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As a coastal scientist with the Louisiana Universities Marine Consortium, Alex Kolker is intimately familiar with the damage a hurricane can wreak on the Gulf Coast state.

Even so, he didn’t expect to receive word earlier this year that his homeowner’s insurance provider, Southern Fidelity, had gone bankrupt and that he would need to find a new provider.

Securing a new insurer proved difficult. He eventually had to settle for coverage through Louisiana Citizens, the state-run insurer of last resort. But it came at a high price – a nearly $2,000 increase to his annual premium, or about 50% more than his previous rate.

“According to the two insurance agents I spoke with, Citizens was my only option,” Kolker says. “Many people I know in my neighborhood were in a similar situation.”

While the state was spared the wrath of Hurricane Ian, Louisiana homeowners need to be prepared for the next time they find themselves in a storm’s path.

KEY TAKEAWAYS
  • About 120,000 Louisiana property owners have been left scrambling for new insurance after their providers either went bankrupt or pulled out of the state.
  • Louisiana Citizens, the state-run insurer of last resort, has been forced to fill the gap in many instances, but it’s coming at a steep cost.
  • The state is trying to lure more insurers into the market but there may be more pain before things get better.

What is causing the problem?

Like Florida, Louisiana is in the middle of a property insurance crisis.

As of earlier this month, at least nine Louisiana home insurance companies had gone into insolvency and a similar number of companies announced they will no longer write policies in the state.

Louisiana Insurance Commissioner Jim Donelon estimates that around 120,000 policyholders have lost their policies.

Louisiana Citizens, the state-run insurer, has increasingly been called upon to fill the void, but not without consequences. Earlier this month, the state’s department of insurance approved a 63% increase to Citizens’ insurance premiums, beginning Jan. 1, 2023.

The rate increase won’t affect policyholders until they renew their policies.

“There’s no sugar-coating it – this increase is extremely painful but required by law to make sure Citizens can handle a potential future disaster for its many policyholders,” Donelon says.

Why are insurers leaving Louisiana?

The troubles in the Louisiana property insurance market bear many similarities to those affecting Florida.

But unlike Florida, where high costs related to extensive litigation are cited as the biggest factor, Louisiana’s primary culprit is its vulnerability to hurricanes and flooding.

Since 2020, Louisiana has been struck by multiple major hurricanes, including Hurricanes Laura, Delta and Zeta in 2020 and Ida in 2021. The resulting insurance claims overwhelmed some insurers, particularly those that were relatively small. Other companies simply decided the state was too risky to continue to do business in and have pulled out.

Which companies have left the state?

The tally of insurance providers that have declared insolvency since 2020 includes Access Home Insurance, Americas Insurance, FedNat Insurance, Gulfstream Property and Casualty, Lighthouse Excalibur, Southern Fidelity, State National Fire Insurance and Weston Property & Casualty.

Those that have announced they will no longer write policies in the state include Aegis Security Insurance, AIG Property Casualty, American Reliable Insurance, American Summit Insurance, Bankers Specialty Insurance, Lexington Insurance, Maison Insurance, Republic Fire and Casualty, Unitrin Direct Property & Casualty, Union National Fire and United Fire & Indemnity.

What should you do if your policy is canceled?

Your insurance company is required to give you notice of cancellation so you have time to get new coverage. Here’s what you should do if your homeowners insurance gets canceled to avoid a lapse in coverage.

  1. Begin by calling your insurance provider. Speak to a representative and find out if there is anything you can do to reverse the cancellation. If the provider has gone under, it may not be possible.
  2. Get some quotes. Even if you are able to resolve the issue with your current insurer, this may be an opportune time to look at other options.
  3. Complete repairs or make the required upgrades. It may be your insurer is threatening to drop your policy because it has an aging roof, old wiring or other factors that are making your property too much of a risk. Taking care of this work will be helpful regardless of how you proceed.
  4. Don’t leave it until the last minute. Getting coverage in place might take time, and insurance companies are busy, so don’t wait.

Insurance Commissioner Donelon says the state is actively courting more insurance providers, but unfortunately more residents may be left scrambling for insurance in the meantime. His advice: “Start shopping now.”