Why home insurance may be the cause of your headache

Headaches are known to be caused by things like dehydration, malnutrition, stress or lack of sleep. But if we had to guess, home owners and those affiliated with the real estate industry have experienced a headache lately that can be blamed fully on the current state of home insurance. As much as we don’t like or agree with the challenges home owners are facing, we can provide a little insight as to why things are the way they are.

To put a quite complicated issue simply, it really boils down to three things:

Fraud – Roofing guidelines have gotten more and more strict and it’s in large part due to an unfortunate amount of claims filed unnecessarily for roof replacements. The involvement of roofers themselves, public adjusters and the misuse of the Assignment of Benefits tool have all contributed to an increase in claims that insurance companies have struggled to sustain through. Profitability and the ability to pay legitimate claims are down, making insurance companies unable to be there for consumers when they need them the most.

Litigation – Property claim payouts have been cited to be up to 4.5 times more when an attorney is involved. Over the past 9 years, approximately 71% of the billions of dollars paid out on property claims when to attorney fees. This one speaks for itself.

Reinsurance – Approximately 40-45 cents of every dollar of a homeowners insurance premium goes toward the cost of reinsurance. This is the insurance that insurance companies buy to protect themselves from overwhelming losses in larger claims and catastrophe situations. When insurer’s expenses are up this high, one of the only ways to compensate is to increase premiums.

It’s safe to say that everyone involved in the insurance, real estate and associated industries agrees that something has got to change. There are people unable to accomplish homeownership or being priced out of opportunities because of these issues. At this time, the reform bill that the Senate presented to the House has been postponed until either next session or a special session, should the Governor call for it. Therefore, there is little to no control over the situation other than hoping for legislative action to be taken sooner than later and spreading awareness to minimize fraudulent and litigious activity.

Hang in there, guys. You make think home insurance is quite a necessary evil at this point. And while the necessary part is true, it isn’t all evil… we’re actually here to help and advocate for home owners. We can get through this together.


Flood Insurance Risk Rating 2.0: New & Improved

The National Flood Insurance Program had some major changes that became effective October 1st. They are calling this initiative “Risk Rating 2.0”, in which FEMA considers a substantial leap forward when it comes to flood insurance. While some of the changes are minor details, there are a few pretty big adjustments to this coverage that you’ll want to know about in order to best serve your clients.
Since the 1970s, this type of insurance coverage has been rated based solely off of a zone determined by the property location and elevation. FEMA now has years of analyzed data combined with a conscious effort to make flood insurance more fairly rated.
With the evolution of the new Risk Rating 2.0 program, FEMA will now use the following factors to more accurately rate a property for flood insurance:
  • Flood frequency
  • Multiple flood types such as river overflow, storm surge, coastal erosion and heavy rainfall
  • Distance to a water source
  • Property characteristics such as construction type, cost to rebuild, and elevation
  • Prior insurance/claims
Some things that remain the same are:
  • Existing statutory limits on rate increases require that most rates can not increase more than 18% per year
  • FEMA will continue to offer premium discounts for pre-FIRM subsidized and newly mapped properties
  • Policyholders will still be able to transfer their discount to a new owner by assigning their flood insurance policy when their property changes ownership
  • Discounts to policyholders in communities who participate in the Community Rating System will continue
FEMA estimated that 20% of Florida homeowners will see an immediate premium decrease, 68% will see an increase up to $120, and 12% will see an increase over $120.
Overall, this is good news and a positive, fair change moving forward. Flood insurance can be complex but it doesn’t have to be. Any time we can be of assistance with flood insurance questions, please reach out. We’re happy to help navigate these waters…. literally.

Can I have my roof re-shingled or do I have to do a complete roof replacement?

Roofs on homes in Florida are a hot topic of conversation these days. And with the real estate market the way it is now, they can make or break a deal from happening.

Insurance companies in Florida are more strict than ever on the age, condition and life left on a roof. Some may be open to a contractual agreement that the roof will be repaired or replaced within a certain time frame after closing, in an effort to not keep the sale from happening, but most want it done before hand.

There lies some confusion as to whether you can have your roof re-shingled or would need to fully replace the roof, which is typically much more expensive.

In most cases, just re-shingling the roof is not acceptable. The insurance company is looking for the shingles to be replaced down to the plywood rather than just on the surface.

The challenge with re-shingling is:

  1. If you just place new shingles on top of the old shingles, there is not an effective way to identify any issues with the roof decking (the plywood).
  2. If damage occurs in the future, it creates more cost for the insurance company because they are taking off two layers of shingles rather than just one.

Roofing contractors have confirmed that re-shingling may save money or be a temporary band aid for any leaks or issues but long term, it will end up costing more. There are also theories that a roof with two layers such as a re-shingle can hold in more heat, which speeds up deterioration, especially in Florida.

Why home insurance is such a hot topic with house fires

House fires can be one of the scariest and most dangerous events to experience but they serve as unfortunate reminders to homeowners about the importance of adequate home insurance. Although Florida homeowners may be more aware of summer fires that can be brought about during hot months with little rain, winter weather is cause for concern as well. The dry, winter air, as well as the combination of heating devices, holiday decorations and fire places can be a recipe for disaster. And of course there are other things that can start a house fire such as candles, electrical panels, heat lamps, overused or shorting outlets, chargers of all kinds, etc.

Home insurance provides protection for your house and the belongings inside of it in the event of an accidental fire. Your Dwelling coverage is supposed to be at what it would cost to rebuild the entire home (and keep in mind that often times a fire can end in a total loss, even if the flames are contained at some point, due to smoke or extinguisher damage). Then the Personal Property coverage would kick in for all of the furniture, contents, clothing, etc inside. These are two very important coverage limits you want to keep an eye on so they remain sufficient.

Here are a few house fire safety tips: 

Have a plan: Homeowners and their families should have an escape plan in the event a fire occurs while individuals are present.

Check your smoke detectors: If you forgot to check your smoke detectors when you changed your clocks, do so now. No really – get up and check your smoke detectors because if you don’t now, you may not later. It’s a good reminder and rule of thumb to do this twice a year when you adjust your clocks for daylight savings time.

Have your fireplace properly inspected before the start of the winter season and properly clean and put out fires after each use. Never leave burning or hot coals unattended.

Use electrical heating devices with caution. In addition to heating your home safely, if it is the holiday season, be sure to unplug all electrical decor and lights when going to bed or the home is unattended. Double check that your chargers (cell phone, computer, golf cart, gaming systems, etc) are not getting too hot.

Never leave lit candles unattended. Unfortunately, people think candles are safe and will just burn down to the wick and go out when the wax is gone. Or that they’re safe being in a glass jar. This is still a dangerous fire hazard.

Take photos or video of your belongings once a year and store with other important documents or sentimental items in a fireproof safe. This will be hugely helpful in the event of a loss.

When Should a 4 Point Inspection Be Done?

A 4 point inspection covers the main 4 points of a home and assesses the updates and conditions of those aspects of the home. This is an effort for the homeowner and insurance company to better understand the status of the home and likelihood of avoiding damage or injury.

Those main 4 areas that this inspection reviews are the roof, heating and air conditioning, electrical and plumbing. The inspection would look at the current condition, when any updates were done and if they are up to acceptable building codes, as well as how much life is left before needing repair or replacement.

Often times when it comes to homeowners insurance, this type of inspection can help determine the insurability of the home and whether or not it meets certain insurance company’s underwriting guidelines. This is extremely important on homes that are 25 years old or more.

So what can be done when it comes to a 4 point inspection early in the process? How can you avoid any hiccups that could delay closing or cause insurance issues after the fact? 

  • If working with a buyer, help them understand the condition and age of those 4 main points of the house and the importance in updates or being up to code
  • If working with a seller, help get quotes to update those 4 main points as that can be a deal breaker for buyers or the re-insurability of the home