So, you’ve bought your first home and have begun looking to acquire homeowners insurance? Well, first off, congratulations! Second, we’ve noticed that many new homeowners don’t consider the fact that they can actually be denied insurance coverage by carriers.
Even experienced homeowners can find that their current or new policies can be rejected for being too much of a risk to insurance carriers.
Risk assessment of a potential policyholder and their property is done through underwriting, and is an important part of the insurance application process.
At Berry Insurance, we’re experts when it comes to working with underwriters - knowing what they’re looking at and what would hold you back from receiving coverage on your home. In this article we will go over what underwriting is and the common reasons homes are denied coverage.
What is underwriting?
Before going into what underwriters are looking for in homes when approving coverage, let’s cover what underwriting actually entails.
When looking to receive an insurance policy for your home, you must first go through an application process to see whether or not you qualify for the policy.
Underwriting is the process of reviewing potential policyholders for the risk that could come with insuring them and their property. An insurance carrier's underwriters look at multiple factors when deciding whether to approve a policy, including not only facts about your home, but also about you as a homeowner. Underwriters also establish pricing for accepted policies.
Underwriters typically base their assessment on the information about you and your home provided by you during your application process. If this is not enough information for an accurate assessment, insurance carriers will also send out field underwriters to inspect the exterior of your home, looking for anything omitted from the original application or to view conditions. This can also be done through satellite imagery, such as Google Maps of your home from a bird's-eye or street view.
How do underwriters assess policies?
When analyzing a homeowners insurance application, underwriters are looking to determine the overall risk of a property and the potential policyholder. Their assessment helps to determine the amount of coverage a policy would need, the likelihood of claims, or if the policy should not be approved for the current state of the home or its owner.
Important underwriting factors:
Underwriters primarily look for common risks when inspecting a new homeowners application, as well as when reviewing current policyholders. The following are some of the most common factors underwriters will be looking for that would influence cost or approval status.
Location:
Where your home resides will influence what coverage is needed on a policy, as well as if the insurance provider would even be interested in granting coverage. Homes in areas prone to flooding or earthquakes, as well as coastal properties, will be seen as a higher risk to underwriters, who may require additional coverage on a policy or deny coverage if the location is too much of a risk.
Age of the home:
The age of the home and when it was built can often be a sign of the condition of the many of the systems that make up a home. Underwriters will specifically be looking for older roofs that have not been replaced in the past ten years, outdated systems like plumbing and wiring, or foundational mold issues.
If you have an older home, or are looking into purchasing one, it can be important to know the ways in which the home's age will affect insurance coverage. To know more about when you should look into newer renovations, check out this article: Things to Keep in Mind When Insuring Older Homes.
Detached structures:
Any additional detached structures on a property, such as swimming pools or trampolines, could present an added risk on a policy. Underwriters and insurance providers will often require safety features (fences, nets, etc.) be added to any risky detached structures before a policy can be approved.
Safety Features:
Homes with safety features, such as an alarm system, can appear as less of a risk when being reviewed by underwriters. Features like these are also a great way to save money on policies, if the carrier offers potential discounts to policyholders for added security.
Insurance history (if applicable):
If you have a previous homeowners insurance policy, underwriters will be looking at your history with that provider, including claims history. This is so they can best get an accurate representation of you as a client, and whether or not your policy would present a high risk.
Home businesses:
If you’re holding business out of your home, especially ones with heavy client foot traffic, then underwriters will likely view your policy as more of a risk. Depending on the nature of your work, you may require additional coverage or a separate business policy if approved.
To ensure you have the right coverage for your home-based business, check out this article: Are Home-Based Businesses Covered by Homeowners Insurance?
Partially unoccupied homes:
Having a home that is left unoccupied for long periods of time during the year would be a large risk to insurers, as no one would be there to handle or even notice claim worthy events such as fires or burst pipes. Whether it’s a second property or vacation home, underwriters will be more cautious to approve any partially unoccupied homes.
Having options
While underwriters will be looking at multiple facets of your home application, it is not the end of the world if you are initially denied coverage. Most underwriters and insurance companies will allow clients to reapply for homeowners insurance once the issues initially identified have been properly addressed.
If you still find yourself unable to receive homeowners insurance through traditional providers, there are other options available. While offering less comprehensive coverage at a higher rate, FAIR Plan policies can be the best means of coverage when homeowners cannot receive coverage through standard insurance providers. To learn more about this option, check out this article in our Learning Center: Is FAIR Plan Insurance Right for You?
