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On most days, homeowners can buy or update a homeowners insurance policy from an insurance company at any time. However, in the days leading up to a natural disaster, such as a hurricane or wildfire, insurance companies may choose to impose a moratorium, limiting the choices for insurance in affected ZIP codes until the level of risk has subsided.
Homeowners insurance moratoriums
A moratorium is what insurance companies use to freeze certain transactions for specific lines of business, most often homeowners insurance. There are two types of insurance moratoriums, and both are designed to promote the health of the insurance industry. One occurs when a state’s department of insurance prevents insurance companies from canceling or not renewing policies for a set period as a means of public policy. These types of moratoriums are implemented to protect homeowners during and after a catastrophe, such as during recent California wildfires.
The other, which is the main focus of this article, occurs when insurance companies temporarily stop issuing and modifying insurance policies. It is common for property insurance policies to be affected by a moratorium due to an impending natural disaster, and insurance companies can decide for themselves when to enact and lift this type of moratorium. For example, many property insurance carriers issue an insurance moratorium on new policies in Florida just before major hurricanes.
The primary purpose of a moratorium is to ensure that the insurance company can pay out potential losses for existing policies at their current policy limits. For this reason, most insurance experts recommend you review your homeowners policy once a year to make sure that your home has the appropriate coverage. This may also be a good time to verify what your homeowners policy covers.
When do insurance companies issue moratoriums?
Each company imposes its own moratorium period, so you may not know one is in place until you apply for insurance through a specific carrier or request a coverage change. Moratoriums are typically implemented in the days leading up to a natural disaster, as most insurance companies are aware that emergency declarations may cause people without insurance or improper coverage limits to suddenly scramble for insurance.
Can flood insurance be put under a moratorium?
Flood insurance is not included in a standard homeowners insurance policy, but it may be offered by your carrier as a standalone policy. Flood insurance through private insurance companies may be subject to a moratorium, but flood insurance purchased through the National Flood Insurance Program (NFIP) is not. However, this federal program has its own caveat. NFIP coverage typically has a 30-day waiting period from the date of policy initiation before coverage begins. There are some exceptions to the waiting period for flood insurance coverage, such as closing on a home purchase.
Can earthquake insurance be put under a moratorium?
The California Earthquake Authority (CEA) does not impose earthquake insurance moratoriums. If your homeowners insurance is with one of its participating insurers, you’ll still be able to get an earthquake policy following an earthquake. However, a CEA policy will not provide coverage for aftershocks related to a seismic event that began before the effective date of an earthquake insurance policy.
Additionally, keep in mind that insurance companies who participate in CEA may still implement their own moratoriums for property insurance. Without an existing residential insurance policy from one of these carriers, you may not be able to purchase earthquake insurance from the CEA during and after a seismic event.
How to protect your home during a moratorium
If you could not obtain insurance before a moratorium or find that you don’t have enough coverage, a licensed insurance broker may be a beneficial resource. They may be aware of companies that are still accepting new policies and could help with researching your options.
Additionally, there are steps you may be able to take to protect your home and belongings when facing a risk like a natural disaster:
- Take inventory of your belongings: Most insurance experts recommend conducting a home inventory, especially before a natural disaster. This may include large items like furniture and appliances, but you might also consider documenting things like clothing, toys, electronics and books. Consider taking photos of your belongings and save any receipts. This may be helpful during the claims process. If you do not have home coverage in place, an inventory may be helpful when seeking federal aid following a disaster.
- Inspect outdoors: Secure outdoor furniture and loose items, like sports equipment and umbrellas, where they cannot be blown away. Trimming large trees may also help to reduce the risk of large branches falling onto your roof and causing injuries. If you live in a wildfire-prone area, creating a defensible space around your property could help protect your home.
- Check your windows: For hurricanes and tornadoes, reinforcing windows may help keep them intact during storms and heavy winds. Reinforcement may also be crucial before a wildfire, as windows that don’t seal properly could allow smoke to seep into a house.
- Prepare your home: Besides reinforcing your windows, there are other ways to stormproof your home to limit damage from natural disasters. This can include trimming dead tree branches, cleaning your gutters and downspouts so water drains away from your house and sealing outside openings in your walls like outdoor outlets, vents and pipe and cable locations.
- Make a plan: Keeping your family and yourself safe during a natural disaster is likely your top priority. Most experts recommend having an evacuation plan and an emergency kit stocked with water, food, and other necessities. Any important documents should be backed up digitally and stored properly to avoid damage. Once a disaster has passed, you may want to consult this Bankrate checklist to begin assessing damage and planning for repairs.
- Secure access and alert tools: Having access to weather and other alters in your area may help ensure your family is able to evacuate and navigate if disaster strikes. The FEMA mobile app provides National Weather Service severe weather alerts for up to five locations you select. You might consider getting a multi-function weather radio that can provide alerts, broadcasts and lighting even if the power or cell services go down.
If you couldn’t obtain homeowners insurance before a moratorium or didn’t have enough coverage, there may still be other ways to seek help. Government organizations like FEMA and non-profit organizations like the Red Cross may have set up centers to assist with the aftermath. The IRS may also provide tax relief for taxpayers who have been affected by natural disasters.
Frequently asked questions
Yes, auto insurance companies can also issue moratoriums. Auto insurance falls under property and casualty insurance, just like homeowners insurance. While home insurance moratorium periods may be more common, some moratoriums are in effect for all property and casualty policies or select lines of business.
Insurance regulators may also impose a moratorium on insurance companies, rather than policyholders. For example, the California Department of Insurance imposed a rate increase moratorium for over two years on auto insurers during the pandemic. If you are unsure if your auto insurance policy is included in a moratorium, contact your insurance agent or the company directly.
The length of a moratorium period will depend on each company. In most cases, it starts a few days before a natural disaster is expected to impact an area and ends once the disaster has passed. Your insurance agent may be able to advise you on these dates and any updates from the company due to a change in the storm pattern.
In most scenarios, an insurance company can start and end a moratorium on homeowners insurance policies without guidance from the government, especially in response to natural disasters.
However, in some cases, a state government can impose a different type of moratorium on insurance companies to prevent insurance companies from canceling or not renewing policies during and after a natural disaster. One example of this is the California fire insurance moratorium. During and following a wildfire, California may issue a one-year moratorium on nonrenewals for property policies in specific ZIP codes.
It could be possible for renters insurance to be put under a moratorium, just like any other type of property insurance. A licensed insurance agent or representative of the insurance company you’re interested in may have more information.