HOMEOWNERS CAN'T COUNT ON INSURANCE. STATES CAN HELP.

The following information was released by the Natural Resources Defense Council (NRDC):

Alternatives to private homeowner's insurance: Higher costs, less protection

Escalating losses from weather disasters and rising rebuilding costs over the past decade have led many insurers to drop homeowner's insurance altogether. According to the U.S. Senate Committee on the Budget, U.S. insurers have dropped more than 1.9 million policies from 2018 to 2023. When homeowners are unable to find traditional coverage, their options are relegated to coverage that is generally more expensive and less protectivewith fewer regulatory safeguards.

FAIR plans

State-run Fair Access to Insurance Requirements (FAIR) plans, beach and wind plans, and joint underwriting associationsalso known as residual market plansserve as insurers of last resort for homeowners who can't get coverage in the private market, but they often come with significant drawbacks. These plans typically charge higher premiums, offer narrower coverage, and have higher deductibles than standard policies. Policyholders may also face limited claims-handling resources, slower processing times, and reduced policy flexibility.

Excess and surplus lines

Non-admitted insurers, also known as excess and surplus (EandS) lines insurers, are not licensed in a particular state but are authorized to provide coverage when admittedinsurers won't. For example, EandS insurers underwrite very-high-risk properties, like fireworks factories, or unique situations that require specialized coverage, like a singer's vocal cords. Increasingly, these unregulated insurers are moving into the home insurance space. Non-admitted insurers can offer more flexible or higher-risk coverage but aren't so reliable for policyholders: Customers are not protected by state guaranty funds if the insurer becomes insolvent, nor can they rely on regulatory safeguards. EandS lines use complex, non-standardized language in their policies and have less stringent capital requirements for financial solvency purposesin other words, these businesses are more prone to fail. Given the lax protections, policyholders generally have less recourse if a problem arises in the claims-handling process.

Lender-placed (aka force-placed) insurance

When a person purchases a house using a mortgage, the lender requires insurance to protect its financial interest. If a homeowner with a mortgage cannot find affordable insurance, the mortgage lender will force-place an insurance policy onto their terms. Lender-placed insurancecoverage that a mortgage servicer buys when a homeowner cannot purchase insurance or the homeowner's policy lapsescomes with significant drawbacks for homeowners. These policies are far more expensive than standard homeowner's insurance and offer much narrower protection. They typically cover only the lender's financial interestessentially, the mortgage balancewhile excluding the homeowner's equity in the property as well as personal property and liability coverage, leaving homeowners largely unprotected.

Going "bare"

Homeowners who have already paid off their mortgage have a final option of self-insuring, aka "going bare"meaning they are compelled to forego insurance coverage altogether for their home. The Consumer Federation of America estimates that more than 12 percent of homeowners have elected to go without insurance coverage due to unaffordable pricing.i While this option may save money in the short run, homeowners can face financial ruin if their home is damaged and requires repairs beyond their means.