There are a lot of things to consider when buying a home – how much home can you afford, will the seller accept your offer, what documents are needed to have the mortgage approved, will the inspection uncover something hidden and many more. With all these moving parts and worries, it’s easy to see why home insurance may be a bit of an afterthought, yet it plays an important part in the process of buying a home.
Most home buyers just want to make sure the home is in good shape, so they don’t have to repair anything immediately. Home insurance underwriters, though, are concerned about several things including having enough coverage to replace the home in the event of a total loss, what claims may exist, and when evaluating an older home, when the roof was last replaced.
Roof age has become increasingly more important over the past 3 years to home insurance companies due to the amount of money they’ve paid for hail damage claims in north Texas. Knowing when it was last replaced can have a positive or negative impact for the home buyer. Here are 4 ways the roof’s age can impact a home buyer.
Acceptance: A roof’s age determines which home insurance companies will write an insurance policy on the home. Some companies will not write a policy on a home if the roof is over 15 years old while others draw the line on a roof that’s 20 or 25 years old. The reluctance to write older roofs is due to the greater likelihood the insurance company will have to pay to replace it.
Coverage Type: There are a few companies that will write a home with a roof 20 years old or older, however, they may only cover it on an actual cash value basis. This means the policy will pay the claim on a depreciated basis leaving the new home owner to pay the bulk of the cost in replacing the roof. Younger roofs are typically covered on a replacement cost basis which is the type of coverage any home buyer should have.
Deductible: The deductible determines what the homeowner must pay before the policy pays for repairs. The lowest deductible offered by home insurance companies in Texas is 1% of the home’s insured value, so a home insured for $200,000 has a wind / hail deductible of $2,000. Some companies raise this deductible to 1.5% or 2% based on the age of the roof. Knowing the roof age may provide the home buyer a significant savings whenever they experience that first hail claim.
Cost: The age of the roof will impact the home insurance cost. Older roofs result in a higher annual premium for home insurance, while younger roofs provide the home buyer a discount.
Home buyers and their realtors should endeavor to determine the roof’s age regardless of when the home was built. If this isn’t mentioned on the sellers’ disclosure, then ask! Knowing can have a profound impact on your home insurance. What do you think? Share your questions, comments, or experiences with me on my Facebook, Google +, and LinkedIn pages. I’d love to hear from you!