More on Home Insurance
More on Home Insurance
Updated November 4, 2020
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Before your homeowners insurance policy becomes active, or in force, your insurer will likely send over an inspector to ensure that all of the information in your insurance application is accurate. If the home insurance inspection uncovers any unaccounted-for risks or determines that your home’s replacement cost is higher or lower than the initial estimate, that discrepancy will be reflected in your policy limits and insurance premiums. Your insurance company can also cancel your policy if your home is considered too high risk based on findings in the inspection.
But despite being an industry standard, home inspections don’t always end up happening — it’s ultimately left to the discretion of your homeowners insurance company. If your home was recently built or it doesn’t face any kind of catastrophic weather or fire risk, your insurer may be comfortable forgoing an inspection.
However, if you’re apprehensive about an inspection because of your home’s condition, you should make improvements rather than bank on the insurance company not inspecting your home. Home insurance inspections happen more often than not, so if you were recently turned down by a company because of the condition of your home or its surrounding area, you should make improvements or repairs rather than test your luck. Keep in mind that home improvements can also lower your insurance costs.
A home insurance inspection is used to determine your home’s insurability and the accuracy of information submitted in your application
In some cases, like if your home was recently built or recently underwent an inspection, your insurance company may not inspect your home
If your home fails an inspection, your insurance company may still insure your home under the condition that you fix or repair specific areas of property within a limited timeframe
That’s up to the company that is insuring your home — but generally no, there is no law or industry-wide rule that says every home must be inspected in order to be insured. If your home is new or the previous owner of your home had an insurance inspection done the year prior with the same company, the insurance company may trust that the home is still in good shape and forego the inspection.
Something to note, the home insurance inspection is different from the inspection recommended to you by your lender before closing on a home. A buyer’s inspection isn’t required either, but it’s a crucial part of the closing process, as it can uncover a number of structural and property-related flaws that can give you leverage to negotiate a lower price or convince the seller to pay for repairs as a condition for accepting the offer.
Any repairs or renovations you conduct as a result of the buyer’s inspection could make it easier to pass your homeowners insurance inspection and lower your premiums. It’s also possible that your insurance company would deem your buyer’s inspection sufficient if you recently bought the property.
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If you fail your home insurance inspection, you may simply need to fix whatever damage that’s making your home uninsurable. But it’s also possible that your insurer will write you a policy but include a stipulation that you make certain repairs within a limited time frame — usually 30 days.
For example, the insurance company may agree to insure your home but with a contingency that you hire an arborist to trim the branches hanging over your roof from a large tree. Repairing or replacing old roofs, HVAC systems, and replacing aluminum wiring with copper wiring are also common policy contingencies that can affect your home’s insurability.
If your home is simply too old for standard home insurance companies to take a gamble on, you can still get insured through certain companies such as Foremost that specialize in high-risk properties. Coverage may also be available on the excess and surplus market — this is essentially a market of insurance that isn’t state licensed so companies are able to take on more risk than “admitted” carriers (insurance companies whose policies are financially backed by the state’s department of insurance).
If you can’t find coverage on the surplus market, you also have the option of getting insured via your state’s FAIR Plan — a last-resort option for homeowners who can’t find coverage on the private market.
It’s also possible, although not very likely, that your insurance company will accept a home appraisal in lieu of sending over an inspector.
A home appraisal is an inspection of the home itself and its surrounding area for the purpose of arriving at a value for the home. You typically get a home appraisal when you take out a mortgage or second mortgage on the home and they generally don’t provide the same level of specificity to insurers as a thorough home inspection.
When informing you of your home inspection, your insurance agent will likely say that the home first needs to pass a 4-point inspection. A 4-point inspection is especially common if your home is over 25 years old or if the home has a history of maintenance or repair issues. If you live in a home that’s less than 25 years old, it’s possible that your insurer will send over an inspector to briefly survey the outside of the home, but they may not need to go inside and conduct a full 4-point inspection.
A 4-point inspection consists of a thorough look at four parts of the home:
The HVAC system
The electrical work
Unlike the frame and exterior build, these 4 areas have a limited lifespan and need to be updated every so often through repairs or full-on renovations. Obsolete electrical work, rusty and leaky pipes, and an old roof are viewed as high-risk by insurers and more likely to result in loss and insurance claims.
For that reason, inspectors closely examine these parts of your home and take note of any potential flaws or defects. A roof that has cosmetic damage and is nearing its expiration date may not cause you to fail your inspection, but it could mean significantly higher insurance premiums than if you replaced it with a new roof.
The person inspecting your home is usually an employee of a local inspection company and will be sent to your home on behalf of the insurance company. The inspector simply examines your property and passes off their report to insurance company underwriters. The underwriters then take the information provided to them by the inspector to determine your home’s insurability, make potential adjustments to coverages like your home’s replacement cost, and set your insurance premiums.
Pat Howard is a homeowners insurance editor at Policygenius in New York City. He has written extensively about home insurance cost, coverage, and companies since 2018, and his insights have been featured on Investopedia, Lifehacker, MSN, Zola, HerMoney, and Property Casualty 360.
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