What is a home insurance moratorium?
On most days, homeowners can purchase or update their homeowners insurance policy at any time from an insurance company. However, in the days preceding a natural disaster, such as a hurricane or wildfire, insurance companies may impose a moratorium, limiting insurance options in affected ZIP codes until the level of risk has subsided.
Insurance moratoriums for homeowners
There are two kinds of insurance moratoriums, both of which are intended to improve the health of the insurance industry. One example is when a state's insurance department prohibits insurance companies from canceling or not renewing policies for a set period of time as a matter of public policy. These moratoriums are put in place to protect homeowners during and after a disaster.
The other, and more important, occurs when insurance companies temporarily cease issuing and modifying insurance policies. Property insurance policies are frequently affected by a moratorium due to an impending natural disaster, and insurance companies can decide when to enact and lift this type of moratorium. For example, many property insurance carriers issue insurance moratoriums on new policies in New Jersey just before major hurricanes or tropical storms.
A moratorium's primary purpose is to ensure that an insurance company can pay out potential losses for existing policies at their current policy limits. As a result, most insurance experts recommend that you review your homeowners policy once a year to ensure that your home has adequate coverage. This is also a good time to double-check what your homeowners policy covers.
How do you find out if your insurer has imposed a moratorium?
Each company imposes its own moratorium, so you may not be aware of one until you apply for insurance or request a change in coverage. Moratoriums are typically implemented in the days preceding a natural disaster because most insurance companies are aware that emergency declarations may cause people who do not have insurance or have inadequate coverage limits to scramble for insurance.
Can a moratorium be imposed on flood insurance?
Flood insurance is not included in a standard homeowners insurance policy, but your carrier may offer it as a separate policy. Private insurance company flood insurance may be subject to a moratorium, but National Flood Insurance Program (NFIP) flood insurance is not. However, there is a catch to this federal program. Before NFIP coverage begins, there is typically a 30-day waiting period from the date of policy initiation. There are some exceptions to the flood insurance waiting period, such as closing on a home purchase.
Can an earthquake insurance moratorium be imposed?
The California Earthquake Authority (CEA) does not impose moratoriums on earthquake insurance. If you have homeowners insurance with one of its participating insurers, you can still get an earthquake policy after an earthquake. However, a CEA policy will not cover aftershocks caused by a seismic event that occurred prior to the effective date of an earthquake insurance policy.
Furthermore, insurance companies that participate in CEA may still impose their own moratoriums on property insurance. You may be unable to purchase earthquake insurance from the CEA during and after a seismic event if you do not already have a residential insurance policy with one of these carriers.
Outside of California, private carriers that provide earthquake insurance may impose a moratorium in the aftermath of an earthquake. These moratoriums are intended to address the possibility of aftershocks.
Steps to take to safeguard your home during a moratorium
If you were unable to obtain insurance prior to the moratorium or discover that you do not have adequate coverage, a licensed insurance agent may be a useful resource. They might know of companies that are still accepting new policies and can assist you in researching your options.
Furthermore, there are steps you can take to protect your home and belongings when faced with a risk such as a natural disaster:
Take an inventory of your possessions: Most insurance experts recommend performing a home inventory, especially before a natural disaster. This could include large items like furniture and appliances, but it could also include clothing, toys, electronics, and books. Consider photographing your belongings and keeping any receipts. This could come in handy during the claims process.
Examine outside: Outdoor furniture and loose items, such as sports equipment and umbrellas, should be kept in places where they cannot be blown away. Large tree trimming may also help to reduce the risk of large branches falling onto your roof and injuring you. If you live in a wildfire-prone area, making a defensible space around your home may help protect it.
Check your windows: Reinforcing windows during hurricanes and tornadoes may help keep them intact during storms and high winds. Reinforcement may also be necessary before a wildfire, as improperly sealed windows can allow smoke to enter a home.
Make a strategy: During a natural disaster, your top priority is most likely to keep your family and yourself safe. Most experts advise having an evacuation plan in place, as well as an emergency kit stocked with water, food, and other necessities. To avoid damage, any important documents should be digitally backed up and properly stored. After a disaster has passed, do a checklist to assess damage and plan for repairs.
If you couldn't get homeowners insurance before the moratorium or didn't have enough coverage, there may be other options. Government agencies such as FEMA and non-profit organizations such as the Red Cross may have established centers to assist with the aftermath. Taxpayers who have been impacted by natural disasters may also be eligible for tax relief from the IRS.
Can auto insurance have a moratorium?
Yes, auto insurance like other insurances can have moratorium. Insurance company will cease issuing or updating policies due to a looming disaster. These are frequently implemented prior to a major storm, such as a hurricane.
How long are insurance moratoriums in effect?
The length of a moratorium period will vary by company. It usually begins a few days before a natural disaster is expected to hit an area and ends once the disaster has passed. Your insurance agent may be able to provide you with these dates as well as any company updates due to a change in the storm pattern.
Is the government in charge of homeowners insurance moratoriums?
In most cases, an insurance company can initiate and terminate a moratorium on homeowners insurance policies without the need for government approval, particularly in response to natural disasters.
In some cases, however, a state government can impose a different type of moratorium on insurance companies to prevent them from canceling or not renewing policies during and after a natural disaster. The California fire insurance moratorium is one example of this. California may impose a one-year moratorium on nonrenewals of property policies in specific ZIP codes during and after a wildfire.
While California insurance companies can enact moratoriums to prevent new policies from being written and existing policies from being modified during wildfires, they cannot "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."
Can a moratorium be imposed on renters insurance?
Renters insurance, like any other type of property insurance, could face a moratorium. More information may be available from a licensed insurance agent or a representative of the insurance company of interest.
Contact Retcho Agency in Closter, NJ, when you have home insurance questions and needs.