The Wrong Insurance Company Could Cost You That Home Purchase.
Are you buying a home or making a move in the coming year? There are some insurance industry changes you need to be aware of to avoid potential challenges in insuring your new home purchase or surprising you with costly policy coverage updates you weren't expecting.
Over the past year, the insurance industry has seen many changes. State Farm, for example, is changing their deductible to 1% for new business, while other carriers require home inspections and pre-binder approval.
Additionally, the matching of undamaged roofing and siding materials is now typically excluded from coverage unless an endorsement is added back onto the policy. Roof coverage also varies depending on age, and premiums have been increasing due to increased claims and repair costs.
Below are a few points to take note of regarding changes that have taken place throughout the insurance industry over the past year.*
1. Deductible changes – Some carriers are changing their deductible to 1% for new business. This means that if you have dwelling coverage of $400,000 on your homeowner’s policy, your deductible will be $4,000. Be aware of your deductible limit so you know what will be coming out of your pocket if a claim is filed and implemented.
2. Home inspections – When a new home policy is issued with a carrier, it is typical for an inspector to come out to the property to take photos and measurements. This is an exterior inspection but if your home value is $750,000 or more, they will require an interior/exterior inspection. Carriers are becoming pickier when performing these inspections. They're looking more closely at the level of wear and tear to a property, roof condition, and trees overhanging on the property. They have the authority to terminate coverage within a 60-day window of the start date of the new policy if there are hazards that do not meet the company guidelines. This cancelation is noted in an industry-wide shared database and can affect mortgage approval or the ability to access other insurance solutions.
3. Matching of undamaged roofing and siding – Most carriers in MN have changed their policy language to exclude coverage for matching materials of undamaged roofing and siding. This means that if you file a claim and only a portion of your siding is damaged, insurance will pay for the damaged parts but if they cannot find replacement siding that matches the undamaged parts, they will not pay to re-side the whole house. This coverage can, with most carriers, be added back onto your policy with an endorsement.
4. Roof coverage – This is not new to many companies but now is the “norm” with insurance policies in the state of Minnesota. An asphalt roof will only have full replacement cost coverage if it is less than 15 years old. Once the roof exceeds the 15-year threshold, coverage changes to “actual cash value” for the materials. There are still a few carriers in Minnesota that will cover a roof over 15 years old with full replacement coverage. Additionally, more expensive roof installations with longer warranty lengths are now treated differently when it comes to deductibles. Instead of the standard deductible, some companies are initiating a valued deductible and charging a percentage rate of that value. So, that $65,000, a 50-year warrantied metal roof may cost you more out of pocket to replace than if you had a comparably sized $40,000, 30-year asphalt roof.
5. Pre-bind approval – some carriers have implemented a pre-bind pause for new business. This means that the agent no longer has the authority to bind new policies until the company underwriters have reviewed the quotes, prior insurance history reports, and prior property loss or claim record reports. This can cause closing delays on that new home purchase and put your purchase in jeopardy. Ask questions of your insurance company before the home purchase/sales contract is finalized.
6. Premium - Insurance premiums have increased with every carrier over the past year, and we are seeing them continue to rise due to increased claims and repair costs. Insurance companies have the right to increase those premiums at any time.
Each insurance company makes changes at a different pace, with varying priorities, and with different rules for these areas of policy change. And, when changes are implemented, insurance companies are required to email you updated policy declarations — but do you know what to look for?
It can be challenging to understand policy language and notice any potential gaps in your coverage occurring without proper explanation and management of that policy. So, knowing what limitations or changes have been implemented by your insurance company and how they can already influence your policy is vital.
That's why it's essential to have a knowledgeable independent insurance agent on your side — someone you trust to manage your policies in a complex and shifting market.
An agency with access to multiple carriers, experience working within multiple areas of insurance, and working knowledge about those carriers' differences in policy inclusions and exclusions can help ensure that all your needs are met.
Additionally, an easy-to-access, proactive independent insurance agent is even more critical. You want someone who will keep you informed about those changes and options so you can be assured you have the most comprehensive coverage and the best available rates for you and your business today. You also want to avoid any unforeseeable and costly claims and repairs later on.
Do you have more questions or need a solid referral to a strong local insurance company and provider? Reach out to our team today!
*Resources for this article came from a local insurance company, and insurance experts, TheInsuranceShop.us as well as The Balance.
