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Imminent Threat

Reviewed by Stefan Tirschler

Noun

im·mi·nent threat | ˈɪmənənt ˈθrɛt

Definition: A present and identifiable hazard with a high probability of causing damage.

Some insurance companies considered active wildfires within 50 km of the town to be imminent threats.

What is an imminent threat?

Imminent threat is one insurance term that’s almost self-explanatory: it means there’s something bad, and it’s about to happen.

More specifically, when we’re talking about home insurance, an imminent threat refers to something that’s happening (or about to happen) and is likely to cause an insurable loss: it’s likely to damage property.

One of the most common imminent threats Canadians deal with is wildfire. We’ll mostly talk about that here, but events like floods or hurricanes can be imminent threats, too.

An active wildfire burning close to a town poses an imminent threat to that town, because it hasn’t destroyed the town yet—but it might. By extension, it’s an imminent threat to the homes in that town.

So, what does that mean for home insurance?

Insurance companies often temporarily stop issuing new policies in areas facing an imminent threat. They’ll also pause policy changes for existing policies in the area.

They take those steps because insurance isn’t meant to protect against things that we know are coming; insurance is meant to protect against unexpected events. It wouldn’t be unexpected if a house burns down while it’s got a forest fire knocking on its door.

Forest fires are incredibly destructive. After the 2016 Fort McMurray wildfire insurers stepped up to pay nearly $4 billion, for example. Insurance companies still pay claims from their existing customers when they suffer a catastrophic loss, whether it’s from a forest fire or a different covered peril. Insurers usually won’t, however, agree to take on new customers facing the same threat.

Agreeing to insure a new home facing an imminent threat is simply too risky for most insurers. Underinsured homeowners often scramble to buy an insurance policy when they see a wildfire or a flood threatening their home. Taking on such risky business is outside the underwriting guidelines of most insurance companies.

Which isn’t to say that all insurers refuse to issue policies in areas under threat. Some new homeowners in towns facing a wildfire threat simply needed an insurance policy for their new house; the nearby fire was a coincidence.

Most insurers wouldn’t insure their new home because of the fire, but in most cases these homeowners were able to eventually find insurance for their new property (though often at a higher premium).

An imminent threat is like a pre-existing condition in health insurance.

People who have chronic illnesses may find it difficult (or at least more expensive) to get medical coverage.

When looking at a home facing an imminent threat, home insurers will either decline to insure it because it’s too risky or agree to insure it for a higher premium. Insurance companies first and foremost have a duty to cover the losses of their customers. Agreeing to insure new customers with a high risk of having their homes destroyed would be an irresponsible use of their existing customers’ premiums.

The important points

  • Most insurance companies won’t issue new policies to cover property facing an imminent threat.
  • An imminent threat is something that would be highly likely to cause an insurable loss, and is about to happen (or will likely happen).
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