The Wrong Insurance Company Could
Cost You That Home Purchase.
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.
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.
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.
are a few points to take note of regarding changes that have taken place
throughout the insurance industry over the past year.*
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.
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.
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.
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.
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.
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.
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?
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.
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
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.
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.