Owning a home is a significant investment, and protecting it with homeowners insurance is a crucial step in safeguarding your financial well-being. However, not everyone qualifies for homeowners insurance, and there are several reasons why an insurance company might reject your application.
Understanding these factors can help you address potential issues and increase your chances of securing coverage. Here are some of the common reasons why home insurance companies turn applicants down.
High-Risk Location
Insurance companies assess the risk associated with the location of your home. If your property is situated in an area prone to natural disasters such as floods, earthquakes, or hurricanes, insurers may consider it a high-risk location. The same can also be true if your home is located in a neighborhood with a high crime rate.
Potential Hazards at Home
Certain features of your property may pose risks that insurers are unwilling to cover. These hazards can include outdated electrical systems, old plumbing, or a roof in need of repair. In some cases, features such as a swimming pool, wood-burning stove, or treehouse can also make it harder to get an approval from insurers. Before applying for homeowners insurance, ensure that your home is in good condition and doesn't present any substantial risks.
Home Age
The age of your home can be a determining factor for insurance eligibility. Older homes may have outdated systems and materials that could increase the risk of claims. Some insurance companies may be hesitant to cover homes built several decades ago, particularly if they haven't undergone significant renovations or updates.
Low Insurance or Credit Score
Your credit score plays a role in the insurance approval process. Insurers often use credit-based insurance scores to assess the risk associated with a policyholder. A low credit score can result in rejection or higher premiums. Typically, a score of 500 or less results in your application being turned down.
Lapsed Coverage
Having a history of lapsed homeowners insurance coverage can be a red flag for insurers. It suggests a lack of continuity in coverage, making you appear riskier to insure. Insurers also take lapsed coverage as a sign that you will let your new policy lapse, too.
Claim History
A history of frequent or large insurance claims can make you a less attractive candidate for coverage. Insurers may view you as a higher risk, especially if you've filed multiple claims in a short period.
Part-time Occupancy
If your home is left unoccupied for extended periods, insurers may see it as an increased risk of burglary, vandalism, or undetected maintenance issues. Be transparent about your occupancy patterns and take necessary precautions to secure your home when you're away.
Ask Why You Were Rejected
If your home insurance application has been rejected, you can ask the agent how they came to their decision. Doing so lets you know if they found inaccurate information and gives you the opportunity to fix the problem and request for a reevaluation.
