Real-world context: Why these risks are rising
- Climate-driven property risk is increasing. The Swiss Re Institute reports U.S. severe convective storms drove a record ~$60B in insured losses in 2023, with overall global natural catastrophe losses above $100B for the fourth year in a row (Swiss Re Institute, sigma, 2024).
- Flood exposure is broader than many maps show. First Street Foundation estimates about 14.6 million U.S. properties face substantial flood risk, beyond what FEMA’s traditional maps capture (First Street Foundation, 2023).
- Vacancies are common. The U.S. Census Bureau regularly counts millions of vacant housing units nationwide; long-term vacancies persist due to inheritance, renovations, relocations, and investment holds (U.S. Census Bureau, Housing Vacancies and Homeownership).
- Admitted insurers are retrenching in some geographies and property types. The U.S. surplus lines market has grown to meet “non-standard” demand—AM Best notes record surplus lines premium with double-digit growth continuing through 2023–2024 (AM Best, U.S. Surplus Lines Market Segment Report, 2024).
Who should read this
- Homeowners or heirs with a vacant property for sale, renovation, probate, or relocation.
- Real estate investors and property managers (single-family rentals, small multifamily, fix-and-flip).
- Owners in high-risk zones: coastal wind/hail, wildfire-prone areas, high-crime ZIP codes.
- Properties with “distressed” characteristics: prior losses, older roofs, nonstandard wiring, or unique construction.
- Homes in Special Flood Hazard Areas (A/AE/VE) or properties that need higher or more flexible flood limits than NFIP.
- Short-term rental hosts with amenities many standard carriers exclude (pools, trampolines, dock exposure).
- Lenders and HOAs seeking to understand coverage when occupancy or risk profile changes.
What is surplus lines insurance (for vacant homes, flood zones, and unique risks)?
Surplus lines insurance is coverage placed with nonadmitted insurers when admitted (standard) carriers will not insure a risk at an adequate price or at all. It is:
- Regulated at the state level but sold by licensed surplus lines brokers.
- Often required for risks that are high hazard, unique, or distressed (vacant properties, coastal wind, high wildfire score, unusual construction, prior losses).
- Flexible in underwriting and coverage forms compared to admitted markets.
- Not typically protected by state guaranty funds if the carrier becomes insolvent.
- Subject to surplus lines premium taxes and potential stamping office fees.
Why this sub-niche matters in 2025
- More properties sit vacant for longer due to higher interest rates, slow sales cycles, and renovation delays.
- Flood risk is being repriced (NFIP Risk Rating 2.0), and private/surplus lines flood options can fill gaps, increase limits, and offer shorter waiting periods or broader coverage in some cases.
- Wildfires, hail, and secondary perils are prompting admitted carriers to tighten eligibility, leaving surplus lines as the practical path to keep properties insured.
- The surplus lines market’s growth and specialization mean faster quotes and customized terms for nonstandard property risks.
Mini case study: Vacant home + theft + flood proximity
A Houston, TX investor purchased a vacant duplex 0.2 miles from a bayou in an AE flood zone. Multiple admitted carriers declined due to vacancy, prior non-weather losses, and roof age (19 years). The investor placed:
- A surplus lines vacant property policy with theft and vandalism included (premiums were ~35% higher than the investor’s previous occupied landlord policy, but it included a “vacancy permit” to buy back common exclusions).
- A private flood policy through a surplus lines carrier for building coverage of $350,000 and contents $15,000 to cover materials stored during renovation.
Two months later, copper theft occurred. Because the surplus lines form specifically included theft of building materials and the insured complied with protective safeguards (doors rekeyed, alarm system active, weekly check-ins), the loss was covered (minus a higher AOP deductible than the investor’s prior policy). Sources: FEMA notes 99% of U.S. counties have experienced a flooding event (FEMA), and First Street Foundation underscores widespread flood risk beyond FEMA maps.
Surplus lines vs admitted vs NFIP/private flood: Quick comparison
| Feature/Need | Admitted Home/DP Policy | Surplus Lines Property | NFIP Flood | Private/Surplus Flood |
|---|---|---|---|---|
| Vacant home (>30–60 days) | Often excluded or limited unless endorsed | Designed for vacancy; can add theft/vandalism buybacks | N/A (flood only) | N/A (flood only) |
| High-risk zones (coastal/wildfire/high crime) | Frequently declined or restrictive | Broad appetite; bespoke terms | Available nationwide but only for flood | Broader flood appetites, higher limits |
| Coverage flexibility | Standardized forms | Manuscript/negotiated endorsements | Fixed program rules | Variable; can add extras (e.g., ALE/shorter wait) |
| Limits | Common caps | Higher single-risk limits; layering possible | Dwelling up to $250k; contents up to $100k residential | Often up to $1M+ dwelling, varies by carrier |
| Deductibles | Standard | Custom; percent deductibles common | Set options | Flexible; named-storm/wind can vary |
| Pricing | Usually lower | Usually higher due to hazard | Subsidized/actuarial by RR2.0 | Risk-based, sometimes competitive |
| Guaranty fund | Yes | Typically no | Federal program | Typically no (if surplus) |
Core features to look for (vacant homes, flood zones, unique risks)
- Vacancy permit or vacant dwelling form (explicitly covers unoccupied status).
- Theft, vandalism, malicious mischief inclusion (many base policies exclude for vacancy).
- Builders risk/renovation coverage if work is ongoing (including theft of building materials).
- Wind/hail or named storm coverage in coastal counties; wildfire endorsements where applicable.
- Replacement cost vs actual cash value (ACV) on buildings and roofs.
- Ordinance or law coverage for code upgrades after a loss.
- Liability/premises liability for vacant land/structures.
- Protective safeguards endorsements (alarms, sprinklers, heat maintained) and your ability to comply.
- Flood options: NFIP vs private/surplus flood; higher limits, basement coverage specifics, waiting periods, and loss of use/ALA (rare in flood).
Common exclusions and limitations
- Wear and tear, deterioration, maintenance issues.
- Long-term seepage/leakage, mold/fungus (often sublimited).
- Intentional damage, illegal acts.
- Earth movement (unless endorsed separately).
- Off-premises power failure (varies).
- Vacancy-related theft/vandalism unless specifically bought back.
- Termite/animal damage.
- Water backup/sump overflow (often optional endorsement).
- For flood: NFIP excludes additional living expenses and most finished-basement finishes; private policies vary.
What sets surplus lines apart
- Appetite for tough risks (vacancy, distressed property, unusual construction).
- Speed and flexibility: underwriters can tailor endorsements and deductibles.
- Higher or stackable limits via layered programs and shared markets.
- Broker-driven placement with diligent search requirements and surplus lines filings.
- Tradeoffs: generally higher premiums, fees/taxes, nonstandard forms, and no guaranty fund backstop.
Quick pre-bind checklist
- Property status: vacancy start date, expected occupancy date, renovation scope.
- Photos and documentation: interior/exterior, roof, security measures, utilities on/off.
- Prior losses and mitigation taken since.
- For flood: elevation certificate (if available), foundation type, lowest floor elevation, distance to water.
- Lender/HOA requirements: minimum limits, deductibles, mortgagee clause.
- Protective safeguards you can realistically maintain (alarms, heat, weekly inspections).
Step-by-step: How to choose the best surplus lines policy
- Define your risk profile: vacant, flood zone, coastal wind, wildfire, prior losses, renovation budget and timeline.
- Try admitted first (unless on your state’s export list). Many states require a diligent search of admitted markets before surplus lines placement.
- Work with a licensed surplus lines broker or retail agent with access to multiple wholesalers/MGAs. Ask for at least 2–3 market options.
- Verify financial strength: seek A- (Excellent) or better AM Best ratings where possible. Confirm current rating before binding.
- Compare coverage forms—not just premiums:
- Vacancy endorsements and theft/vandalism buybacks.
- Wind/hail or named-storm terms and percentage deductibles.
- Replacement cost vs ACV, roof surfacing schedules.
- Ordinance or law, water backup, mold limits.
- Builders risk extensions if renovating.
- Scrutinize warranties and conditions: protective safeguards, inspection compliance, occupancy changes, repair timelines.
- Model deductibles against likely loss types (wind/hail percent vs AOP flat).
- Understand fees and taxes: surplus lines taxes, stamping fees, minimum retained premiums, policy fees.
- Confirm lender acceptance and mortgagee provisions.
- Get a clear binding timeline and evidence of insurance that satisfies closing or lender deadlines.
Claims tips, red flags, and common mistakes
- Before a loss: keep time-stamped photos/video at binding and after any material changes; maintain logs of weekly property checks; save receipts for security upgrades and materials.
- Report promptly and follow the policy’s proof-of-loss timelines (NFIP requires signed proof of loss typically within 60 days; surplus lines property policies commonly require prompt notice and cooperation—deadlines will vary by form).
- Preserve evidence and prevent further damage (board-up, tarp, water extraction).
- Compliance matters: if your policy requires an operating alarm, heat maintained above a set temperature, or weekly inspections, document it. Breaching safeguards can void coverage.
- Watch for: ACV-only roof settlements, cosmetic-damage exclusions for metal roofs, theft exclusions during vacancy, wind-driven rain limitations, high named-storm deductibles.
- Common mistakes: letting a home sit vacant without notifying the insurer; not buying back theft/vandalism; underinsuring the building (coinsurance penalties); missing surplus lines taxes/fees in your cost comparison; assuming NFIP includes ALE (it doesn’t).
Top surplus lines providers for these risks (neutral snapshot)
Note: Availability varies by state and risk. Always verify current AM Best ratings and specific appetite.
| Name | Pros | Cons | Payout (financial strength/claims resources) | Notable Features |
|---|---|---|---|---|
| Lexington Insurance (AIG) | Broad CAT capacity; strong appetite for high-hazard property | Minimum premiums/fees can be higher | AM Best typically A; large national claims infrastructure | Coastal wind, layered programs, manuscript flexibility |
| Lloyd’s of London (via syndicates/coverholders) | Highly customizable; niche programs for vacant/renovation and private flood | Forms vary by syndicate; claims experience varies by TPA | Market rating historically A-level; layered capacity | Bespoke endorsements, higher flood limits via private markets |
| Kinsale Insurance Company | Focused E&S specialist; efficient underwriting | Tighter guidelines in some classes | AM Best A (Excellent) | Vacant, renovation, small commercial property |
| Nationwide E&S/Scottsdale | Broad property appetite; strong distribution via wholesalers | May require higher deductibles in CAT zones | AM Best A+ (Superior) | Vacant dwelling, landlord, builders risk options |
| Markel Specialty (E&S) | Specialty programs and niche risks; investor-friendly | Not all states/risks available | AM Best A (Excellent) | Short-term rental, vacant/renovation offerings via MGAs |
| Westchester Surplus Lines (Chubb) | High limits; strong engineering and claims | Appetite can skew to larger schedules | AM Best A++ (Superior) | Large/complex risks; tailored wildfire/wind underwriting |
| RLI (E&S) | Strong financials; pragmatic underwriting | Limited distribution, selective | AM Best A+ (Superior) | Specialty property endorsements; investor-oriented |
| Nautilus Insurance (W.R. Berkley) | Competitive for small property accounts | Appetite varies by territory | AM Best A+ (Superior) | Vacant property, contractor/builder’s risk via MGAs |
Short, neutral brand notes
- Lexington (AIG): Often a go-to for high-hazard property with layered capacity. Expect manuscript terms and clear CAT deductibles.
- Lloyd’s syndicates: Useful when you need highly tailored solutions (vacant + theft of materials, unique construction, or private flood with higher limits). Experience depends on the specific coverholder/TPA.
- Kinsale: E&S-focused carrier known for targeted appetite and efficient quoting through wholesalers; competitive on smaller habitational/vacant risks.
- Nationwide E&S/Scottsdale: Well-known for vacant dwelling and landlord solutions, often accessible through many wholesalers; pricing reflects CAT exposure.
- Markel Specialty: Niche-friendly, including short-term rentals and renovations; check form specifics for theft/vandalism and water backup.
- Westchester (Chubb): Strong choice for larger values and complicated exposures; engineering support helps with wildfire and wind mitigation.
- RLI: Financially strong with selective appetite; often valued for consistent claims handling.
- Nautilus: Practical for small-to-mid property; appetite can shift by state and loss history.
FAQ (US-specific)
Q: How long can my home be vacant before coverage problems start?
A: Many admitted policies restrict coverage after 30 or 60 consecutive days of vacancy, especially for theft, vandalism, and water damage. Surplus lines vacant dwelling policies are designed to cover longer vacancy periods—verify the definition of “vacant” and any inspection requirements.
Q: Is surplus lines insurance more expensive?
A: Usually yes, because it insures higher-risk or nonstandard properties. Expect higher deductibles, possible policy fees, and surplus lines taxes. Compare the total cost, not just base premium.
Q: Will my lender accept surplus lines?
A: Generally, yes—lenders care about limits, mortgagee clauses, and carrier financial strength. Confirm AM Best ratings and provide the lender with the insurer’s details and evidence of insurance early.
Q: Flood coverage: NFIP or private/surplus?
A: NFIP is widely available with standard terms and caps ($250k building for 1–4 family homes). Private/surplus flood can offer higher limits, potentially broader coverage, and different waiting periods. In some high-risk zones or for high values, combining or selecting private flood may be advantageous.
Q: Does vacant property insurance cover theft of materials?
A: Not by default. Many policies exclude theft and vandalism during vacancy unless you add a buyback/endorsement. If you’re renovating, ask for theft of building materials and tools on-site and any security requirements.
Q: Are named storm or wildfire deductibles different?
A: Yes. Coastal properties often carry
