High-risk homes: What drives up insurance

Potential home buyers are looking for a good price, good schools, and good floor space, but what about the nearest fire station, the home’s materials, and weather risks? We’ll share what you should add to your dream-home checklist to save you on insurance.

And once you’re in that dream home, we’ll touch on what not to do to increase your insurance premium — or, even worse, cause a claim to be denied, or your insurance to be canceled which can make getting new homeowners insurance even harder.

First, we’ll cover the unthinkable: You’ve found your dream home, but home insurance companies consider it a nightmare and deny you regular homeowners insurance.

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5 Reasons your home can be “High-risk” for insurance

Here are five factors that could make your home too much of a headache for an insurance company to approve a policy.

#1 – Weather: Your house may be considered high risk if you’re buying in an area that typically experiences extreme weather, such as hurricanes, tornadoes, windstorms, or hail. In the eyes of an insurer, this translates to an increased risk of property loss and money to settle claims.

That’s mainly why Florida, Louisiana, Texas, Mississippi, and Oklahoma are among the states with the highest homeowners insurance rates.

Read more: Why is home insurance so expensive in Texas

#2 – Crime: If your house is in a high crime area, that will make it high risk. Insurance adjusters will see a greater risk for claims related to theft and vandalism resulting in property loss or damage.

#3 – Occupancy: If the home will be vacant often, such as a vacation home, that’s a high-risk consideration because the property is more susceptible to break-ins. There’s also the chance of prolonged undetected problems, like a burst water pipe, that can cause considerable damage.

#4 – Property condition and age: Coverage can be denied if the property needs such extensive repairs that it’s unlivable. Other causes for denial could include dead trees that pose a risk of collapsing onto the property and exposed wiring.

Some insurance companies also deny coverage for older homes because of the risks associated with antiquated electrical, plumbing, and other systems.

#5 – Claims history: Homeowners with an extensive claims history could have trouble getting home insurance. An insurance company will check your history through a CLUE (Comprehensive Loss Underwriting Exchange) report. Typically claims stay on the report for five to seven years.

While catastrophic claims will have less impact on your coverage eligibility since insurance companies acknowledge homeowners can’t control the weather, the claims that will have a great impact are for preventable water damage, liability, fires, thefts, and dog bites.

Read more: How to find the history of your home

Insurance options for a high-risk home

You can move on from being denied homeowners insurance by an insurance company. Here are avenues you can pursue.

Make contacts

If your home is in a high-risk area, chances are the people living next door and around it have run into the same insurance issues. Talk with the neighbors and ask how they secured their insurance and what company gave them a policy.

You can also reach out to your state’s department of insurance if you’re having trouble obtaining homeowners insurance. Your state may have established programs to help homeowners in high-risk areas who are having difficulty getting coverage from the standard market.

As detailed by the Insurance Information Institute (III), these include Fair Access to Insurance Requirements (FAIR) plans in both urban and coastal areas, beach and windstorm plans covering predominantly wind-only risks in designated coastal areas, and state-run insurance companies in Florida and Louisiana.

Read more: How to buy a home in Florida: Step-by-step buyer’s guide

Make improvements

Ask the insurer if there is an option to secure insurance if you make the home more acceptable and reduce risks, such as upgrading building materials, fixing problematic systems, or installing a security gate or alarms.

As a potential buyer, you could have your real estate agent negotiate with the sellers regarding the improvements.

Move on to other insurers

No two insurance companies are alike. Yes, the factors that determine your approval and your rate are standard, but providers differ on policies and requirements. For example, there are insurers who offer coverage for high-risk homes, which they balance out by charging an increased premium.

It’s always a good idea to compare the offerings of at least three different insurance companies. Opt for local agents, since they know the area, the market, and available resources.

Read more: Understanding the ins-and-outs of home maintenance insurance

What increases regular homeowners insurance

As promised, here is the checklist of the items that will increase your home insurance premium.

• High flood risk: If the home is in a natural disaster zone, you should buy catastrophic insurance. Standard homeowners policies don’t include damage from earthquakes or flooding due to external conditions. You may be required by your lender to purchase flood insurance if the property is located in a federally designated high-risk flood zone or floodplain.
• High fire risk: While homeowners insurance covers damage from wildfires, you will have a high deductible and a high premium if the home is in a fire-prone part of the country, mainly in the western United States.
• Firefighting challenges: Speaking of fires, if the home is a long distance from a working fire hydrant or a fire department and is in an area with a low fire rating, your insurance will be higher. A fire rating is how states qualify fire departments by the number of responders, equipment available, and water availability. 
• Wood construction and wood stoves: A few more notes about fires: Homes made of wood result in higher rates than those constructed of brick because wood typically burns faster than brick. Homes with wood stoves will increase your premium as well. You’ll also pay more if you don’t have smoke alarms in your home.
• High replacement cost: Regardless of the home’s price, a home in areas with a higher cost of living will cost more to repair and replace, given higher costs for materials, gasoline, and skilled labor.
• Aging home: Older homes are usually more expensive to insure because they don’t have the updated system and latest in fire-retardant materials and protection found with newer homes.
• Aging roof: Since replacing a roof is such a big-ticket item, the older and more damaged the roof of the home, the more expensive the homeowners insurance will be.
• Backyard pool: A swimming pool will get you brownie points with your children and your loved ones and can add value to your property, but this nice-to-have feature, as well as a hot tub or an outdoor spa, calls for additional liability coverage in case someone is injured.
• Other high-risk recreation: A trampoline would also call for additional liability protection, and most insurers would only offer that if certain safety precautions were in place.

How to stay in good graces with your home insurer

After you move in, here are some tips on what not to do to keep from driving up your insurance rate.

Don’t be lax in your home’s upkeep. Observe proper smoke detector maintenance, as well as annual or seasonal inspection and repair of your roof and your HVAC, plumbing, and electrical systems. This will help reduce the number of preventable claims you make. If you have two of those types of claims within a five-year period, your insurer could drop you. 

Don’t be dishonest about any changes you make to the home, such as not reporting adding a room or finishing a basement. You want to make sure you have the right amount of coverage; otherwise, if you file a claim, you’ll be denied a refund for the unreported changes you made.

This would even include notifying your insurance company if you get a new dog. Many insurers restrict, refuse, or cancel home coverage if you own a certain breed, including Akita, Alaskan malamute, Chow Chow, Doberman pinscher, German shepherd, pit bull, Rottweiler, Siberian husky, and wolf hybrid.

It’s controversial, and actually illegal for insurers to do in Michigan and Pennsylvania, but the insurance providers who won’t insure for certain breeds of dogs do so because of the high number of claims tied to dog-related injuries and the high medical costs and sizable settlements attached to the claims.

And here’s a tip you may not have thought of: Be social media savvy. Increasingly more of what policyholders do in their daily lives is becoming privy to their insurance companies.

For example, many people aren’t aware the geotagging setting on their phone’s camera is switched on. This could put your home at risk while you’re away on vacation and posting about it. In the event of a break-in, an insurance company may claim negligence on your part if they find photos uploaded to social media with geotags.

We hope we’ve helped you round out your dream home checklist so you have a much better idea of how to keep your home insurance as affordable as possible. Happy house hunting!

Read more: A comprehensive guide on types of homeowners insurance

Written by Karen C. March 6, 2021

Karen Condor is a real estate and home insurance expert who writes and researches for the insurance comparison site, USInsuranceAgents.com.