High risk home owner insurance can be quite expensive, but if you owe money on a mortgage it's a necessary expense. A home can be considered high-risk for a variety of reasons and it's important to shop around vigorously for the lowest rates if you fall into this category.
High Risk Policies
Insurance policies are considered high risk for a wide variety of reasons. Insurance providers examine different details regarding the home and the applicant when determining the likelihood of a claim being made in the future.
The home's location, history, and condition are all considered when deciding whether or not a home is considered high risk.
- Location - The location may force a home into the high risk category. For example, homes located in areas prone to natural disasters (hurricanes, tornadoes, earthquakes, and other natural disasters) may automatically be categorized as high risk by insurance companies. Homes located in high-crime areas may also receive this label.
- History - Previous claims filed on a home may sway the cost of future coverage. High risk home owner insurance may be a result of multiple claims, even if the claims were completely legitimate and beyond the homeowner's control.
- Condition - A home that is in constant disrepair can result in a higher instance of claims. Homeowners who do not do routine upkeep on their homes may experience a higher level of problems with the house, some of which may wind up as insurance claims.
You cannot expect to purchase a home in a high-risk area and not have to pay a higher premium for your homeowner's insurance.
Sometimes it isn't the house that is the cause of the high-risk label. Homeowners have more effect on their insurance policies than they may realize.
- Credit report - A highly blemished credit report prompts insurance companies to label the applicant as high risk. This is regardless of previous claims made on the home.
- Inquiries - Many insurance companies make a record of any time a policyholder calls to inquire about coverage after an incident has occurred. The insurance company counts this inquiry as a claim that has been made, even if the incident is not covered and no further action was required. In this instance, an inquisitive nature on the part of the homeowner can result in being labeled a high risk policyholder.
There may not necessarily be a demonstrated correlation between credit scores, inquiries, and the actual amount of claims filed by homeowners. Insurance companies still look at these factors nonetheless.
High Risk Home Owner Insurance Downfalls
Whether the high-risk label is a direct result of numerous claims or if there is different reasoning for the classification, being labeled a high risk homeowner will have difficult results:
- High premiums - Your premiums for home owner insurance will be high. Even if you shop around for the very best rates you can find, you will still pay more than someone who is not considered high risk.
- Inadequate coverage - You may not be able to find adequate coverage. Some insurance companies may cover the home but not offer you additional riders, such as flood coverage in a high risk location.
- No policy issued - You may have a hard time finding an insurance company that is actually willing to issue you a policy. Insurance companies have the option to not offer policies in certain locations.
You may be able to find some coverage through a state-sponsored program if you find your home falling into the category of "uninsurable." Not every state offers special programs for people in this situation. The ratio of homes labeled uninsurable is relatively low, and most homeowners can find coverage one way or another.
One important thing to remember when shopping for high risk insurance is this: Every claim you ever make is documented, so don't bother trying to mask your claims history from a potential insurer.
If you need high risk home owner insurance you may want to start your search online at an insurance comparison website like US Insurance Online. You can comparison shop several different insurance companies by filling out one form.