Buyer Beware! And that goes double when buying a home that may trap you into a high price for insurance.
But what can you do to avoid buying a new house that costs alot to insure?
Inspections are the key to lower home insurance costs
There’s an old saying, “Inspect what you Expect.”
There are a number of inspections that can save you from being caught in a high insurance trap.
Some of these are required by a lender and they include:
- Survey Inspection: This determines the property boundaries- which is your land and which belongs to your neighbor.
- Appraisal inspection: This one determines for the bank whether the home is worth the price you are paying for it.
- Home inspection: This inspection checks whether everything is in working order and if repairs need to be made.
These are all necessary and will determine if the bank will lend money to you and if the closing can be completed.
But they won’t tell you if your new home is an insurance trap that will costs you thousands more than you need to pay.
To get a handle on the insurance costs, you will need a few other inspections.
Some of these inspections will clue you to items that can cost you a lot of money on home insurance.
And these inspections will also alert you to conditions that can make you ineligible for many of the lower-priced home insurance companies.
You will need to spend a little money BEFORE you buy the house.
But a couple of hundred dollars before you buy the house could save you from spending thousands in an insurance trap.
Wind Mitigation Inspection Report
A Wind Mitigation Inspection Report (also known as a Wind Mit) checks to see how hurricane-proof your home is.
When a hurricane hits, your house will be under tremendous atmospheric pressure, not to mention high winds and rain.
The Wind Mit tells the insurance company how well your home is equipped to keep the pressure, wind, and rain out.
It also grants you discounts on your home insurance premium. Few or no discounts equal high home insurance prices.
Here are the items a Wind Mitigation Report checks:
- Roofing Covering – what type of Roof Covering- Asphalt/Fiberglass, Concrete/Clay tile, Metal, Built-Up, or Membrane? And does the roofing material comply with the Florida Building Code of 2002 (FBC Equivalent) or Miami-Dade Product Approval?
- Roof Deck Attachment – what is the WEAKEST form of roof deck attachment? How large are the nails that attach the roof deck to the roof trusses? 6d or 8d (better)? How far are the nails spaced apart? The larger the nail, the closer the nail pattern, the more you save.
- Roof to Wall Attachment – What is the WEAKEST connection that attaches your roof trusses to the walls of your home? Some of the choices are: Toe Nails (the worst for discounts), Clips (better), Single Wraps, (still better), Double Wraps (even better), and Structural (the best – usually found on high rise buildings)
- Roof Geometry – the roof shape. Does it encourage wind to ride over it, or does it present an obstacle that might force wind to go under it and lift it? The choices here are: Hip roof which has slants on every side like a pyramid, Flat roof applies to buildings with 5 or more units that can be structurally attached, and Other roof, which is a roof which does not qualify for Hip or Flat. Most roofs you see in South Florida are Other, that is Gable with a couple, but not all, slanted sides . Other roof would also include the flat roof you see over many patios in Florida.
- Secondary Water Resistance (SWR) – a secondary underlayment applied to sheathing (roofing paper) to prevent leaking between the seams. Usually, this is a special tape that lines all the seams of the roof paper where water might intrude.
- Opening Protection – the WEAKEST form of wind-borne debris protection installed on the structure. Also known as the Shutter discount, this indicates whether all openings are protected, including windows, doors, and garages from the debris missiles created by hurricanes.
Did you know that one of the major factors in expensive home insurance is having the Roof to Wall Attachment rated as “Toe Nails”?
In most cases there is a solution: by repairing missing nails or retrofitting the attachments with clips or wraps will get you the better rating. While this could cost a couple thousand dollars, the upgrade will save you thousands EVERY TIME YOU RENEW your policy. Contact us for more information.
Our advice is to order the Wind Mitigation Inspection Report as soon as possible to reveal any weaknesses in the home’s hurricane defenses. This could save you from buying a hurricane-prone house and a large home insurance premium trap.
4 point Inspection
A 4 point inspection checks the home’s:
- Roofing
- Plumbing
- AC/Heating System
- Electrical System
A 4 point inspection might be confused with the Home inspection that the lender will require.
But there is very meaningful differences between the two and it impacts your insurance price.
Whereas the Home inspection checks to see if all these are in working order, the 4 point inspection goes one step further and also reveals how much remaining life is left on the system.
We can illustrate this difference by using the roof as an example.
The Home inspection might tell us that the roof is currently not leaking.
But if the 4 point inspection reveals less than 3 years remaining life for the existing roof, it will be very difficult finding insurance for the home – especially at a competitive price.
The 4 point inspection will also reveal the type and age of systems that make a home ineligible with many companies: the more companies that compete for your business, the lower your premium will be.
For example: the 4 point will reveal what kind of circuit breaker box the home has.
Some electric panels are unacceptable to the majority of Florida home insurance companies.
Brands like Federal Pacific, Zinsco, and Stablok may limit the companies that will compete for your business.
Did you know if your 4 point inspection reveals a discrepancy, you will need to remedy it before the insurance company will let you bind the coverage. You remedy it by producing a paid receipt from a contractor that states the exact repair mentioned on the 4 point.
Some of the issues we see the most on 4 point inspections that need remedies are:
- The Electric panels mentioned above.
- Water heaters that are more than 15 years old.
- Pex, or Polybutylene pipes.(Black) under the sinks.
- Roofs with less than 5 years remaining life (3 years for Citizens).
- Any un-repaired prior damage from prior claims.
The 4 point Inspection Report will help you avoid any “Remaining Life” and “Unacceptable Risk” home insurance traps.
Our advice is to order a 4 point Inspection Report at the same time as you order the Wind Mitigation Inspection Report.
Most Inspection companies will give you a discount for performing both at the same time.
Prior Claims
Some houses are constantly springing leaks.
We advise asking for a loss report or loss run on your potential new home.
If you can’t get a written report, at the very least, ask if the prior owners had any problems with leaky roofs or leaky pipes.
Many companies are asking about prior claims at the house – not just if the new owners had any claims on their prior homes.
And all the companies will run reports on both.
This could give you the illusion that you have a decent home insurance price, only to be cancelled within 60 days of the original binder for prior claims.
Then you have to shop for new insurance from the position of having an underwriting cancellation. Not easy and never cheap.
Avoid Home Insurance Traps when Buying a New Home
Here’s what you need to do:
- Order a Wind Mitigation Inspection Report as soon as you have decided that you want to make an offer on the new home.
- Order a 4 point inspection at the same time you order the Wind Mit to save on both.
- Ask for a Loss Report for prior claims at the home.
Keep in mind that Insurance Companies in Florida will reduce risk exposure in zip codes to satisfy their Re-insurance Carriers.
Also, some Carriers will decide to pull out of some counties or even the entire state for profitability reasons.
And still more will raise their rates substantially after large storms.
The point is that you may probably have to re-shop your insurance in the future.
So the Home Insurance traps you avoid now, will also benefit you in the future when you need to re-shop your coverage.
Whether its considering a new home to buy, or re-shopping your existing insurance, contact Cronin Insurance and ask them to shop the market for you.
Low rates, choice of companies and personal advice.
Cronin Insurance is the Wise Choice.
