Let's Talk About Insurance

MoccasinAugust 2, 2010

How do I approach this topic? Ok. What I want to find out is, how are you dealing with home insurance issues, and are you satisfied?

Insurance companies in the home owners markets are getting pretty darn particular these days, IMHO. For one thing, ever since Hurricane Katrina, they've just about stopped writing any new policies south of I-10 along the Gulf Coast of Alabama, Mississippi, and Louisiana. Not sure about Texas and Florida. Also, they've put in clauses about no wind damage coverage, and such as that, the policies they do write are of dubious benefit in case of a loss.

When we bought this house in Feb 2008, that April was the last policy they wrote NEW south of I-10, or so I am told.

We are not on the water, but I will never go without flood insurance again. It is cheap insurance. It was the ONLY policy which paid off big time when Katrina destroyed our house on the river. I think home owners paid about $1000 total. When you look at a $400,000 house/property, that was pathetic.

And I think my premium for home owners is upwards of $3000/year. That still has a % deductible for a hurricane claim, and a % deductible for any other claim. Plus the city has a new building code, and all windows that get replaced must meet the new standards, which could be out of pocket expenses for many folks. They may have insurance only to please their mortgage company, and not afford the extra "replacement cost" coverage.

So here we are in a high risk zone as far as the insurance companies are concerned. This situation means it is hard to sell a home because getting insurance to cover loss is a big deal to mortgage companies, you know.

I post this now because I read on Older Homes forum that an old house needed to have a certificate of updated wiring and plumbing in order to get coverage. If the homeowner does it themselves, how do you get such a certificate? Is that one of the benefits of building permits and inspections? And could some homeowner DIY-er then call the city to do an inspection after-the-fact?

Where will this subject lead? I really want you guys to give this thread some thought, and weigh in with your experiences and opinions. Thanks.

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I think I'd start with the state office of insurance and find out what they will accept as the certificate of updated plumbing/wiring. see how logical their requirement is.

then move on to the local city planning dept and ask them what is needed if one does this update themselves. Do you need a permit? do you get a cert of these updates?

it sounds like you might have to contact your local state representative down the road too.

    Bookmark   August 2, 2010 at 1:49PM
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Insurance companies are getting silly. They are so terrified of losses that they are putting ridiculous riders on their policies. Quite a few people pay for their insurance and, in a loss, end up getting piddly squat because of the riders.

I haven't looked at the balance sheet for an insurance company lately so I can't comment on any profit margins they have, etc. Obviously it is in the *insurer's* best interests to only insure homes in low-risk areas, but this is not in *society's* best interest because so much of the country is in some sort of risk zone.

Putting in a clause against wind damage, imho, makes the policy worthless. I don't even know why they would sell a policy like that.

I think that basically insurers just want to write policies in highly profitable areas and dump lower profit/high risk homes into state-run-high risk pools.

It can be difficult even in areas of the country that aren't generally considered "high risk". My house is in the inner city (Cleveland), and there were two large insurers unwilling to write a policy for my house due to the number of arsons and vacant houses in this zip code. I did find one though through a family friend that is an insurance agent.

My insurance company didn't require a certificate for the new electrical, but my agent did have to come out and take a clear picture of the new 100 amp box and all the new wiring coming from it. If we had knob-an-tube wiring there would have been no way we could have gotten a policy.

I can't even imagine the troubles people have in hurricane zones.

Although I don't feel too sorry for people that literally build there house ON the beach on sand, or on narrow barrier islands...that's like building a house on a levee...barrier islands are nature's levees.

    Bookmark   August 2, 2010 at 3:48PM
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We've been through all this in FL. Our premium went from $700 to $3000 in one year! Insurance companies have gotten very good at weaseling out of claims- you really need to read your policy and make sure it is air tight. Are the days coming when you'll have to hire a lawyer to read your insurance policy?!

There's more stuff coming, too. Soon, residential sprinkler systems will be a requirement in new construction. That means that older homes without them will likely pay an additional cost. If you do any work on your home without a permit, the insurance company could very well reject your entire claim. People in rural areas are seeing their rates rise because they are further from emergency services. And so it goes. The insurance companies are one step ahead of John Q. Public, you can be sure of that. They have teams of lawyers figuring out in advance how to get out of paying claims.

It used to be that insurance companies were there to protect you in the event of catastrophic loss. Now, it seems like the only loss they're worried about is their own.

I need to go take a blood pressure pill......

    Bookmark   August 2, 2010 at 5:32PM
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I have a similar issue, only for me it's earthquake insurance. It's incredibly expensive, yet I don't dare do without having been through several earthquakes. Plus I get punished because I have an older home -- 83 years old -- so it costs even more, plus I'm in the area of the big Northridge earthquake of 1994 -- so that gets added on to.

Fun stuff.

    Bookmark   August 2, 2010 at 6:30PM
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Krysek, I think it was your comment on Older Homes Forum that led me to begin this thread here. Glad you found it, because your experiences may show the future for some of us DIY folks on this forum.

And I quite agree with you about the barrier islands belonging to the ocean....they are there because the sea created them, and they really protect the mainland by their presence. Those who build on them should not expect the rest of us to foot the bill when time and again the sea claims its own. It's hard enough without that complication.

And Jay, I know what you mean about blood pressure going UP thinking about this. Our little house here is now up to $3000 and we have a really high deductible, based on a percentage of the whole house value less the land value. And if we do our own repairs, without a permit required, they do not really recognize any improvements. Thankfully, we do not have a mortgage, but if something happens to this house, we could not start over from scratch.

Desertsteph, the state insurance office knows about our situation, and the state ins pool for high risk areas is the only help for a lot of folks. Not a good thing for folks with a fixed income or NO income.

    Bookmark   August 2, 2010 at 6:32PM
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A few months before we bought the house, the house was vacant, and someone broke in and ripped out all the copper. They then purposely left the water on and flooded the basement.

THANK GOD the previous owners didn't put in a claim on their homeowners insurance or I don't know if we could have gotten a reasonable policy! I know insurers have some database thing where your previous claims, or the house's previous claims, go into database and history. And nothing scares an insurer more than flooding! I think it's called CLUE.

I really do feel for many of you who are in high risk areas and have trouble finding affordable coverage. I hope one day there is a better resolution to all this than the insurance companies squeezing out of liability as much as possible.

    Bookmark   August 2, 2010 at 7:19PM
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We still own our last house, and not because we want to! We moved out of that house on Thanksgiving weekend of 2005 and spent the winter getting in shape to sell - taking off wallpaper, fixing the bathroom ceiling, cleaning, painting and mouse-proofing the basement, putting flooring on the steps to the basement, and painting the whole main floor. Then we had the original wood floors refinished. March 1, 2006 it went up for sale at $160,000. A year and a half later, we got our first offer, a rent-to-own situation for $140,000. Because she had credit problems to fix, we did a 2 year lease before purchase. By that time rolled around, the house was not worth the contracted price and the deal fell thorough. Going price for a house like ours? $85,000.

This is where the insurance comes into play. We are paying high-cost landlord insurance. The agent told me that he is being told to stop the insurance on all empty houses! If we could not find a new tenant, we would have an empty, uninsured house. Luckily, we had my father-in-law's caregiver and her husband ready to move in. Part of the deal I made with her to get her to return to Michigan and resume her caregiving for Dad was that she could live in our old house at the same price she had paid to rent the two=bedroom apartment they had here before going back to Florida. So I am getting about half of the cost to keep up the house each month in rent, but am glad to have someone in the house at all. I told the agent that I would move back to the house before losing the insurance. It is only 5 minutes from my work. I could see DH on weekends and I could keep one of the three dogs we have there with me at the old house.

There is so much vandalism of empty houses that insurance companies are no longer insuring vacant home in the Detroit area.

ML, we have a high deductible, I thought - $1000. I have never heard of a deductible by percentage. How does it work?

I agree that oceanside and barrier island properties should not be insurable if it means that we all have to help pay when they are destroyed. I expect to hear that a lot more areas join that list as global warming changes weather patterns. Places like Paterson NJ or the area around the Red River in North Dakota might not be insurable soon.

    Bookmark   August 2, 2010 at 8:29PM
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I live 5 houses off the water in Long Island. I have to buy flood insurance because I'm in a FEMA flood zone. I don't think there's been a flood here for a 100 years but that doesn't matter.

I hate having two insurances. So many companies won't do flood insurance that my broker has to get a third party carrier which my home owners insurance co. makes me get a document notarized to that account. Crazy.

My house is approx. 1100 sq ft (I count bathrooms and hallways), it's gone down in value in the last two years at least $50,000 (but I'm not looking to sell so it's only a "paper" loss) but my insurance is on the mortgage value so I pay approx. $2,800 for flood and homeowners. For a tiny house on a teeny lot!

I think that's a lot. But I probably wouldn't think it's enough if I lost my house!

    Bookmark   August 4, 2010 at 8:51AM
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Buddyrose, there are changes coming to the flood insurance program, which is different because it is FEDERAL insurance and not underwritten by any private company. You may be REQUIRED to get it, or you may in some locations voluntarily decide to get it.

With our river house, they said we were not required to have it. I said, I live on the water, I'm getting it. Thank GOD, because it was the flood insurance which saved us from losses of Hurricane Katrina.

I say changes to the insurance program for flood, because it will not be written by the regular insurance companies any more. It will change this November, and then your new policy for next year will be written under the new program. I'm not sure who will be handling it, but I've been advised not to throw out any mail from companies offering insurance until I at least read it. It could be my flood insurance renewal.

Given my experience with flooding losses, I consider the $300 or so money well spent. And in your case, NY is long overdue for a hurricane. I think there was a whole island wiped out north of Long Island or Manhattan Island early in the 20th century, so being 5 houses off the water does not keep you safe from such events.

I have a favorite saying, JUST BECAUSE I'M PARANOID DOES NOT MEAN THEY ARE NOT OUT TO GET ME. Stuff happens.

Your house is larger than ours, we pay $3000 for homeowners with high deductibles for hurricane claims, and then the flood is a separate policy for about $300 more. We get a discount because we also have our auto insurance with the same company.

A lot of people have no option about the insurance or taxes being held in escrow by the mortgage company. So they pay it month by month even before it is due and the insurance company gets to play with your money that whole year. Probably gives peace of mind to the mortgage people, who want to make sure your house is restored to livable condition even when you lose everything else. So they can sell it out from under you.

Sorry to be so cynical, but I'm reading Norm Chomsky, and I don't have much faith in the large corporate nature of our society.

    Bookmark   August 4, 2010 at 9:38AM
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I don't think it's hard to get insurance in Texas, but companies have stopped covering water damage and mold. I don't think my dd in MO had any problem getting insurance either. Her house is 60 years old and she had to have the electric box replaced for it to pass inspection.

    Bookmark   August 4, 2010 at 11:28AM
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Not one of those tiny houses, but just a cheap, simple house that cost under $25K to build, I'd drop everything except liability and self-insure.

    Bookmark   August 4, 2010 at 11:37AM
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"Is that one of the benefits of building permits and inspections?"

Oh my! Made my sides hurt I laughed so hard. Almost choked on my coffee. There is no benefit to building permits or inspections other than to lighten your wallet.

    Bookmark   August 4, 2010 at 2:23PM
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I know this will probably open the gates to a completely new channel of discussion, but in all my experience, the only insurance company that has come across as being reliable for both car and home insurance, has been AARP. Yes, we all have problems with their political leanings, but the insurance which incidentally is through The Hartford is reliable. Each of my car and homeowners claims has been attended well, and wherever rates have increased, they have had a sound justification to support the increase. I cannot afford to self insure, nor will I let any insurance company bully me into going for a smaller / less functional house, just to cut back on insurance costs. My point is that though the situation has worsened, not all companies are being paranoid:).

Here is a link that might be useful: AARP

    Bookmark   August 26, 2010 at 3:20AM
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Though I can't speak for all insurance companies, I know the one I work for isn't cashing in on lots of profit. And trust me when I say I'm first in line on the "big business is killing this country" bandwagon. (I refuse to do business with Wal-Mart, but that's a different thread).

I do want to clear up some misconceptions, though. Much of the problems with insurance these days is the increasing populations of people living in high-hazard areas. In the last few years, hurricanes and the California Wildfires have cost the industry billions and caused a number of smaller companies to go insolvent. Because of this, many states have been enacting insolvency and catastrophe funds--those are programs homeowners pay for and the insurance companies are required to collect, not through premiums but through taxes tacked on to your policy. Florida is the worst. Flgargoyle, I'll bet if you checked your policy you'd see that much of the increase in your insurance isn't the premium but the state assessments tacked on after Katrina (look for Insurance Guaranty Fund, Hurricane Cat Fund, Citizens charges on your declarations page). Those are fees your state regulators are charging you that your insurance company is required to collect. Adding insult to injury is the fact that those assessments are charged to ALL homeowners in the state, so even if you don't live in a high hazard area, if lots of people in your state do, you're paying to cover them.

My main concern isn't to defend insurance companies, as I'm a homeowner too and pay like everyone else. Mostly, I wanted to caution anyone who gets offers for catastrophe-type insurance (earthquake, flood, wind) from a company you've never heard of and the premiums sound too good to be true. If there were a large catastrophe, those companies are likely to go insolvent, meaning when you go to file your claim, there's no one at the office to take your call. Check with a company like AM Best to make sure that insurer has a good rating. I wouldn't insure with anyone graded below an A.

    Bookmark   August 26, 2010 at 9:34AM
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Well, the flood insurance program is all federal insurance. I think it is the most reasonably priced policy anyone can get. It was the one which paid for the loss of our house in Katrina, NOT the homeowners! Homeowners said there was NO WIND DAMAGE, so they paid less than $1000 for a home which was a total loss. Huh! Well, it was WIND which pushes the water, and I failed to see how an 8 foot storm surge through my house could destroy the air handler in the attic without the wind blowing it in there. Of course, the roof was still on. We lived on the bank of the river inside the city limits of Mobile.

The only thing UNTOUCHED by the debris was my Blessed Virgin which had debris all around, but not a speck on her. It all swirled around her, but did not mar her appearance a bit. SHE is the best insurance I ever have had.

    Bookmark   August 26, 2010 at 11:49AM
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I don't doubt that people can have bad experiences. It's a shame because it gives the whole industry a bad name. You were smart to carry the flood insurance. I've yet to pick up earthquake on my home. Last time I checked, it was horribly expensive and carried such high deductibles you were better off taking what you would pay in premiums and building up your own savings account. I've heard the market has improved and people can get cheaper earthquake insurance these days, but I've just been lazy about looking into it. It's one of those things I could end up sorry for!

    Bookmark   August 26, 2010 at 12:31PM
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