What is a moratorium?

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On most given 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 emergency, insurance companies may choose to impose a moratorium, limiting the choices for homeowners insurance in affected ZIP codes until the risk has passed and the moratorium is lifted.

What is a moratorium on homeowners insurance?

There are two types of moratoriums and both are designed to protect 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 to protect homeowners during a catastrophe, such as during recent California wildfires.

The other, which is the main focus of this article, occurs when insurance companies temporarily halt issuing new and modifying existing 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.

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 highly recommend you review your homeowners policy once a year, not just to check how your policy premium compares to the average and if you are getting the most competitive rate, but also to make sure that your home has the appropriate coverage. It’s also a good opportunity to refresh what your homeowners policy covers, especially as it relates to hurricane and tornado coverages.

How do you know if your insurance company has issued a moratorium?

Because each company imposes its own moratorium, you may not know one is in place until you apply for insurance through a specific carrier or request a coverage update. A moratorium is more likely in the days leading up to a natural disaster, as most insurance companies are aware that emergency declarations can cause people without insurance or improper coverage limits to suddenly scramble for insurance.

Can flood insurance be put under a moratorium?

Flood insurance is a standalone policy and is separate from a standard homeowners policy. Although it may not be put under a moratorium, it also comes with its own caveat. Whether purchased through the National Flood Insurance Program (NFIP), a federal program offered through most major insurance companies, or another private carrier, there is typically 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.

Steps you can take 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 trusted and licensed insurance broker can be a great resource. They may be aware of companies that are still accepting new policies and can help with researching more options. Even so, there are additional steps you can take to protect your home and belongings, whether you are facing a storm, wildfire risk or another natural disaster. A few highlights are below:

  • Take inventory of your belongings. Your home inventory should probably include large items, like furniture and appliances, but it should also include things like clothing, toys, electronics and books. Take photos of your belongings and save any receipts as well, which may be helpful for the claims process and reimbursement.
  • Inspect the outdoors. Secure outdoor furniture and loose items, like sports equipment and umbrellas, where they cannot be blown away. Trimming large trees can also help to reduce the risk of large branches falling onto your roof and causing injuries.
  • Check the windows. For hurricanes and tornadoes, reinforcing windows can help keep them intact during storms and heavy winds. Reinforcement can also be crucial before a wildfire disaster, as windows that don’t seal properly can cause smoke to seep into a house.
  • Make a plan. Keeping your family and yourself safe during a natural disaster is the most important task. Make sure to have 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.

Steps to take after a storm has damaged your home

Once the storm has passed, the biggest priority should be your and your loved ones’ safety before returning to your home or going outside. Once it is safe to do so, you can look at your home and note if there has been any damage. Bankrate has compiled a checklist of items to do after a natural disaster, but a few key points are below:

  1. Document any damages. Your documentation should include damage your home might have sustained and any personal belongings as well. It can also be a good idea to take photos from multiple angles so that your insurance claims adjuster can clearly understand what happened.
  2. File a claim. After a natural disaster has passed, it can help to file a claim as soon as possible to get the process started. Even if you aren’t sure yet of the full extent of damage, you can let the claims adjuster know that you will submit more photos and documentation when you have them.
  3. Take measures for temporary repairs. Although you may need to wait for your insurance adjuster’s approval before beginning repairs, you can still take precautionary measures to prevent further damage, like applying a tarp to a leaking roof or securing a door to prevent trespassers and thieves. You can also obtain quotes from contractors to understand what repairs are needed and their estimated costs.

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

What is the best homeowners insurance company?

The best home insurance company for you is dependent on things such as your area and ZIP code, the size of your home and construction costs, and a wide variety of other factors. It’s generally good to shop around and compare quotes for similar coverage and limits from different companies to find the right fit for you.

How long do insurance moratoriums last?

When an insurance moratorium starts and ends will depend on each company. In most cases, it starts a few days before a storm is expected to make landfall and ends once the storm has passed. Your insurance agent will be able to advise on these dates and any updates from the company due to a change in the storm pattern.

Does the government regulate homeowners insurance moratoriums?

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, while rare, the government can impose a different type of moratorium on insurance companies. For example, In response to the wildfires of California, the state government issued a one-year moratorium on nonrenewals for property policies in specific ZIP codes.  While insurance companies in California were still able to enact moratoriums to prevent new policies from being written and existing policies from being modified during wildfires, they will not be able to “issue a cancellation or nonrenewal for wildfire risk for one year from the date of the Governor’s emergency declaration associated with the nearby fire.” For more details, check out the full announcement from the CA Department of Insurance. Again, it is rare that the government will step in to issue this other kind of moratorium on insurance companies, but it does occasionally happen during a wide scale natural disaster.

How do I know if I need flood insurance?

To check if your neighborhood is in a high-risk flood zone, you can use FEMA’s flood map. Depending on your area and whether you have a government-backed mortgage, you may be required to purchase flood insurance. Keep in mind that flood insurance premiums are usually required in full upfront. Additionally, if you do not have the finances to repair flood damage, you may still want to purchase flood insurance, especially if your area is prone to flooding. If in doubt, speak with a licensed insurance agent to determine if flood insurance is right for you.