Home Insurance Challenges: How Real Estate Agents Can Help

Last Updated on October 31, 2025 by Elizabeth Nolan

The home insurance landscape has fundamentally shifted, creating unprecedented challenges for real estate transactions across the United States. Average property insurance premiums have risen by more than 30 percent since 2020, and many buyers are discovering they cannot secure the homeowners insurance required for their mortgage financing. As a real estate professional, understanding how to navigate these turbulent waters isn’t just helpful—it’s essential for protecting your clients and your business.

The Current State of Home Insurance: What Every Agent Must Know

The insurance crisis isn’t confined to traditionally high-risk areas like California’s wildfire zones or Florida’s hurricane corridors. Insurers are becoming more selective about the risks they’re willing to take on, especially in areas prone to natural disasters, and this selectivity is expanding to regions previously considered low-risk.

Understanding High-Risk Designations

Insurance companies evaluate risk based on multiple factors that extend far beyond natural disaster zones:

Geographic Risk Factors:

• Wildfire exposure areas (WUI zones)
• Flood plains and coastal regions
• Hurricane and tornado corridors
• Areas with aging infrastructure

Property-Specific Risk Factors:

• Homes built before modern building codes
• Properties with older electrical, plumbing, or HVAC systems
• Homes with specific construction materials (wood shake roofs, brick veneer)
• Properties with previous insurance claims
• Dwellings in areas with limited fire department access

The Ripple Effect on Real Estate Transactions

When buyers cannot secure homeowners insurance, the entire transaction is jeopardized. Cash buyers face difficult decisions about proceeding without coverage, while financed purchases typically fall through entirely since lenders require insurance as a condition of the mortgage.

Strategic Solutions for Real Estate Agents

1. Proactive Risk Assessment and Disclosure

Early Property Evaluation Begin insurance discussions during the listing consultation. Research the property’s insurance history and identify potential red flags:

• Review the property’s CLUE (Comprehensive Loss Underwriting Exchange) report
• Check local wildfire risk maps and flood zone designations
• Assess the property’s construction date and materials
• Identify any unique features that might affect insurability

Transparent Communication Set realistic expectations with both buyers and sellers about potential insurance challenges. Include insurance considerations in your initial buyer consultation and provide educational materials about the current market conditions.

2. Building Your Insurance Professional Network

Cultivate Relationships with Specialized Agents

Not all insurance agents are equipped to handle high-risk properties.

• Surplus lines brokers who specialize in hard-to-place risks
• Independent agents with access to multiple carriers
• Agents experienced with FAIR plans and alternative markets
• Commercial insurance specialists who may write high-value homes

Create a Referral System

• Tier 1: Standard market agents for typical properties
• Tier 2: Specialists for moderately challenging properties
• Tier 3: Surplus lines brokers for high-risk situations

3. Alternative Property Insurance Solutions

FAIR Plans: The Safety Net FAIR insurance policies are policies of last resort, designed for homeowners in high-risk areas unable to get coverage from a standard provider. While coverage is basic and costs are higher, FAIR plans ensure mortgage qualification remains possible.

Currently, 33 states plus the District of Columbia offer FAIR plans. Key states include: California (California FAIR Plan), Texas (Texas FAIR Plan), Florida (Citizens Property Insurance Corporation), Louisiana (Louisiana Citizens Property Insurance Corporation)

Surplus Lines Market For properties that don’t qualify for standard insurance but may not need FAIR plan coverage, surplus lines insurers offer alternatives. These carriers can provide broader coverage options than FAIR plans, competitive pricing for specific risk types, and faster underwriting.

Coverage focuses on homes in high-risk areas, high-value/unique homes, homes with a history of claims, vacant properties and homeowners who want higher coverage limits. 

Captive Insurance Programs Captive insurance is particularly attractive for real estate because it can provide tailored coverage for risks that traditional insurers may exclude or price prohibitively – property damage from windstorms, fires, and vandalism. They can also extend to include perils like floods, earthquakes, and terrorism. 

Captives can be formed to address specific risks unique to the homeowner or a group of homeowners allowing for personalized risk management.

4. Risk Mitigation Strategies

Property Improvements That Matter Help clients understand which improvements can significantly impact insurability.

Fire Resistance Measures:

• Class A fire-rated roofing materials
• Defensible space creation (100 feet minimum)
• Fire-resistant landscaping
• Ember-resistant vents and screens
• Non-combustible siding materials

General Risk Reduction:

• Updated electrical systems
• Modern plumbing and HVAC systems
• Security system installation
• Regular maintenance documentation

Documentation and Certification Encourage clients to obtain certifications for risk reduction improvements:

• Wildfire mitigation assessments
• Elevation certificates
• Energy efficiency certifications
• Security system documentation
• Regular maintenance records
• Is their current insurance transferrable to the buyer?

5. Transaction Management Strategies

Extended Contingency Periods Build longer insurance contingency periods into purchase agreements if possible, especially in high-risk areas. Consider:

• 21-30 day insurance contingencies instead of standard 7-14 days
• Specific language addressing surplus lines and FAIR plan options
• Clear protocols for extending contingencies if needed

Alternative Financing Strategies When traditional mortgages become impossible due to insurance requirements:

• Portfolio lenders may offer more flexibility
• Bridge financing for property improvements before permanent financing
• Owner financing arrangements with appropriate insurance protection

Here’s where having a solid network of local mortgage brokers is key. These transactions are for people not websites.

Educational Resources for Clients Provide comprehensive educational materials:

• Insurance market overview documents
• State-specific FAIR plan information
• Risk reduction improvement guides
• Financing alternative explanations

Technology Tools and Resources

Property Risk Assessment Tools:

• First Street Foundation flood and fire risk maps
• FEMA flood zone maps and historical data
• State-specific wildfire risk databases

Documentation and Communication Systems:

Client Management Integration Integrate insurance considerations into your CRM system:

• Flag high-risk properties automatically
• Track insurance application progress
• Maintain specialist referral databases
• Document risk mitigation efforts

Related article: The Ultimate Guide to CRM Platforms for Real Estate Agents: Boost Your Client Relationships and Close More Deals in 2025

Market-Specific Considerations

California: The Epicenter of Change

California’s insurance crisis has reached critical levels, with major insurers withdrawing from the market entirely. The FAIR Plan provides basic fire insurance coverage for high-risk properties when traditional insurance companies will not. California agents must understand:

• AB 2167 requirements for wildfire risk disclosure
• FAIR plan application processes and limitations
• Surplus lines market opportunities
• Recent regulatory changes affecting coverage

California Department of Insurance

Florida: Hurricane and Flood Challenges

Florida’s unique exposure to both hurricane and flood risks creates complex insurance scenarios. Agents must navigate:

• Citizens Property Insurance Corporation procedures
• National Flood Insurance Program requirements
• Wind versus flood coverage distinctions
• Assignment of benefits considerations

Florida Realtors Consumer Guide

Texas: Diverse Risk Landscape

The state of Texas presents varied challenges across different regions:

• Coastal hurricane exposure
• Hail and tornado risks in the interior
• Wildfire exposure in rural areas

Texas Department of Insurance

Staying Informed on Market Changes

Rising personal home insurance rates, fueled by escalating claims costs, increasing property values and the growing frequency of natural disasters, will all have a profound impact on market dynamics. Stay on top of the National Association of Insurance Commissioners (NAIC) updates for your area.

Resources and Professional Partnerships

Government and Regulatory Resources

• FEMA Risk Rating 2.0 resources for flood insurance guidance
• State insurance department consumer assistance programs
• Local emergency management office risk assessment resources

Professional Organizations and Associations

• National Association of REALTORS® Consumer Guide
• Independent Insurance Agents & Brokers of America (IIABA) professional networks
• National Association of Insurance Commissioners (NAIC) consumer guides
• Local real estate association insurance committees

Conclusion: Turning Challenges into Opportunities

Navigating home insurance in 2025 can present significant challenges, but it also creates opportunities for real estate professionals who proactively adapt their practices. By developing expertise in alternative insurance solutions, building strong professional networks, and positioning yourself as a knowledgeable resource for clients facing insurance challenges, you can differentiate your services and build a more resilient business.

Success in this new environment requires ongoing education, strategic partnerships, and a commitment to client advocacy that goes beyond traditional transaction management. The agents who thrive will be those who embrace the complexity of the current market and develop the expertise to guide their clients through these unprecedented challenges.

Remember that every client you help navigate these insurance challenges becomes a powerful advocate for your services. In a market where many agents are unprepared for these complexities, your expertise becomes a significant competitive advantage that can drive referrals and repeat business for years to come.

The insurance landscape will continue evolving, but the fundamental need for knowledgeable, well-connected real estate professionals will only grow stronger. Position yourself as that indispensable resource, and you’ll find opportunities for growth even in these challenging times.