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When a natural disaster like a wildfire or hurricane looms, having valid home insurance can give you peace of mind. But homeowners with insufficient coverage may be out of luck until the threat of loss has passed. To reduce the risk of catastrophic claims, insurers may suspend issuing new policies or change the coverage or deductibles of current policies a few days before a natural disaster strikes. Bankrate explains what you need to know about suspending your home insurance so you don’t get caught out in the rain.
What is a moratorium?
An insurance moratorium is a strategy used to freeze certain insurance transactions in a particular insurance industry. This can occur in both homeowners and auto insurance. State insurance departments can also issue moratoriums to financially protect policyholders from having their policies terminated after an event involving widespread damage.
What is the home insurance moratorium?
A homeowners moratorium occurs when an insurance company temporarily stops issuing and modifying home insurance policies due to an impending natural disaster. Insurance companies can enact and lift this type of moratorium on their own to suit their risk assessments. For example, in Florida, many property insurance companies issue insurance moratoria on new policies just before a major hurricane hits.
The main purpose of the grace period is to allow insurance companies to pay potential losses on existing policies up to your current policy limits. For this reason, most insurance experts recommend reviewing your homeowners insurance annually to ensure that your policy’s coverages and limits still meet your financial needs. Understanding your homeowners insurance coverages and deductibles can save you time and stress if a natural disaster occurs.
In some cases, state regulators enact moratoriums to protect policyholders and preserve coverage. California implemented a one-year mandatory moratorium preventing insurers from canceling or non-renewing policies on homes affected by certain wildfires. Florida issued non-renewals and cancellations on homes affected by Hurricane Idalia. New laws prohibit insurers from canceling policies until 90 days after all repairs have been completed on the home.
What is the grace period on car insurance?
Auto insurance companies can also offer grace periods. Auto insurance, like homeowners insurance, is classified as a property/casualty insurance. While grace periods for homeowners insurance may be more common, some grace periods apply to all property/casualty insurance or to specific lines of insurance.
Insurance regulators may also impose grace periods on insurers rather than policyholders. For example, the California Department of Insurance imposed a rate increase grace period on auto insurers for more than two years during the pandemic. If you’re not sure whether your auto insurance is covered under a grace period, contact your insurance agent or insurer directly.
How long will the moratorium last?
Insurance grace periods vary depending on the specific event and insurer’s policy. Movers are usually implemented 24-48 hours before an expected event, such as a hurricane, and remain in effect until the danger has passed, which may take several days after the event. Movers may also continue after an event, such as an earthquake, due to the risk of aftershocks. The exact length of the grace period depends on the insurer’s risk assessment and the impact of the disaster.
It’s up to the government to decide how long a moratorium a state will initiate. Typically, federal officials working with state insurance commissioners consider how many people are affected by a disaster, how much emergency aid is available, whether communications systems are up and running, and other factors.
When do insurance companies issue payment deferrals?
Each insurance company has its own grace period, so you may not realize you have one until you apply for insurance through a particular insurance company or request a change to your coverage. Grace periods are usually implemented a few days before a natural disaster occurs, because most insurance companies know that a declared emergency may suddenly cause people who are uninsured or have inadequate coverage limits to rush to get insurance.
Could flood insurance be suspended?
Flood insurance isn’t included in a standard homeowners policy, but your insurance company may offer it as a stand-alone policy. Flood insurance from private insurers may be eligible for a grace period, but flood insurance purchased through the National Flood Insurance Program (NFIP) is not. However, this federal program comes with its own caveats. NFIP coverage typically has a 30-day waiting period from the policy start date until coverage begins. However, there are some exceptions to the waiting period for flood insurance, such as the closing on a home purchase.
Can earthquake insurance be suspended?
The California Earthquake Authority (CEA) has not imposed a moratorium on earthquake insurance. If your homeowner’s insurance is with one of the CEA member insurance companies, you may still purchase earthquake insurance after an earthquake occurs. However, CEA policies do not cover aftershocks related to earthquakes that occur before the effective date of your earthquake insurance policy.
Additionally, keep in mind that insurance companies that are members of the CEA may implement their own property insurance moratoriums, so if you do not have home insurance from one of these insurers, you may not be able to purchase earthquake insurance from the CEA during and after an earthquake occurs.
Outside of California, private insurance companies that offer earthquake insurance may offer grace periods after an earthquake. These grace periods are designed to address the possibility of aftershocks.
How to protect your home during the moratorium
If you were unable to obtain insurance before the grace period or find that your coverage is insufficient, a qualified insurance broker may be able to help you. They may know of companies that are still accepting new policies and may be able to help you research your options.
Additionally, there are steps you can take to prepare your home and protect your belongings when faced with a natural disaster or other danger.
- Take an inventory of your possessions: Many insurance experts recommend taking an inventory of your belongings, especially before a natural disaster. This includes larger items like furniture and appliances, but also consider recording clothes, toys, electronics, books, and more. Take photos of your belongings and keep receipts, as this may be helpful during the claims process. If you don’t have insurance on your belongings, taking an inventory may be helpful when seeking federal assistance after a disaster.
- Inspect outdoors: Secure outdoor furniture and loose objects, such as sports equipment and umbrellas, to prevent them from being blown away. Pruning large trees can also reduce the risk of large branches falling on your roof and causing injury. If you live in an area prone to wildfires, creating a defensible space around your property can help protect your home.
- Check the window: In the case of a hurricane or tornado, reinforcing your windows may prevent them from being damaged during the storm or high winds, and reinforcing them before a wildfire may be crucial, as smoke can get into your home if your windows are not properly sealed.
- Prepare your home: Besides reinforcing windows, there are other ways to storm-proof your home to limit damage caused by natural disasters, such as pruning dead tree branches, cleaning gutters and downspouts to direct water away from your home, and sealing exterior openings in walls, like outdoor outlets, vents, and locations of pipes and cables.
- Make a plan: During a natural disaster, keeping your family and yourself safe is likely your top priority. Most experts recommend having an evacuation plan and an emergency kit stocked with water, food, and other essentials. Important documents should be digitally backed up and properly stored to avoid damage. Once the disaster has passed, we recommend consulting this Bankrate checklist to assess the damage and begin planning for repairs.
- Secure Access and Alert Tools: Having access to weather and other alerts for your area can help your family evacuate and get to safety if a disaster strikes. The FEMA mobile app provides severe weather alerts for up to five selected National Weather Service locations. Consider purchasing a multi-function weather radio that can provide alerts, broadcasts, and lighting even if the power or cell service goes down.
- Ask for help if necessary: Government agencies like FEMA and nonprofits like the Red Cross may be setting up post-disaster assistance centers, and the IRS may be offering tax breaks to taxpayers affected by natural disasters.
