Moratorium

In homeowners insurance, a moratorium is a temporary ban that stops insurers from canceling or nonrenewing policies in an area hit by a disaster. A legislature can enact it by statute, or the insurance commissioner or governor can order it, typically after a declared emergency. Its purpose is to keep people who have just lost property, or who live next to the damage, from losing coverage when replacement coverage is hardest to find.

California's Insurance Code section 675.1 is the best-known example. For one year after the governor declares a state of emergency for a wildfire, insurers may not cancel or nonrenew residential policies in ZIP codes within or adjacent to the fire perimeter based solely on the fact that the wildfire occurred, and the Insurance Commissioner issues a bulletin listing the covered ZIP codes. Other states have used emergency orders after hurricanes, each with its own terms.

A moratorium has limits. It does not stop cancellation for nonpayment or material misrepresentation, does not force an insurer to write new business, and does not freeze premiums at renewal. When it ends, a nonrenewal can follow, so use the time to shop and to find out whether a residual market plan is available. See the moratorium guide and the nonrenewal entry.