Many felons that have turned their lives around and want to own a home may have a hard time finding homeowners insurance. While getting the proper insurance may be hard it is not impossible.
Homeowners Insurance For Felons
Ironically, felons who are able to buy a home may want to first consider checking their ability to obtain insurance for that home! Protecting their new and very sizable investment is crucial, but sometimes it is very difficult for a felon to get the insurance coverage they need.
Why? Because it can be hard for them to re-establish their trustworthiness, especially if the crime they were convicted of was fairly recent. One area that can be problematic, yet which is often overlooked until it is too late, is the ability to obtain various forms of insurance. This article will address one such type of insurance—homeowner’s insurance for felons.
Can a felon get homeowners insurance?
Yes, a felon can get homeowners insurance in most cases. While it may be more of a struggle for felons to find an insurance company to cover their home it is not impossible for most.
What is Homeowner’s Insurance and why have it?
Before we dive in, let’s define our terms…what exactly is homeowner’s insurance? Very simply put, it is a type of insurance a person or persons can buy to give them some level of financial compensation if their house is either damaged or perhaps completely destroyed.
The precise amount of monetary coverage depends on the plan the person buys, and indeed it is very important to also look at exactly what is covered and what is not. It is often only after some unfortunate accident that a person learns that their home was never covered for the specific thing which damaged it. For example: many causes of damage are due to natural disaster such as tornadoes, floods, lightning strikes, or other similar weather-related events.
Yet at other times, damage might be sustained from human-caused accidents…driving a car through a garage, cutting down a tree incorrectly so that it lands on your roof, not monitoring a cooking oven and then discovering that your kitchen is on fire…
There is literally no end to the number of potential dangers that could affect a person’s home…and no end to how much impact to your finances such an unfortunate occurrence can have. Many people have lost their entire life savings due to inadequate or improper homeowner’s insurance coverage.
Mortgages and Homeowners Insurance
Of course, anytime one purchases a home, they do not truly own it so long as they are paying a mortgage. The mortgage lender owns it until the balance is paid off, which is why nearly all such banks require the purchaser to keep a minimum amount of insurance coverage on their investment. If you buy a home, you’ll have to show proof of such a homeowner’s insurance policy, and perhaps provide updates as requested. But again, if you have a felony record, it could be a problem getting such a policy in the first place unless you have had your felony expunged.
Now let’s quickly look at some laws and regulations…
Can an Insurance Company Deny a Policy to a Felon?
Yes, they have the right to deny accepting a felon’s insurance policy application. Every state manages their affairs slightly differently, and it’s no different when it comes to homeowner’s insurance.
Any buyer who has already obtained such insurance is generally safeguarded against the insurer having the right to cancel the policy…unless of course the buyer, for example, lied about some prior felony conviction or some similar lack of full disclosure at the time of applying for the insurance policy.
If everything was fully disclosed when the insurance was first bought, the company should have no legal right to ever cancel as long as the buyer is making regular, timely payments and isn’t actively committing any crimes!
With that said, the buyer is only safeguarded during the term of the policy; once the policy term expires, and it is time for a renewal, the insurance company does have the ability to decline renewal…usually for any reason they so choose.
More on Insurance Denial
No one can force the company to offer insurance if they decide not to, and there’s the problem. They could decide not to renew, if they consider a person with a prior conviction to be untrustworthy or a liability. Remember, the company is there to make money. They only offer insurance coverage on the premise that they won’t have to actually ever pay out! The amount they make on your policy is very little compared to the amount they are potentially liable for should anything ever happen and they have to offer a payment!
For this reason, they hedge their bets. Perhaps more than any other business model, an insurance company is particularly averse to taking risks because they have too much at stake.
That is why an insurance company may not desire to offer insurance in the first place! If a person has been convicted of a felony, especially some type of crime related in any way to property destruction or to using property in an illicit way or for “illegal purposes,” then there could certainly be a problem obtaining insurance. And it goes without saying, if one has been found guilty of a crime involving arson or some types of explosives, the odds of getting an insurance company to insure that person’s home drop significantly.
Bad Credit And The Effects On Homeowners Insurance For Felons
Apart from whatever crime the prior felon may’ve been convicted of, it is also possible to be denied based on something as simple as bad credit. One’s credit score can be a very difficult thing to fix once damaged, and though the scope of this article doesn’t include credit repair, it is useful to understand that your credit score, if poor, can be used against you.
Anyone who has even been imprisoned likely can attest that a credit history can be severely impacted when you don’t have an income or ability to pay off your credit card or other debt. Or if one was incarcerated prior to having ever built up their credit history in the first place, then they will have very little to show and thus will not have a great score.
Either way, there are many factors involved with a credit score…and you can be sure that a homeowner’s insurance company is going to want to know that credit score before making their decision of whether or not to offer insurance. Indeed, they may provide a policy but at a higher premium than what others might be paying. It is just another case of showing how the negative consequence of one action can snowball and cause problems in other areas.
In terms of your credit report, there are a few various categories covered:
- Identifying information – things like your Social Security Number, your date of birth, and your employment status (working, unemployed, etc.)
- Trade Lines – basically, your credit accounts…and which type of accounts they are. Also included, the date the accounts were opened, each accounts maximum credit limit, and of course the account balance and record of payment (on time, overdue, unpaid, etc.)
- Credit Inquiries – these are checks run on an individual’s credit history, usually done by any company or bank that has considered offering a line of credit to that individual. Too many credit checks can slowly erode your credit score
- Public Records – self-explanatory, but essentially any public record information retained in courthouses, related to an individual’s bankruptcies, foreclosures, liens, etc.
Where to Check Your Credit Score
If you do not know your credit score, you can check it with one of the three major credit bureaus:
Per Experian’s main site, a credit score has a “range between 300-850,” and “a credit score of 700 or above is generally considered good. A score of 800 or above on the same range is considered to be excellent. Most credit scores fall between 600 and 750.”
Thus, in general, if your score is below 700, it may not be considered “good” and could lead to a homeowner’s insurance company denying your policy. In fact, it’s one of the main reasons for denial.
Applying for Homeowner’s Insurance as a Felon
Finding a company that offers a homeowner’s insurance policy is easy. Applying is not hard, either. But for felons, it can be hard to close the deal because of the factors the insurance company use to evaluate a homeowner’s insurance application. As stated above, if they think the property could be at risk of damage because of the felon’s prior history of offense or offenses, they’ll just say no.
Certain characteristics of the home itself can even come into play. For example, older homes or wooden homes can be harder to insure. But by and large, it is the “lifestyle choices” of the person being insured that are looked at with a microscope. So how does one overcome their past and get insurance like everyone else? Well, honestly, part of it is that if they are denied by one company, they just need to be determined and keep looking…
Locating a Felon Friendly Insurance Company
One good piece of advice is, if the felon had car insurance, they might want to simply ask that same company for a homeowner’s insurance policy. If there was no severe history of auto insurance claims, it certainly can help their odds! But again, the felon must always bear in mind, never try to cover up the past. Yes, telling the truth can potentially impact their ability to get coverage, but if the truth is discovered after, it will absolutely impact the deal.
It’s far better to be honest, get denied, and keep looking that to try and cover it up, then get denied later. Do these insurance companies talk to each other? If you lie to one, will they tell the others? It’s possible.
The bottom line is, never give up hope, be forthcoming, and do your best to fix your credit score in advance, if possible. If you’re able to find a mortgage company willing to offer you credit to buy a home, you should be able to find a homeowner’s insurance company… But don’t that that for granted. Do your homework first!
Hopefully this article provided useful information for felons in need of homeowner’s insurance, so they can have the same security and coverage for their home as everyone else!