HomeHome InsuranceWhat to do if you get rejected for homeowners insurance

What to do if you get rejected for homeowners insurance

Homeowners insurance is the best way to protect your biggest investment. But not everyone gets approved for home insurance.

You can be rejected for a variety of reasons, from having bad credit to living in a floodplain.

CNBC Select explores why home insurance companies reject properties and what your options are if it’s happened to you.

Why was I rejected for homeowners insurance?

There are many different reasons a carrier might turn you down, some of which have to do with you and some with the home itself.

High-risk location

If your house is in an area plagued by tornadoes or wildfires, a carrier may consider it too great a risk to insure. The same may be true if your neighborhood experiences a lot of crime.

You may be able to mitigate some of that risk by installing security devices or weatherproofing. Check with an insurance professional to see what improvements could help.  

Potential hazards

The very thing that made you fall in love with your home — a swimming pool, wood-burning stove or treehouse, for example — could make it harder to get coverage if an insurer considers it a fire hazard or other risk.

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Age of home

Older homes are more prone to problems, from leaky roofs to outdated plumbing or wiring. If a residence hasn’t been sufficiently maintained over the years — if there hasn’t been “pride of ownership” — it can make a company wary of insuring it.

Low insurance score

In most states, insurers can consider your credit history when deciding whether to insure your home and when calculating your monthly premiums. (California, Hawaii, Maryland, Massachusetts, Michigan, Nevada, Oregon and Utah either prohibit or greatly restrict credit-based insurance decisions.)

Similar to your FICO credit score, your insurance score is based on your payment history, credit mix, the length of your credit history and other financial factors.

A score of 500 or less is considered poor and may result in your being turned down.

Lapsed coverage

If you let a previous homeowners policy lapse, it could hurt your chances of getting a new policy. Insurers may worry you’ll let your new policy lapse, too.

Previous claim history

Carriers typically look at the history of claims on a given property — if there have been a lot of payouts for foundation repair, for example, it might suggest a more serious structural problem.

In addition, If you’ve filed a lot of claims on a previous homeowners policy, it could also count against you.

Part-time occupancy

Insurance companies want to know there’s someone home to look after the property. If it isn’t your primary residence — like, say, a beach house or ski condo — you might have a harder time getting coverage.    

What to do if you’ve been rejected for home insurance

Nationwide Homeowners Insurance

  • Cost

    The best way to estimate your costs is to request a quote

  • Maximum coverage

  • App available

  • Policy highlights

    Policy covers home and property damages caused by theft, fire and weather damage. It also covers personal liability, loss of use and unauthorized transactions on your credit card

  • Does not cover

    Water damage, earthquakes, flood insurance, identity theft, high-value items, rebuilding home after loss (these can all be purchased as add-ons for extra coverage)

Chubb Insurance is CNBC Select’s pick for high-value homes, offering extended replacement cost coverage and complimentary home inspections. In 2023, Chubb scored an A++ rating for financial strength from A.M. Best, the agency’s highest grade.

Chubb Homeowners Insurance

  • Cost

    The best way to estimate your costs is to request a quote

  • Maximum coverage

  • App available

  • Policy highlights

    Policy covers home and property damages caused by wildfires, extreme weather, crime, vandalism and personal liability, which also covers claims for libel and slander. Also includes replacement cost for contents, extended replacement cost for dwelling and a cash settlement option

  • Does not cover

    Flood or equipment breakdown (these can be purchased as add-ons to your policy)

You can also check with your state’s Department of Insurance to see which companies are available in your area. 

Consider a FAIR plan 

If you’ve been turned down several times, see if your state is one of the more than 30 that offers Fair Access to Insurance Requirements (FAIR) plans, which enable high-risk homeowners to get insuranced.

FAIR plans are subsidized by the state and private insurers, which collectively cover a home, thereby mitigating the risk any single carrier has to take on.

You can see if your state offers FAIR plans on the Insurance Information Institute’s website.  

Get modified coverage 

If your home is at least 40 years old, you may qualify for an HO-8 policy, intended for older houses where the cost of repair may outweigh the fair market value.

H-08 insurance only covers specific perils — typically fire, theft and vandalism — and only pays out the actual cash value of your possessions after depreciation.

Take out a surplus line policy

Surplus line insurance covers properties with unique risks that traditional carriers “can’t or won’t insure,” according to the Texas Department of Insurance. Typically a state will allow a surplus line company, like Lloyd’s of London or Berkshire Hathaway, to operate in its borders while unlicensed. (The company must be licensed in its home state or country, however.)

Most surplus line policies are taken out by businesses, but a homeowner who has made an effort to work with a standard insurance company and received three to five rejections may qualify, according to the Insurance Information Institute.

Surplus line policies may have more exclusions and higher deductibles than a standard one. In addition, your claim could go unpaid if the insurer becomes insolvent.

Work on your improving your credit

In states that allow insurance companies to consider your credit, your history of on-time payments accounts for 40% of your insurance score. So consider automating payments and, if possible, paying the full balance each month.

Other criteria include your amount of outstanding debt (30%), how long you’ve had credit (15%), credit mix (5%) and whether you’ve applied for lines of credit recently (10%).

eCredable LiftLocker® is a paid service that sends information about on-time utility payments to TransUnion, one of the three major credit-reporting agencies, which can help you build credit. For $14.95 a month,  you also receive a copy of your TransUnion credit report every month, plus identity theft alerts and other benefits.

Do I have to have homeowners insurance? 

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Bottom line

If you have been rejected for homeowners insurance, find out why. There are options, including other carriers, modified policies and FAIR plan coverage. Just going without coverage is a risky proposition.  

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Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.

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