Significant changes are taking place within the insurance industry, particularly in homeowners’ insurance. Many homeowners are noticing sharp increases in premiums, unexpected cancellation notices, and more challenges securing coverage when purchasing a home. So, what’s behind these shifts?
Why Is This Happening?
The primary culprit is severe weather patterns. Over the past 5-6 years, the frequency and intensity of catastrophic weather events have escalated, triggering massive insurance claims. The 2021 derecho, numerous hailstorms, and a record-breaking number of tornadoes this year have all contributed to substantial losses for insurers. Coupled with inflation, a slow post-COVID economy, and wage battles, the insurance industry is facing a “perfect storm.”
While insurance is designed to protect homeowners from catastrophic losses, the current state of affairs has forced insurers to rethink how they structure policies and manage coverage.
Key Industry Changes:
To mitigate losses, insurers are implementing several new strategies, many of which impact coverage and deductibles. Here are some of the most significant changes you should be aware of:
- Wind and Hail Deductibles: These are now becoming more common as separate, higher deductibles specifically for wind or hail damage.
- Depreciation on Roof, Siding, and Windows: If your roof is 65% through its life expectancy and sustains hail damage, the insurance company may only cover a portion of the replacement cost, factoring in depreciation.
- Tighter Underwriting on Roofs: Insurers are more stringent when it comes to covering roofs, particularly those that are older or in poorer condition.
Four Critical Questions to Ask About Your Homeowner’s Insurance:
As a homeowner or buyer, it’s crucial to stay informed about your insurance coverage. Here are four questions you should ask:
- Is the policy a true replacement policy?
Make sure you understand whether your insurance covers the full replacement cost or only the depreciated value of your home or specific components, like the roof or siding. - Are the roof, siding, and windows subject to depreciation for wind and hail damage?
Clarify how your insurer handles these critical parts of your home, especially after a storm. - Do you have coverage for sewer and drain backups?
This is an often overlooked but essential part of coverage. Sewer and ground water backups can cause significant damage, and not all policies include this protection. - What are my deductibles?
Be sure to check if you have more than one deductible for different types of damage (e.g., a general deductible vs. a separate wind or hail deductible).
The Bottom Line
No two insurance quotes are identical, especially in today’s evolving market. As a consumer, it’s essential to look beyond the quote and delve into the details of what you’re actually purchasing. Pay attention to differences in coverage related to deductibles, depreciation, and specific exclusions. Taking the time to understand your policy now can save you headaches later. By staying informed and asking the right questions, you can navigate these changes in the insurance industry and ensure your home is adequately protected.
Joe Yamen Shelter Insurance | Office 515-276-0011 | Email: [email protected]
