Having trouble insuring your home or rental property because no insurance company will take it?
If the risks surrounding your home are too great then normal insurance will not take it at any cost. It means that the chance of there being a claim of significant size or frequency is too likely to insure.
- You can't buy life insurance if you know you are going to die or are engaged in a high risk occupation.
- You can't insure a wrecked car after it is wrecked and expect the insurance to pay for the repairs.
- You can't insure something for which there is a high certainty of a claim.
The idea of insurance is that you buy it before you have a fire, have an accident, get sick or die AND that the chance of loss or likelihood of a claim is within the range of "normal."
Then how do you satisfy the mortgage company's requirement to have insurance when no insurance company will accept you because your house is sitting on the edge of a brush fire zone? In California there is a "company of last resort", the California FAIR Plan. FAIR stands for Fair Access to Insurance Requirements. It is a state plan (most states have it) that will insure anything within reason that cannot be insured on the open market, usually because of proximity to hazards, most often natural ones, but also man-made ones such as high crime areas. Sometimes they will accept homes that are simply old that have not been updated if they are otherwise well maintained. An example would be a home that has electrical circuits on a fuse box system or still has gravity heaters with grates in the floor. If the house is otherwise in good condition; the roof is good, the place is well maintained with no other hazards, then FAIR Plan will probably take it when mainstream insurance companies won't.
The FAIR Plan policies are bare-bones, covering fire and lightning, for sure, with optional coverage for windstorm, hail, aircraft, vehicle, riot, smoke and explosion. You will have no liability coverage, no burglary or theft, no medical payments, little or no loss-of-use coverage. There is a lot of coverage missing when compared to your homeowner policy, but the items that are covered are the most likely causes of loss to occur. You can supplement the FAIR Plan policy with separate liability policy or with a specific policy designed to "wrap around" the basic FAIR Plan policy and plug some of the holes in it. This is where you will need to have a broker explain what you do and don't have and how the supplementary coverage works.
Even FAIR Plan won't take all houses. If the house is run down, has unrepaired damage or dangerous construction elements, FAIR Plan may decline it or require that the deficiencies are repaired before they accept it. Insurance is not a substitute for proper maintenance. You can't let your house deteriorate and hope that the insurance company will pay for the damages that resulted not from an accidental loss, like rain or riot or brush fire, but from your failure to maintain the property.
The cost of a FAIR Plan policy may be less than your homeowner policy and it may be more, depending on location. FAIR Plan will surcharge for very high risk properties. One thing you will know for sure, the FAIR Plan coverage will be smaller than that of a homeowner policy, that's certain, whether the price is higher or not.
If your insurance current company is threatening to cancel your policy because you have allowed the house to go downhill, the roof to go bad, junk piled in the yard, broken windows, etc. don't count on FAIR Plan covering you. That's not their purpose. If your current insurance company says they don't want you anymore because your house is too close to the brush or other natural or man-made hazard, then FAIR Plan may give you insurance. As a broker, I would first check some other regular home or fire insurance companies to see if they will insure you under a normal policy. That's why a broker has many different companies. Some may accept you where others reject you. But if not, then off to FAIR Plan you go.
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