Here’s What You Should Do If Your Insurance Company Denies Fire (or Flood) Coverage
Los Angeles County is currently suffering from apocalyptic scenes of deadly, out of control wildfires. Unfortunately, insurance does not function the same way as a gas or electric company; even in the face of a natural disaster, insurers are not obligated to service your home. Instead, these companies can choose which properties they are willing to insure based on their risk assessment models. This selective coverage is becoming increasingly common in disaster-prone areas, especially in regions facing increased risk of wildfires or floods. While receiving notice of cancellation or non-renewal can be stressful, there are a few steps you should take before you force coverage . Here’s what you can do.
Immediate Actions After Receiving a Cancellation Notice from Your Insurance Company
Be sure to review your notice carefully. Document both the date the notice was received and the effective date of the cancellation/non-renewal. Determine the specific reason(s) for the coverage change, and then check to see if the notice meets the state’s notice requirements.
From here, contact your insurance company:
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Request a detailed written explanation if one is not provided.
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Ask about the specific risks or problems that led to their resolution.
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Find out if any property improvements might change their decision.
As always, get all communications in writing for your records. And make sure you understand and fight for your rights here. You may be eligible for a grace period, or your state may require insurers to help you find new coverage. If they don’t, document any violations of public insurance laws.
Another place to look is your mortgage insurance requirements. Contact your lender to discuss the situation and request additional time, if necessary, to secure new coverage.
Public Insurance Options
If you lose coverage, consider these national and state insurance programs:
California Fair Plan
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Coverage up to US$3 million for structures
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Must be combined with a “difference in conditions” policy.
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Property inspection required
New York Fair plan
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Insurance of real estate objects that are difficult to insure
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Basic fire and extended coverage
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Application must be submitted through a licensed insurance agent.
Florida Property Insurance
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Insurance of Last Resort for Florida Residents
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Must prove inability to find private insurance coverage
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Special risk assessment during major natural disasters
Texas Fair Plan
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Basic coverage for qualified properties
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Available after two rejections on the private market
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Requires compliance with property maintenance requirements
National Flood Insurance Program (NFIP)
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Insurance coverage up to $250,000
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Content coverage up to $100,000
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Available in participating communities
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Covers direct physical damage from flooding
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The property must be located in a community that participates in the NFIP.
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Coverage becomes effective after a 30-day waiting period
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Must meet minimum floodplain management standards.
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Annual premium depending on flood zone and coverage
You may also want to consider private flood insurance options, which often come with shorter waiting periods—unfortunately, at a higher cost. Whenever you want to buy insurance, you may want to consider policy bundling, which is combining multiple policies to get better rates. In this case, do some research and work with insurers who specialize in high-risk properties.
What else to do if you live in a high-risk area
The risk of losing your physical home makes your community and the people in it even more important. Join local disaster preparedness groups and participate in local emergency planning. You can join or start building local insurance pools, public catastrophe insurance, and other types of self-help safety nets in case insurance companies let you down.
In terms of your own finances, natural disasters are one of the main reasons to maintain a strong emergency fund . Remember, losing your insurance coverage can be alarming, but there are usually several options. The key is to act quickly, understand your rights, and explore all possible alternatives before agreeing to more expensive or limited coverage options.
If you would like to help the tens of thousands of people displaced from their homes in California this week, you can visit redcross.org , donate to the United Way’s efforts here or the California Community Foundation’s Wildfire Recovery Fund here.