Declined for Home Insurance? Where to Find Coverage

By Jenny Melendez · More articles

Home insurance

A decline from one homeowners company is not the end of the market. It does mean you stop shopping at random and start with the reason for the decline, then with the markets that exist for that reason.

Read the decline before you shop again

Companies decline for a reason they can name: the roof, an open claim, a dog with a bite history, a house that has been vacant, a prior cancellation for nonpayment, or a location they do not write. The next company will ask the same questions. If you do not know the reason, you will collect the same “no” three times and think the whole market is closed.

Ask the declining company, in writing, what it declined. “Underwriting guidelines” is not a reason you can fix. A roof with missing shingles is. A lapse because a bill went to an old address is a different conversation from a house that has been empty for a year.

Fix what is cheap to fix before the next application. A missing handrail, a boarded window, or a trampoline the guidelines exclude will follow you from quote to quote. Do not hide it. Applications ask about prior declines and prior claims. A false answer is a reason to void a policy later, which is worse than a decline today.

The order that usually works

  1. Get the written reason and your current declarations page, if you still have a policy.
  2. Ask two other companies that actually write homeowners in that state, through an agent who can see more than one carrier. A decline from a company that does not write your county does not count as much as a decline from one that does.
  3. If those companies also decline, ask about the residual market. In Texas that is the Texas FAIR Plan Association. In Missouri it is the Missouri FAIR Plan. Both are last-resort property policies, and both require a licensed agent. They are not something you buy from a website at midnight.
  4. Keep the old policy in force until the new one is bound. A decline on a quote is not a cancellation of the policy you already have.

Flood is not part of this conversation. A standard homeowners policy does not cover flood. The Texas Department of Insurance says that plainly, and it is true of the Missouri FAIR Plan dwelling form as well: that form lists named perils, and flood is not one of them. If the lender wants flood insurance, that is a separate policy.

Texas FAIR Plan

The Texas FAIR Plan Association describes itself as a residual market. It can issue policies throughout Texas, but it is not allowed to provide windstorm and hail insurance for property that is eligible for the Texas Windstorm Insurance Association. If the house is in the TWIA area and you qualify for the FAIR Plan, you may have to carry both a FAIR Plan policy and a TWIA policy. TDI describes the same coastal problem from the other side: on the Texas coast, or in Harris County on Galveston Bay, a home policy might not include wind and hail, and TWIA sells that coverage.

Eligibility is set by statute and then by underwriting. The association’s own page says you must have been denied by at least two insurance companies that are licensed to write, and are actually writing, property insurance in Texas. You are not eligible if you already have a current homeowners or other property policy, a renewal offer, or a valid offer of comparable property insurance from a Texas-licensed company. A policyholder has to reapply in the voluntary market every two years. The FAIR Plan does not sell direct to the public and does not have its own agents. You apply through a licensed property and casualty agent who meets the plan’s requirements.

The coverage is limited, and it starts from actual cash value. The association’s summary says the homeowners and dwelling policies cover the dwelling and outbuildings at actual cash value, which it defines as replacement cost minus depreciation. The homeowners policy may be endorsed to replacement cost. To be eligible for that endorsement you must insure the dwelling for 100 percent of its replacement cost. If at the time of loss the home is insured for less than 80 percent of full replacement cost, the plan may pay only part of the loss. Replacement cost is not available on the dwelling policy. Replacement cost is the cost to rebuild, not the sale price, and it does not include the land.

The association’s phone number for policyholders is 800-979-6440. TDI’s Help Line, 800-252-3439, is the place to confirm that an agent or company is licensed before you send money.

Missouri FAIR Plan

The Missouri Property Insurance Placement Facility, the Missouri FAIR Plan, was established in October 1969 to make property insurance available to people who could not get it in the normal market. The plan says it is not meant to compete with voluntary companies. It is a last resort for basic property insurance. Applications have to be submitted by a Missouri-licensed agent, and the plan asks that a diligent effort be made to place the property in the regular market first.

For a dwelling of one to four families, the plan offers a DP 00 01 named-peril policy. The named perils it lists are fire, lightning, explosion, windstorm, hail, riot or civil commotion, aircraft, vehicles, smoke, volcanic eruption, and vandalism and malicious mischief. Theft can be added for contents, with a minimum of $1,000 and a maximum of $25,000, and only if contents, extended coverage, and vandalism and malicious mischief are already on the policy. The maximum for buildings and contents combined is $200,000. Theft, up to $25,000, sits on top of that. The coverage is available for owner-occupied and tenant-occupied homes. The plan says to read the forms. This paragraph is the plan’s summary, not your policy.

A building with five or more families, or one used for business, is commercial. That policy is also named-peril, and the maximum is $1,000,000 for all buildings and contents combined at one location. A farm, in the plan’s definition, has to be a farm operation that generates a profit. Acreage with a house is not a farm. The farm forms cover the dwelling, the contents of the dwelling, and outbuildings. They do not cover farm equipment, crops, livestock, or liability.

The plan’s published address is 11116 S Towne Square, Suite 303, St. Louis, MO 63123. The local phone is 314-421-0170. The Missouri-only toll-free number is 800-392-7240.

What these policies leave out

A last-resort policy is basic on purpose. Liability that would have been on a standard homeowners package may be missing or thin. Theft may be optional, as it is on the Missouri dwelling form. Water that comes from outside, meaning flood and often surface water, is not the named perils listed above. Actual cash value on a roof means the claim pays replacement cost minus depreciation, so an older roof produces a smaller check than a replacement-cost endorsement would.

Use the residual policy to close the gap, then keep a dated record of the two declines and shop the voluntary market again before the term ends. In Texas the plan requires that re-shop every two years. In Missouri the plan’s own description is that it should not be where a risk stays if a voluntary company will take it.

Tennessee and Colorado

This page does not name a Tennessee or Colorado residual plan, because those states’ insurance department sites did not give a usable coverage page at the time of writing. The shopping order is the same. Get the decline in writing. Have a licensed agent try companies that actually write in that county. Ask that agent what the state offers after two real declines, and confirm the license with the state before you pay. In Tennessee, the Department of Commerce and Insurance publishes a homeowners guide and lists 615-741-2241. In Texas, use the Help Line above. Do not wire a premium to a name you have not checked.

A house you are about to buy has a deadline the residual market does not care about. The lender wants a policy at closing. Start the two voluntary quotes during the inspection period, not the week the moving truck is booked. If those quotes fail, the agent needs time to submit a FAIR Plan application, and the plan can still underwrite the condition of the house.

Do not cancel a policy you have because a quote elsewhere was declined. The decline applies to the quote. Your current policy ends only when you cancel it or the company cancels it with whatever notice that state requires.

Questions that come up after a decline

Does a FAIR Plan policy satisfy a mortgage?

Lenders usually want proof of insurance for the dwelling at an amount tied to the loan or the rebuild cost, and they want to be listed as mortgagee. Whether a particular FAIR Plan form is acceptable is the lender’s checklist, not a promise on this page. Send the lender the form before closing, not after.

Is the Texas FAIR Plan the same as TWIA?

No. TWIA is wind and hail in its coastal coverage area. The FAIR Plan is a limited property policy for the rest of the risk, and it does not sell wind and hail where TWIA is the wind market. Some coastal houses need both.

Can I apply to the Missouri FAIR Plan myself?

No. The plan says all applications must be submitted by a Missouri-licensed agent.

If you still have time before a closing or a cancel date, start a home quote so an agent can see whether a voluntary company will write it before anyone opens a FAIR Plan file.

Sources

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