Due to extreme weather or potentially damaging storms, you may hear the following from your insurance agent, “we are currently experiencing a moratorium with your insurance company.” They will go on to explain that under a moratorium, they cannot write a new policy, make policy changes, or add endorsements until the moratorium is lifted. Your existing policy remains in force, and the terms of your policy have not changed.
What is an insurance moratorium?
A moratorium is when an insurance provider temporarily stops selling or updating policies. Generally, this occurs leading up to or immediately after a widespread disaster and is based on location.
What will a moratorium affect?
New policies: You might not be able to buy a new insurance policy for the affected coverage during the moratorium.
Changes: Making changes to your existing policy, like adjusting deductibles or coverage, might be on hold, too.
Renewals: Renewals for existing policies usually still happen unless the insurance company announces otherwise.
Here’s an example:
Imagine a big storm is brewing offshore. You realize you need an umbrella, but everyone else suddenly rushes to the store, too. Now, the store runs out of umbrellas!
An insurance moratorium is like that store temporarily closing its doors during the storm. It’s when an insurance company decides to pause selling or changing policies for a specific type of coverage, usually before a major event like a hurricane, wildfire, or flood.
Why do insurance companies issue moratoriums?
To avoid overextending themselves or taking on too much financial risk. This mechanism is used to keep insurance companies financially stable so they can continue to respond to claims filed by existing customers. The explanation can be explained by three main considerations made by your insurance company.
- Risk Management. During an event, the chance of claims skyrockets. The insurance company needs to make sure they can handle existing claims before taking on new ones. Think of it as making sure all the current customers are cared for before they take on new ones.
- Fairness: If everyone buys insurance right before a disaster, it’s not fair to those who’ve been paying all year round. The moratorium prevents people from last-minute shopping for coverage they weren’t prepared for.
- Practicality: Handling a flood of new policies during a big event is chaotic and slows down the whole process. This will make it more difficult to service existing customers.
So, if your insurance company has issued a moratorium, know that, as a current customer, this will be an inconvenience, but it is meant to keep your best interests in mind.
How long will the moratorium last?
The good news is moratoriums are temporary. The duration of the moratorium is at the discretion of the insurance company. They typically lift moratoriums once the threat of disaster has passed.
What can my agent do to help?
Unfortunately, your agent’s hands are tied until the moratorium is lifted. We, like you, need to wait until the moratorium is lifted. Your insurance company, not the agency, issues the restrictions. Once the moratorium is lifted, we will let you know so we can help you with your insurance needs.
As agents, we understand the frustration when this happens and will work to help you with your request as soon as possible.
