send us a message. One of our licensed advisors will be happy to share their insight and help you determine next steps.