Insurance Tips for Homeowners (and home buyers)

Homeowner’s Insurance Tips

One thing to remember about insuring homes in Colorado is that, over the past few years, insurance companies have lost billions of dollars to fires, tornadoes, flooding, and hail.  They are actually operating at a loss insuring Colorado homes.  With that in mind, is not surprising that insurance companies are looking for a reason to drop their coverage on many homes in this area, including mountain communities. Here are some of the key sticking points that can potentially derail the sale of a home or even continuing its insurance coverage with your current insurance company.

Roofing-

If you have T-Lock roof, these roofs are no longer insurable if you change carriers.  If you are currently insured, your insurance company will probably maintain coverage but may drop the insurance strictly to cash value, usually with higher deductible, rather than the normal replacement cost.  T-Lock roofs have not been installed widely since about 2003, and they’re no longer being manufactured, which makes it difficult to do repairs and generally forces insurance companies to replace the entire roof.  However, I was told last year by State Farm that they will repair small sections of T-Lock roofs by cutting out replacement shingles from rolled roofing.

Almost all wooden shingle roofs have become uninsurable.  If you’re changing your carrier you probably will have a difficult time maintaining insurance on your roof.  Or if you’re buying a home with a wooden roof, it probably won’t be able to get coverage. (Just like the T-Locks roofs.)  Until recently, a few carriers did cover homes with wooden roofs but they had to be newer than 15 years old.  Even that, apparently, has gone away.

If you’re thinking about putting on a metal roof, be sure that it is hail resistant certified.  Some of the metal roofs are made of the material that will dent like the roof of the car.  Obviously, insurance is difficult to find for the more inexpensive metal roofs.  Usually, premium metal roofs, like a standing seam metal roof, will have no problems with coverage.  Be sure to check with your agent.

For class 1, three tab asphalt shingles, 18 years old is generally the cut-off age for coverage.  Class 1, shingles are generally a builders grade roofing made of thinner material.  Architectural and presidential grade roofing has a longer life for both its warranty and it’s insurability.  It’s a good idea when you choose your next roof, if you plan to stay in the house for any length of time to go ahead and upgrade to the better quality roof.  I’m always surprised how fast time flies when you live in a home (and how quickly it comes time to spend thousands of dollars on a new roof).

While it is still code to have three layers of roofing, insurance companies will only give coverage on two layers.  If you’re thinking about purchasing home or selling a home with three layers of roofing, be aware that the roof will likely need to be replaced to maintain your insurance coverage. Often, you’ll find homes that had a cedar shingle roof that’s been covered with a three tab asphalt shingle.  These two layer roofs are quickly becoming a problem for insurance companies, since they’re a sitting duck for hail damage.  One thing to keep in mind, on a wooden shingle roof, when it’s re-roofed it will need new underlayment, which will be an added expense.

Speaking of insuring an older roof, particularly on the home that you are purchasing or selling, a certification on the roof means nothing to the insurance company.  It may mean the roof is not leaking, but it’s the age of the roof, the type of roof,  and the condition that ultimately impact its insurability.

Probably your best bet in the world of roofing is a cement roof.  Insurance companies generally offer a discount on these super durable roofs.

Wiring and Electrical

If you have a home that was manufactured sometime between 1960 and 1975, there is a possibility that you may have aluminum wiring.  Aluminum wiring itself is actually pretty decent wiring (if it’s maintained correctly), but it has become another pariah in the world of building materials and insurability.  These days,  most insurance companies won’t accept a house with branch wiring that is aluminum.  While rewiring an entire house throughout its walls and attic would be amazingly expensive, you do have the option of pig tailing each run to copper wire.  This apparently is acceptable to most insurance companies and would allow you to maintain coverage even in a house with aluminum wiring.  You should be aware that the cost to pigtail each outlet, fixture, and switch is going to be close to $20 per pigtail.  Which can really add up on a larger home.

On older homes with any presence of knob and tube wiring, it immediately becomes uninsurable. I recently tried to find an insurance carrier that would cover a home with knob and tube wiring and even secondary market carriers like Lloyd’s of London wouldn’t touch it.

You’ll probably find the same thing if you have a home with the old-style screw-in fuse box.  All homes have to have modern circuit breakers to be insurable.  In the past, fuse boxes were often inside the house, usually in the kitchen.  Again, that’s likely to be problematic when it comes to insurability.  Keep in mind that, while you may have insurance coverage and a problem like a wooden roof or a fuse box, insurance companies have the right to inspect the home to protect themselves. This happens quite often during the period while you’re purchasing or selling a house.  They will probably drop coverage if they find a problem like knob and tube wiring. Frankly, if you have a home with knob and tube wiring, it’s time for an upgrade.  One of the practical problems knob and tube creates is for insulation.  You can’t safely cover knob and tube with insulation.  If you don’t have adequate insulation in your home, you’re just wasting money anyway.

One more note about electrical.  Even homes with “newer” electrical panels are starting to show their age.  While they may have been updated over the years, increased demands on electrical systems may be pushing your system closer to the age of extinction. Older boxes that are rated for 100-150 amps are starting to run short on capacity, as homeowners add to their electrical loads with more appliances, hot tubs, and electronic equipment.  Just keep in mind, that you may be looking at spending a few thousand dollars on a box upgrade somewhere down the line.  Also, if you have a box manufactured by Federal Pacific Electric or FPE (particularly the Stab-Lok boxes), you should have it looked at by an electrician.  These boxes are notorious for not working properly.  FPE went out of business, but not before selling thousands of sub-standard circuit breaker boxes all over the United States.  So far, I haven’t heard that there’s a problem with insuring the FPE boxes, but it may be only a matter of time before insurance companies clamp down on these circuit breakers.

Plumbing

Fortunately most plumbing isn’t quite on the radar of your insurance company, just yet.  That means, while copper, PVC,  and Pex plumbing are preferred (by both homeowners and insurance companies), it hasn’t quite reached the level of those types of plumbing being the only choice to maintain your insurance.  Galvanized plumbing, cast-iron, even polybutylene, are still acceptable to some insurance companies.  While I would never recommend that you purchase a home with some of these chronically bad systems like Ipex (not to be confused with Pex) or polybutylene, if they’re not leaking they shouldn’t deter your insurance company from providing you coverage.  Be sure to take a good look at your documents from your insurance company to be fully aware of what is covered and what isn’t.  Don’t forget that damage from rain or groundwater is never covered under the homeowners policy. You should have coverage if your home experiences a ruptured pipe, but be sure and double-check your policy, especially after there’s been a change in coverage. Don’t forget that there might be something in the fine print that can cost you a lot of money.

One bit of advice, if you have galvanized plumbing be sure to keep an eye on it, particularly near the joints where the process of cutting threads effectively eliminates about a half of the thickness of the wall of the pipe.  Usually, if there’s a problem with galvanized, it tends to happen near joints.

Property Claims-

Recently, with the large amount of losses that insurance companies are experiencing in Colorado, they are constantly reviewing the viability of coverage for homeowners.  It’s quite surprising for people, who’ve done business with their insurance company for more than 20 years, when they are unceremoniously dropped.  Often, it’s because the homeowner had the audacity to file a claim on their insurance.  The insurance industry usually will look back over the past five-seven years for what they consider to be excessive claims.  Although I’ve seen them cite losses that were more than 15 years old as a partial reason for denying coverage.

Also, beware of zero dollars claims which can possibly  have the same effect as a claim where the insurance company had to pay out.  Often the zero dollar claims come as a result of an inquiry about coverage, for instance on a roof.  The insurance companies may hold these zero dollar claims against you.

You should also be aware of something called the C.L.U.E. report. Like a credit report, the C.L.U.E. gives insurance companies an insight into the risk that you bring to their company.  LEXIS-NEXIS, on their website, defines the C.L.U.E. report as:  The C.L.U.E. Personal Property report provides a seven-year history of losses associated with an individual and his/her personal property. The following data will be identified for each loss: date of loss, loss type, and amount paid along with general information such as policy number, claim number and insurance company name.

As you can imagine, any negative history on the C.L.U.E. report is going to cost you either higher premiums or will go towards denying you coverage.  Take a few minutes to look at the LEXIS-NEXIS website.  They will provide you with a report, if you ask. (https://personalreports.lexisnexis.com/index.jsp)

For home buyers, the C.L.U.E report can definitely make a difference on the coverage that you can purchase for your new home.  Be sure to start the process of finding acceptable insurance as early in the process of buying as possible.  People who are renting should know that claims on renter’s insurance will likely follow you, as you purchase your home.

Flood Insurance-

Flood Insurance is required by mortgage companies for any home in a flood plain.  Oddly enough, this also includes homes in high-rise buildings (coverage is required even if you’re not at ground level).  You can check with your insurance carrier to see if you’re buying a home in a flood zone.  Keep in mind, homes that aren’t in flood areas account for 25% of the flood-related claims and 30% of the federal disaster assistance for floods. So, flood insurance may be prudent, even if you’re not in a designated flood plain.  Many of the homes that were damaged in the 2013 floods in Colorado weren’t in flood plains.

Just remember, that no traditional homeowner policies cover damage by outside water.  The FEMA website for homeowners has lots of valuable info. (https://www.floodsmart.gov)

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Obviously, homeowners insurance coverage can get pretty complicated, plus it’s constantly changing.  As roofs get older, as building materials change or are no longer manufactured, as claims in one part of the county get worse… insurance companies change the rules that we all have to live by.  Not every insurance company plays by the same rules.  Some will provide coverage while others won’t.

If you’re buying a home, be sure to get all insurance issues worked out prior to closing.  You don’t want to be surprised by an insurance issue that falls into your lap after the closing.  Remember, insurance companies can still inspect and drop coverage well after closing.  A good home inspector and a smart, well-informed insurance agent can help you avoid a lot of problems.

It’s a good idea to talk to an insurance broker when it’s time to review your policy.  Insurance brokers (rather than single carrier agents) deal with many insurance companies.  They can often find coverage with smaller insurance companies, even when the big companies have changed their guidelines.

Speaking of insurance brokers… thanks to Ryan Mathisen, the Sales Manager at Colorado Insurance for much of the information in this article.  If you have any insurance questions, you might give him a call:  Office: 720-266-5302 or Email: ryan.mathisen@buycoloradoinsurance.com

Another insurance broker who has been a big help for me is Jeff Muller at Gotto Insurance: Office: 303-495-5434 or email: jeff2@gottoins.com

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