Article originally published by Aryn Bates, CPRIA on LinkedIn https://www.linkedin.com/pulse/do-you-know-your-dream-homes-insurance-history-aryn-bates/
What new home buyers should keep in mind.
Curb appeal, a gourmet kitchen, a good school district, an amazing master bathroom…. there are many must-haves to check off your list when shopping for your new home. But what about the behind the scenes features of the home? Do you know the age of the roof and whether it will be able to withstand the next 30 MPH storm? Is the landscaping graded for proper drainage? It would be easy to overlook some of the harder to see aspects of your home, especially if the kitchen backsplash coordinates perfectly with the granite countertops. Focusing on aesthetics, without delving deeper, can be a costly mistake.
Most new home buyers are provided with a home warranty upon closing. This protects the new homeowner for the next year, in the case of any of the mechanicals or appliances breaking down. But what happens when the year is up? Not all homeowners choose to continue this coverage, especially when the cost can range upwards from $500 annually.
The realtor disclosure is in place to provide the new home buyer with some peace of mind about the property they are purchasing, but even this is not a fail-safe. The seller fills this form out to the best of their ability and based off what they remember, but this is not all-inclusive. Especially in the case of water, this can create future headaches for the new owner.
Water damage is second only to wind as the most common cause of home insurance claims. According to Chubb, a weather-related water loss is 40% more likely to occur in the winter months and failure of a plumbing supply system is the number one cause of non-weather related losses.
The insurance industry looks unfavorably upon any type of water claim on an insured property, both because of the severity of the damage that can occur and the future problems that may arise from the water (mold, mildew, decrease of structural integrity). Some insurance carriers are even going as far as allowing a prior owner’s water loss(es) to impact the premium the new home buyer will pay.
So what can you do to help prepare and protect yourself when you are home shopping?
1. Keep a list of anything that looks questionable during your walkthrough with the plan of asking the seller’s realtor about later.
2. Extend the coverage to your mechanicals and appliances by electing to add a mechanical breakdown endorsement onto your home insurance policy. The premium for this endorsement typically ranges between $50 and $150—much more affordable than continuing the home warranty.
3. Have a CLUE (Comprehensive Loss Underwriting Exchange) Report run on the prospective home before you buy. This will shows the claims history for the property, so you can make sure that everything was properly mitigated and you won’t have to incur potentially costly insurance premiums due to the prior owner’s claim.
4. Make sure you get a property appraisal/ inspection prior to closing, and do your best to be present during, as any potential issues can be brought forth for the seller to remedy prior to move-in.
Aryn Bates, CPRIA, is a Personal Lines Specialist at Overmyer Hall Associates. She has been working in the high net worth personal lines market and consulting with members of the Financial Industry for seven years. She can be reached at 614-453-9369.