Several times a year, I receive a call from an individual or family member who’s very anxious. They’ve found their dream home in north Texas, put their earnest money down, and ordered the inspection. The inspection outlines an issue and they find out days or a week before closing from their insurance agent that this issue prevents them from getting home insurance.
I received such a call last week from a woman in Dallas. Her family is scheduled to close on their new home this week, but they’d run into not one, but two issues which threatened to derail closing. They’d already been told by their insurance agent they would be unable to write a home insurance policy on their new home.
Here are at four home attributes which prevent many home insurance companies writing a home insurance policy.
Aluminum Wiring: Many home builders switched to aluminum wiring from 1965 to 1974. It’s a great conductor of electricity and it’s cheaper than copper. The only problem is aluminum wiring degrades over time. Gaps can form between the wire and the connector at a switch or plug. When this happens, arcing may occur which causes sparks and potentially a home fire.
We have at least two home insurance companies that will write a policy on a home with aluminum wiring provided two things have been done. The connectors must have been professionally pigtailed by an electrician trained to do this and the electrical panel or box must have circuit breakers.
Overlay Roof: A roof with an overlay typically has two layers. The most common ones are two layers of composition shingles or a layer of composition shingles over a base layer of wooden shingles. This usually occurs when a person files a home insurance claim for hail damage and instead of pulling off the layer of damaged shingles, the roofing company lays the new shingles over the original layer.
Most home insurance companies don’t like these roofs due to the increased cost in having remove two layers of shingles before putting on a new roof. In the case of a composition shingle over a wooden shingle roof, not only do both layers need to be removed, but plywood decking has to replace the wooden shingles which further increases the cost.
Wood Shingle Roof: I love the look of a wood shingle roof, however they are a fire hazard which is why home insurance companies don’t like them. In the late 1990’s, a home with a wooden roof on a cul-de-sac in Plano caught on fire. Sparks landed on roofs of all the homes in the cul-de-sac causing the neighboring homes to catch fire. All the homes in the cul-de-sac were total losses except one; the one with a composition shingle roof. Since then, most home insurance companies stopped writing policies on homes with wooden shingles.
Prior Claims: Whenever I write a home insurance policy for someone buying a new home, there are two sets of claims that an underwriter reviews prior to writing a policy; the buyer’s prior claims and claims on the home that’s being purchased. Some insurance companies only count the buyer’s prior home insurance claims while other companies factor both the buyer’s and any claims on the home being bought.
Claims may impact the cost of the home insurance on the new home. In some cases, they make it impossible to write a policy on the new home such as claims for major water leaks, fire, theft, and personal liability claims.
The good news is we work with several excellent insurance companies, several of which will write policies for homes with these issues. This 0enabled us to help the woman and her family with home insurance for their new home allowing them to close on time.
Are there any home issues that gave you a problem? Share them with us, along with your comments, experiences, and questions in the comments section of our blog or on our Google + and Facebook pages. I’d love to hear from you!