May 18, 2015

Non Standard Home Insurance

What exactly is the non-standard insurance market?  How do I know if I need non-standard home insurance.  Should I hide facts about my home when applying?

Non Standard Homeowners (Home) Insurance is a type of homeowners insurance for those that do not qualify or are refused standard home insurance.    You usually may discover this either when you are dropped by your insurance company or when you go to buy a new home.  Standard home insurance is slightly easier to define: Standard home insurance is regular insurance written by the typical household named companies and these insurance companies usually have a sold credit rating.  The coverage form is wide and covers you for many of the perils you face on a day to day basis.   Non Standard Homeowners Insurance is for people and homes that can not get Standard Home Insurance and thus must either pay a much higher amount to have standard home insurance (if that is even possible) or are forced to take an insurance form that covers you for far less, typically from an insurance company that is not rated as highly.

I realize that this definition is difficult to decipher, but essentially if you own a home that requires non standard homeowners insurance – You will Know it!  If you are buying a home and every insurance company one by one tell yous NO – then you may be a candidate.  Standard home insurers consist of the likes of AAA, Farmers, State Farm, Nationwide, the Hartford, Travelers, Chubb, Safeco, Metlife, Allstate, and most of the other companies that advertise on television.  The difference between the coverage forms from Standard insurance companies differs between various standard insurance carriers somewhat, but much less so, than the difference between any one standard home insurer and a non standard insurer.  As a general rule of thumb, if you have the choice to buy a standard policy form vs a non standard policy form, you should take the standard policy.

Non Standard home insurers may not have the highest Financial Strength Rating via the AM Best rating scale.

If you think it is wise to “not be truthful” when applying for insurance in order to get a standard home insurer to accept you and your abode, I always advise people against this.  First off, if you do, more than likely the information will be found out either during the quoting process or the underwriting process, in which case your insurance agent may be less likely to go to bat for you.  Second, even if it does pass underwriting and it is something that you knew about, it may end up voiding  your insurance policy, potentially when you need it most.  Is it not better to know that you have coverage from an insurance company that has accepted you and your home for what it really is?  In other words, please don’t lie, it rarely works out in your favor.

Why Non Standard Home Insurance?:

What are some of the Reasons that you might be denied access to a  Standard Insurance Carrier?  Not all of these apply to all states.

Flood Risks – your new home may be in a flood plain and have a history of flood issues and past claims.

Properties that have been unoccupied, especially for a long period of time.  Insurers do not like vacant properties.  Typically people that own vacant properties will procure a special type of insurance that specifically tailored to this risk.

Criminal convictions

Subsistence of the property – if your property has subsisted over time this may prevent a standard carrier from writing the policy.

An Adverse claims past – Have you had multiple insurance claims in the past?

Insurance Refused – Has your past Insurance Policy been refused by multiple companies?

Insurance Cancelled – If your insurance has been cancelled in the past this could hurt you when re-shopping for it now.

Bad Credit Score – In many states, I am told that your credit score may increase either your costs or increase the likely hood of you being declined, thankfully California is one of a handful of states that have banned this practice.

Unusual building characteristics such as: Thatched Roofs, Wood Shake Roofs, Walls made of plastic timber (logs), or other rare materials.  This can get a bit detailed because there are dozens of building characteristics that some insurance companies may accept while others may not.  Read my post about How my roof affects my home insurance.   Just because you have one odd characteristic about your home, does not necessarily mean that you may need non standard home insurance.  What you may need is a broker that can shop your policy around.  I know of several standard home insurers that will not accept a home that has old roofs but some standard home insurers that will.  Following my above rule, when you are between the choice of Standard Insurance Company B and Non Standard Insurance Company C, choose the Standard Home Insurer (B).

Prefab homes- Was your home built off site and shipped to its current location?

Asbestos – do you have asbestos in your home?  Sure you can lie on the form, but what happens if a your nanny sues you after she develops a sickness that may have been caused by it – are you covered?

Vacation Homes – Insuring vacation homes can be a tough business.  As previously stated, Insurance carriers do not like vacant homes and vacation homes can sometimes be seen as such.   I could devote an entire post to insuring vacation homes, but they carry numerous risks with them.  Things to consider: Do you plan to rent the home out?  How frequent will you visit the house?  Is it seasonal or year round?  Lastly as is often the case with vacation type homes, is it near tidal water or near a wildfire area?

Home purchased in foreclosure – Insurance companies increasingly are openly refusing homes purchased in foreclosure and even ones purchased under duress.

Home Based Business – I am not talking about telecommuting or part time work.  But do you run a full time for profit business with customers coming by?

Dogs –  there are about ten dog breeds that insurers do not like at all…  If you have a dog that is even just partially one of these breeds, beware.  Shop your home insurance asking if they accept pitbulls.  You may have two options, accept an insurance policy that Excludes all liability coverage for the animal or accept a non standard policy.  Also even if you have a dog breed that is NOT on the disapproved list, if that animal has a bite history, you may find yourself either excluding the animal from coverage or accepting non standard home coverage.

Location of the property such as near a wildfire area.  Is your home near a wildfire area?  This is the most common problem in and around the San Francisco bay area, your brushfire score may indicate that your home is near an area ‘that has been determined’ to be in danger.  In general if you live near wild lands, federal, state, or otherwise you may be in the market for a non standard insurance policy.

Poor Fire Protection Class – .  A fire protection class basically is a ranking of how fast and efficiently a responding fire department can get to your home in an emergency.  For a more comprehensive bit on what is a fire protection class, please read here.  If you live in an area that has only an all volunteer department or if the responding fire department is more than five miles away – this could be an issue.

Other really rare situations – it is impossible to put together any sort of full list on this, but there are all sorts of extremely odd building or lifestyle characteristics that could ruin your chance of finding a standard home insurance carrier and may not even allow you to get past underwriting with a non standard carrier.  What kind of home insurance covers former world champions and convicted felons that own tigers?

Combination – Some homes have a combination of the above problems such as a recently built log home purchased in foreclosure, with a pit-bull, near a wild-fire area.  The more items that are of issue the more serious the chances that you will need to procure insurance from a non standard insurer.  But rest assured, there is hope.

What to do:

If you have been refused by multiple carriers and they are all telling you a similar reason, you might start off by either calling the rest of the standard carriers one by one and point blank ask them if they take homes with this “condition”, or you should contact an insurance broker and ask them to shop the policy for you.  In this situation you should always choose someone that has access to lots of insurance carriers.

Hope:

Just because you need to purchase non standard home insurance, you should not worry, Non Standard Home Insurance is almost always better than No Insurance.   Non Standard, although more expensive, is still better than some of the other coverage options which may include: Non Admitted Carriers and the State Backed FAIR plan.

The California FAIR plan is the insurer of last resort in the state of California.  For a semi detailed list of what may or may not be covered by the California FAIR plan, read this.

What exactly is the difference between a non standard home insurer and the California Fair Plan?   Too difficult of a subject to explain in a blog.  However, in my experience a non standard insurance form is better than a coverage form issued by the California FAIR plan.

One additional area of hope for those forced into some of these markets is that just because your home is not a candidate for Standard Home Insurance, does not necessarily mean that that will always be the case.   A fire protection score may increase, you may remediate and remove the asbestos, you may no longer have that dog that bit your Uncle Louie.  If and when conditions change, be sure to contact your insurance broker and have them reshop  your home insurance.

Almost every home in California though, has insurance options, so shop around with Standard, Non Standard, and maybe even Non Admitted and the FAIR plan.

The benefit of calling a specialist:

When should you contact a specialist?  I recommend that you call an Independent (as in non captive) Insurance Broker/Agent the moment that a second Standard Insurer will not accept you.  When calling explain the reasons that you have been declined and ask if they have any experience in quoting and writing such policies.  If you are unsure if the person you are dealing with is the right person ask them – Who can you write insurance with?   If you find yourself yawing during the role call of insurers, you may be at the right place.  Why should you call an independent is really pretty simple – an independent broker will usually be able to take one main application (often times the application needs to be split up and amended for a variety of reasons) and apply to dozens of companies.  At the same time they may take a slightly different version of that application and submit it to non admitted carriers.  If a home owner were to attempt to do this themselves, it would have to become their part time job.

Who does Marindependent Insurance Services LLC write with?  Check out a partial list here.  Please note – it is constantly changing.

Marindependent Insurance Services LLC – Mill Valley, San Rafael CA – 0K10734 – Independent Insurance Services – Agent and BROKER

Scott W Johnson – 0h11625 – California Licensed Only

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