Thursday, February 16, 2012

Do they really have to inspect my house every year?

This one of those questions I get on a regular basis. Insurance carriers inspect the outside of the homes and buildings they insure when you start a new policy and every year when you renew. These inspectors are independent companies that are contracted by your insurance carrier to go out and write a report on what they observe about the outside of the structure.

"I told that inspector to stay out of my yard!" or "I live in a gated community. They won't be able to get in. I'm set!"  Good for you. Your policy is now going to be canceled. Your insurance policy is a contract between you and the carrier. It outlines what the carrier will and will not cover and that they must perform under the contract. It also outlines what your obligations under the contract are. That's right, you have some things you need to do. One of them is to allow an exterior inspection of your home.Would you write a really big check without seeing what you are paying for?
"But nothing has changed. My house is the same as it's always been." Well, yes and no. Inspectors are looking at your home differently. They look for peeling paint and damaged stucco which could let in moisture and cause damage to the entire wall. They look at roof shingles to check for peeling, cracked or missing shingles which can cause leaks or worse come off in the wind and cause more damage. Has your tree grown in the last year? Is it overhanging the roof? Those branches move in the wind and can damage the roof and trim of your home. Is there debris around the home and yard? Items leaning against walls can damage them. Items around the yard can be a fuel source for fires, breeding ground for insects and pests, not to mention a good way for someone to get hurt by tripping on them. A home that is not maintained causes claims, injury and can be a target for thieves and squatters.

These are just a few things inspectors look for. They are not there to pick on you or your home. They are there to insure that the underwriters conditions for them to insure you are met. They also are there to point out repairs that need to be made now, while they are minor, rather than putting it off and it is now a huge amount of work to be done later.

For most of us, our homes are our biggest investment but consider that they not only provide shelter. They give us a place to rest at the end of a long day, a place to enjoy the company of friends and loved ones, a place to raise our family, and a place to enjoy our hobbies. Home is a big part of our lives, not just a building. Taking care of it is more than just a requirement of insurance. It's an investment in our peace of mind and quality of life. Insuring them properly and maintaining them will help protect you from avoidable claims and if something happens, you have coverage to help put things back the way there were.

Friday, February 10, 2012

Watch your renewals this year. New regulations have insurers, agents, and clients up in arms.

When you go to renew your homeowners and other property insurance policies this year, you could be in for a bit of a shock.

Last year California Insurance Commissioner Dave Jones enacted regulations about how insurance carriers figure replacement cost on structures. The goal of these regulations was to make sure that carriers where not issuing polices that underinsured property. Needless to say, they are being challenged in court.
OK, I know, the first thing you are going to say is "My house was insured for more than it's worth to begin with! How can I need more insurance?!". When a disaster occurs, our goal in insurance is to rebuild your home, rental, office, etc.,. Worst case the entire building is destroyed and we have to rebuild from the ground up. That means new materials, hauling off the remains of the old structure, getting permits, architectural plans, hiring workers, paying fire department fees, paying city, county and state building fees, building code upgrades, and more. Real Estate market value varies greatly from the rebuild cost of a home based on the market factors at a particular moment in time.

If there is a large scale disaster, the cost of materials and labor can skyrocket since they are in high demand and there may be a shortage. Carriers have to try to take this in to account too. As I said before, the goal is to rebuild your building hopefully with out having to go to you and say "Oh, Mr. and Mrs. Homeowner, we are 70% finished with your home, but the insurance coverage has all been spent. We need you to come up with $84,000 so we can finish the job." I hope your motel is near a good bar.

Now, back to the regulations and what they mean to you. Many carriers are interpreting these rules differently and applying their calculations and formulas accordingly. In California, it is up to the insured (you) to make sure you have enough coverage. While they are required to send a copy of their analysis to you with your renewal, you can also request one, free of charge from your carrier or agent. I recommend that you read it closely. I have run across some "assumptions" that carries have made that did not fit the property. For example, the flooring was rated as having 70% carpet, 10% vinyl, 20% tile. They do not have any vinyl in the home.  They may have rated your bathroom as custom, or have down that you have a partial wood or wood laminate floor. If these items do not apply, you should speak to your agent about how to get the analysis corrected. It can lower your rebuild cost and the amount of money you pay.

Just be sure that the amount of insurance is still enough to rebuild your property. Your underwriter will still have to review the new valuation and approve it. After all, they are writing the check. If it is not reasonably close to rebuild cost, they can (and usually will) reject it.