Image: Dog © Alley Cat Productions, Brand X, Corbis

Related topics: insurance, home insurance, insurance claims, homeowners insurance, insurance rates

Insurance broker Doug Akiyoshi once walked into a backyard in Seattle to take some pictures of a potential client's house.

"Suddenly, this dog appeared out of nowhere," he said. "It was a Lab, and it was in attack mode. And I climbed that wall as fast as you can imagine."

Akiyoshi, based in Mercer Island, Wash., said he later phoned the owners and told them: "You know, you've got a problem here. Does that dog have a biting habit?"

"And they said, 'Well, that was one reason why we got dropped by our other carrier,'" Akiyoshi recounted.

He informed them that the dog was why he, too, would be declining coverage.

Homeowners often learn the hard way that standard insurance policies don't cover natural disasters such as floods and earthquakes. But less dramatic -- and less well-known -- problems can put even a standard policy out of reach.

Dog bites, for example, account for one-third of homeowners' liability claims, costing insurers $412 million in 2009. As a result, agencies have all but blacklisted homeowners with pit bulls, Rottweilers and other dogs included on the U.S. Centers for Disease Control and Prevention's list of deadly breeds. But a dog of any breed with a history of biting -- such as the dog belonging to Akiyoshi's would-be clients -- is likely to send insurers running.

Knob and tube? Time to rewire

Knob-and-tube wiring was the main method of electrical wiring from the 1880s through the 1930s, lasting even into the 1950s. Back then, a single outlet per room was common, and the average household's few appliances didn't collectively suck much power.

What concerns insurers is the strain that today's power-hungry appliances place on older wiring. Knob-and-tube wiring typically doesn't have a ground, and you're not supposed to use modern three-hole outlets unless the ground is functional.

Fuse boxes, which often accompanied older wiring, pose another problem. As a safety feature, the fuses have thin slivers of metal designed to "blow" when too much electricity courses through them, shutting off power. But homeowners occasionally try to beat the system and keep the electricity flowing by sticking pennies, which are much thicker, into the fuse sockets. Doing so makes the wiring inside a house's walls hot -- so hot that the house could catch fire.

Good luck convincing an insurance agent that you would never try this.

Some regular carriers will cover you without making you tear out all your knob-and-tube wiring. They can live with it running between a wall switch and overhead lights, assuming you've otherwise rewired with grounded outlets for power-hungry appliances such as microwave ovens, TVs and hair dryers.

The bad news: Paying for those upgrades, plus a new circuit breaker, costs thousands of dollars. So "affordable" insurance doesn't necessarily come cheap.

Bottom line: Most carriers consider extensive knob-and-tube wiring a fire hazard and won't insure a house that has it.

Past claims or a dropped policy can doom you

Let's say you've been living in a condo when you get a job across the country, somewhere you can afford to buy a house. You cancel your condo homeowners policy and move into an apartment until you can occupy your single-family residence.

But 18 months ago, while still in the condo, you filed a water-damage claim under your homeowners policy -- a claim easily accessible to all carriers through a shared database.

You can pretty much cue up "game over." Filing any claim can be the kiss of death when your policy comes up for renewal. But you're even more likely to be a dead duck if you let your insurance lapse.

That's because carriers hold new clients to even tougher standards. And by letting your policy lapse, that's what you've become.

A State Farm agent explained the actuarial reasoning this way: Data show that about 70% of customers never have a loss. Of the remainder, 18% file only one claim, leaving only 12% who ever file two or more. So underwriters wield a generally unyielding measuring stick: People who file claims do not fit the same low-risk profile as people who don't.

A carrier may show mercy to existing customers, depending on the type and severity of the claim and on how long they've been clients. But if you've previously filed a claim and let your homeowners insurance lapse before shopping for a new policy, you're probably out of luck in the mainstream market.

We are not family

Does your household consist of more than two unrelated people living under the same roof? If so, expect a "thanks, but no thanks" response from most regular carriers when you go shopping for homeowners insurance.

Insurance companies view such households as high-risk bohemian spaces and will therefore generally decline to cover you. Their thinking:

  • Residents will be inconsistent about locking doors.
  • Such living arrangements come perilously close to a boardinghouse, with a greater chance of vandalism, stoves getting left on and more foot traffic than a more traditional household.
  • Par-TAY Friday night, or any night, à la "Animal House."

Pride of ownership -- or lack thereof

It's one thing to be a slob around the house. A man's home is his castle, right?

But when slovenliness spills outside -- broken-down appliances on the lawn or unregistered clunkers in the driveway -- insuring your castle could prove impossible. Insurers like to see evidence that you're maintaining your property.

From an insurance agent's point of view, signs of trouble that don't reflect well on you, raise liability issues, and will likely rule out your chances for standard coverage include:

  • A moss-covered roof.
  • A lack of gutters or downspouts.
  • Peeling paint.
  • Buckled sidewalks or driveways caused by tree roots.
  • A seriously overgrown yard.
  • Nonworking, unregistered vehicles parked in the driveway or in front of the home.

You can deal with some of the "disrepair" issues listed above yourself. Or you can hire a handyman or contractor to do it. In some cases, including electrical work, it may be necessary to obtain permits.

In addition to making your home insurable through regular channels, the fixes will make it more valuable when you sell.

If all else fails

If repairs aren't on your horizon, your record is riddled with past claims or you don't want to get rid of your dog or your roommates, you can try the so-called higher-risk, "residual" market.

Industry-subsidized programs known as FAIR plans were set up by many states in the late 1960s after riots made it difficult for some people to obtain homeowners insurance. More information is available through the Property Insurance Plans Service Office, or PIPSO, a not-for-profit corporation based in Massachusetts.

PIPSO President Ron Cassesso said it's not possible to make an apples-to-apples comparison between standard and FAIR plan premiums because of the relatively limited coverage under many FAIR plans and because financial data are compiled differently. But he acknowledged that residual market policies generally cost more and provide less coverage.

For people who can afford them or who have no choice but to pay sky-high premiums, another option for homeowners insurance is to deal with companies that offer so-called excess, or surplus, lines. However, that means doing business with unregulated carriers that can basically charge as much as they want.