Top 6 Things That Can Make a Home Difficult to Insure
By Randall Schreffler
Top 6 Things That Make a Home Difficult To Insure
A client recently asked me; “Why does it seem like finding home owners insurance is so difficult for me..ahhhh”? This particular client had a home that seemed to have many of the most common elements that prevent clients from securing home owners insurance at all, let alone securing homeowners insurance in the more affordable marketplace.
As I spoke to various carrier underwriters about the solutions available to this client, it hit me. Many of my real-estate friends might find this information valuable. Knowledge is power and this information might just arm you with the power to “tune” into those things that might make a home difficult, very expensive and near impossible to insure in todays marketplace. Below are a list of the top 6 things that, in my professional dealings, have caused clients a great deal of problems securing home owners insurance. They are in no particular order of importance as they all factor in on the price and eligibility depending on the carrier. *Every carrier’s criteria/appetite is unique and may vary by company.
Prior Claim History – Many carriers look at the last 3 years of homeowner claims history. They look to see how many, how much and what causes of loss there are. Any loss that is turned in by a homeowner will be there loss regardless if they move to a new home. The loss DOES NOT stay with the house or count against the new homebuyer even though it may and likely will show up on the reports run by the agent/carrier. However, again it DOES go with the owner/seller of the home who turned it in at the time of loss, there is no escaping it, at least for 3 years. Depending if the loss was caused by a catastrophic loss from a known storm or just a mishap could be the difference in their decision to insure the risk or not. Each carrier is unique, but this is a factor that they all look at very closely. History has a way of repeating itself and can be the best predictor of future behavior.
Age of Roof – If the age of the property roof is in the 15-25 plus year old range the carrier may say “Not interested”….unless the homeowner can show proof that a partial or full roof renovation was completed in the last 15 or fewer years.
Type of Wiring, Type of Electrical Box – Copper is the only type of wiring most home carriers will readily accept. Couple this with an updated electrical verses fuse box at 100amps or more. If you see a mix of aluminum and copper, that can be really bad or just aluminum the carrier is likely to say “Not interested”….unless the homeowner can show proof that the wiring was updated and meets local code standards.
Another issue to look for in this area is “Knob and Tube Wiring”. If found, get it updated or expect a “Not interested” response from almost every carrier in the industry. Below is a picture of “knob and tube” wiring as many ask what it looks like. I am also including some pictures of the various wiring/electrical boxes you might find in houses today. Electrical panels are preferred by most home carriers and fuse boxes can be an issue for some carriers. If the box is a “twisted mess of wires” you would be well advised to have a qualified, licensed electrician look things over.
Knob and Tube Wiring
Plumbing – Many carriers prefer updated plumbing, but as long as the plumbing is in good working order this should not be a huge issue. However, there is one type of water main or pipe type to avoid. It is called polybutylene pipe, is blue/grey in color and known to have major issues. Chlorine used to treat drinking water will weaken it over time leading to major breaks and causing thousands in damages. This is a known issue in Maryland and other states and was primarily installed in homes from 1978-1995. Many carriers will exclude losses or subtancially reduce coverage if the cause of loss is determined to be failure of polybutylene pipe. So your clients should be advised to read their policy carefully and identify if polyburylene piping is present in the home. For more on this topic you can cut and paste the link below into your URL and read the blog about why you should replace this type of water main/pipe. http://www.merchantcircle.com/blogs/Five.Star.Plumbing.Services.Inc..410-836-0118/2010/5/Why-You-Should-Have-Your-Polybutylene-Pipe-Replaced-Baltimore-MD/550691
Acceptable plumbing/pipe types are Cast iron, copper and PVC . These are the most common types of pipes you will find in most homes and as long as they are in good working order, no visable or known leaks, most carriers will accept them.
Pets – Almost every carrier has an acceptable “dog breed” list. As a person who loves dogs, I understand this rule, but am glad some carriers take a softer stance on it. However, regardless of how loving, lick your face to death, friendly- cute your dog is, if his/her breed is not on the carriers “approved breed” list, the carrier will likely NOT insure the home. The good news is, all carriers seem to have different lists and some will accept the risk if the dog has never bitten anyone to the point of breaking the skin.
Trampolines, Pools and Play Sets – Trampolines, pools and play sets are known in the insurance world as an “attractive nuisance”. More simply defined, these are things that children are naturally attracted to, do not know/understand the danger of and have the potential of causing serious injury or death to themselves. A garage door opener or open refrigerator in your garage could also be considered an attractive nuisance, but these are not something most carriers ask about. The point here is anything that can be considered an “attractive nuisance” is going to be looked at with more scrutiny by the carrier. Many carriers are generally ok with play sets and pools, but will require the pool to be properly fenced. Trampolines are met with very mixed reviews and often if one is present will require a separate “trampoline liability exclusion form” to be signed and completed before they will consider insuring the property.
In conclusion, there are many other things carriers consider when deciding to insure a home. The number of prior losses, which if you recall from above, follows the homeowner and not the property, the extent of the losses turned in, if any lawsuits have been filed against the homeowner etc… My intent with this blog is to help you, the reader, identify those things that you may be able to have some control over or at least address with your potential buyer/seller prior to buying or selling a home. If you have any questions, please just contact me or post them and I will respond as I can. Thank you for reading.