Your Location can be a Primary Factor of Insurance Availability

The location of a property can be a primary factor of insurance availability. Homes located in areas with greater exposure to losses due to a particular peril pay a higher cost for coverage than areas less exposed to that peril.

It is essential to evaluate the insurability of a property before purchasing your new home. Insurance premiums for homes in the Midwest may reflect a higher cost due to tornado coverage. It may be difficult to find available or affordable coverage in the voluntary market for homes with greater exposure to wildfires, such as those in designated brush zones in California.

Another factor that affects the availability of insurance is a pending event. For example, if a hurricane or a wildfire is approaching, insurance companies will often issue a temporary prohibition on issuing coverage, and no new coverage can be written in the area threatened by the peril until the threat passes.

Exposure to Earthquakes

Homeowners who live on or near major faults are vulnerable to earthquakes, and the soil type in certain areas may be more susceptible to earthquake damage. As a result, the closer a home is to a fault line, or if it sits on certain susceptible soil types, the more limited insurance options may be because of the risk of earthquake loss.

Recent earthquake activity can also determine earthquake insurance availability. As more earthquakes occur, insurance companies are likely to experience significant claims from earthquakes, and may become financially distressed. These companies may find it difficult to provide coverage to the same volume of policyholders, this can cause an overall availability problem. In certain areas, state associations are established to ensure insurance availability in constricted markets. These publicly run entities provide insurance coverage when availability and affordability problems arise.

Exposure to Hurricanes

Homes in coastal areas of the U.S. are more exposed to hurricanes than homes further inland. As a result, homeowners in these areas may find fewer hurricane insurance choices. Frequent storm activity can constrict hurricane insurance availability and markets. As with earthquakes, publicly run entities typically fill gaps in the market and may provide insurance coverage when availability and affordability problems occur.

Home Features Can Affect Insurance Availability

Homeowners can encounter insurance availability problems due to their homes location as described above. However, if a home has unusually hazardous features, insurance companies may be unwilling to provide coverage regardless of location.

Some of the features considered hazardous include inferior construction, a low-performing roof shape or roof covering, an unbolted frame, an unsecured chimney and/or water heater, or structurally weak features such as awnings or other exterior ornamentation. Additionally, older homes that do not meet current building codes and poorly maintained homes may be difficult to insure.

Ensuring the “Insurability” of Your Home

Homeowners can ensure the insurability of their homes by keeping them current to local and modern model building codes, by performing regular home maintenance, and by implementing loss mitigation measures. Homeowners may also evaluate their insurance options by staying informed of changes in the local insurance marketplace.

More Resources

FLASH and The Actuarial Foundation. If Disaster Strikes Will You Be Covered? A Homeowner’s Insurance Guide to Natural Disasters