Nassau County’s Insurance Crisis: How Dropped Coverage Is Leading to Mortgage Default and Foreclosure

Nassau County homeowners are facing an unprecedented crisis as major insurance companies abandon the Long Island market, leaving thousands of residents scrambling to find coverage or risk losing their homes to foreclosure. This growing problem has created a domino effect that threatens the financial stability of countless families across the region.

The Scale of the Problem

Major insurers including Allstate, MetLife, Travelers, Liberty Mutual and Nationwide have begun pulling out of Long Island, citing overexposure and risk due to potential hurricane strikes. At least half a dozen companies have either stopped writing policies on Long Island or refused to renew existing policies, some of which were decades old. Many constituents, particularly from areas like Howard Beach, have reported that major insurance companies were dropping their homeowners policies, even though they had never filed a claim.

The number of New Yorkers forced to take out “extreme” insurance after being dropped by conventional insurance companies has more than doubled, forcing homeowners to pay thousands more each year on premiums. If you live in a coastal area, such as Long Island, your options are more limited, and you may end up with less coverage at a higher price.

The Connection to Mortgage Defaults and Foreclosure

The insurance crisis directly threatens homeowners’ ability to maintain their mortgages. When homeowner’s insurance policies lapse or are canceled, mortgage lenders may purchase force-placed insurance on behalf of borrowers to protect their interests. This lender-placed insurance is typically more expensive than coverage homeowners could obtain independently and kicks in when your homeowner’s insurance policy lapses, is canceled or is deemed insufficient by the lender.

If force-placed insurance leads to significantly higher monthly mortgage payments, struggling to afford the higher payment could result in missed mortgage payments or foreclosure, which can harm your credit. In the worst-case scenario, if homeowners don’t address the insurance lapse promptly, their mortgage could be recalled, meaning the lender demands full repayment of the mortgage amount immediately. This can be financially devastating because borrowers need to come up with the entire mortgage balance on short notice, potentially forcing them to sell their home or face foreclosure.

Limited Options for Dropped Homeowners

When traditional insurers drop Nassau County homeowners, their options become severely limited. For homeowners who are dropped, finding traditional coverage from another company can be either costly or impossible, with those unable to find traditional insurance forced to resort to “extreme” insurance, known as excess line or surplus insurance. This insurance is only available to homeowners who have been denied coverage by every licensed insurer in New York and is provided by insurers licensed in other states or foreign countries. Despite being typically meant for high-risk commercial enterprises, more Long Island homeowners have been forced to purchase this insurance, typically paying double or more for less coverage.

The Coastal Market Assistance Program (C-MAP) is a voluntary network of insurers and insurance producers that assist New York homeowners in coastal areas find insurance coverage. The program is administered by NYPIUA and is for owner-occupied, one-to-four family dwellings located in areas including Nassau County. However, before applying to C-MAP, a homeowner must have received a non-renewal, cancellation, or conditional non-renewal notice from their existing insurer for a reason other than non-payment of premium.

The Financial Impact on Families

The crisis has created severe financial hardship for Nassau County families. One example shows a homeowner who was unable to obtain homeowner’s insurance from an insurer licensed in New York State was forced to open an excess line policy where she now pays $2,400 annually with a $1,000 deductible. The average homeowners insurance premium in Nassau County is about $1,200 to $1,600 per year, making the forced transition to excess line coverage particularly burdensome.

Legal Assistance Is Critical

When homeowners face the threat of foreclosure due to insurance-related mortgage defaults, seeking experienced legal counsel becomes essential. A qualified Foreclosure Attorney Nassau County can help navigate the complex legal landscape and explore available options to protect homeowners’ rights.

The Frank Law Firm P.C. is a foreclosure law firm in Nassau County, NY, offering assistance with mortgage modifications and loan restructurings. A foreclosure attorney can assist homeowners in various ways, including reviewing mortgage documents to help understand legal rights and obligations, negotiating with lenders to find solutions that work for both parties, and representing homeowners in court to defend their homes against foreclosure.

The attorneys at The Frank Law Firm P.C. offer personalized service and a commitment to achieving the best outcome for each client, taking the time to understand each unique situation and working tirelessly to find the best solution.

Resources and Next Steps

Nassau County residents struggling with mortgage foreclosure issues are invited to attend FREE Mortgage Foreclosure Clinics at the Nassau County Bar Association (NCBA) in Mineola where they can meet with volunteer attorneys. The Mortgage Foreclosure Assistance Project, funded by the New York State Attorney General’s Homeowner Protection Project (HOPP), provides free direct legal services to homeowners facing foreclosure or concerns about being in default.

The insurance crisis in Nassau County represents a serious threat to homeownership stability. As traditional insurers continue to exit the market, homeowners must act quickly to secure alternative coverage and understand their legal rights. Those facing potential foreclosure due to insurance-related mortgage issues should seek immediate legal assistance to explore all available options and protect their homes.