The All-Important Residential Insurance Inspection

An insurance inspection of a residential property is something that, although not required of all properties prior to issuance of a homeowners’ insurance policy, is required of many. Some of the reasons for you, as an insurance company underwriter, to order a home insurance inspection include:

• The property being considered is an older home
• The insurance applicant is new to your company
• An existing policy is coming due for renewal and the home hasn’t had an inspection for a long time
• It’s difficult to accurately determine a property’s replacement cost

What’s a Residential Insurance Inspection For?

A standard home inspection, which a potential home buyer will likely obtain before purchasing a home in order to assess its overall condition, differs from an insurance inspection, which primarily has two goals:

1. Determine as accurately as possible what it would cost to rebuild the home in the event that it got completely demolished by a peril, such as a fire or tornado, that’s covered by the policy you’re considering issuing.
2. Uncover any risks that could potentially impact future claims against the policy.

This data, provided by your inspector, will be used during the underwriting process to help determine whether a policy should be issued and, if so, at what premium cost to the insured. If it’s found that the replacement cost of the home is significantly different than what had been thought prior to the inspection, you may need to adjust the cost of the policy either up or down from what was initially estimated. This isn’t at all unusual since a home inspection may take place as much as ninety days after a policy has been issued.

After receiving your inspector’s report, you may also require the policy applicant to affect certain repairs before the policy can be finalized. If risks are uncovered within the home or property that could potentially be the cause of future insurance claims, so you’ll want to have these risks addressed before approving the insurance coverage. If the homeowner refuses to fix problems that have been pointed out, you may either refuse to issue the policy or increase the cost to a level more appropriate to the unrepaired condition of the home.

Home Insurance Inspection Benefits

While a home inspection may be ordered for your benefit as the insurance company underwriter to aid in your underwriting efforts, it also provides a number of benefits for the homeowner as well. These include:

• It can give the homeowner the peace of mind of knowing that their home is both safe and structurally sound.
• By uncovering potential risks that could later lead to insurance claims, an inspection can save a homeowner time, trouble, and money by averting problems that are headed off before damage is caused or someone gets injured.
• Since your company may offer discounts to homeowners for having certain systems in place for protection against fire and/or burglary, your inspector may bring potential discounts to your and the homeowner’s attention.
• A professional inspection can help the homeowner know if they have the correct amount of insurance protection in place for their specific situation. Paying for too much protection is a waste of money. Having too little protection can be disastrous if a major claim is submitted.

Kinds of Home Insurance Inspections

There are a number of different types of home inspections done for insurance purposes, from the very basic to the fully comprehensive. These include:

• The simple exterior observation inspection, which includes photos from each of the four sides of the residence and of the rooftop. This inspection type will verify the home’s address, location, construction type, roof type, proximity to water, and overall general condition. This may be augmented with exterior measurements, a diagram, and replacement cost estimation for the structure.
• An interior inspection includes a complete interior and exterior conditions and hazards report, diagram, and detailed replacement cost estimation. Also includes a 4-point inspection.
• The 4-point inspection is an examination of a home’s four major systems, including electrical, plumbing, roofing, and HVAC.
• A wind mitigation inspection is especially important for homes 40 years and older or rental homes 30 years and older. Also, important for homes on the southeast coast of the U.S. This inspection is to determine the sturdiness and stability of a structure in the face of storms or other strong winds.

It Pays to Inspect

The old saying goes, “Don’t expect what you don’t inspect.” Inspecting a property to gain accurate data to use during underwriting gives you a better opportunity to eliminate potential future claims and to come up with a policy cost that’s both fair for the client and profitable for your company. Davies is a top-rated home inspection provider. Get them in your corner for unparalleled field underwriting support, with nearly four decades of providing the most accurate underwriting reports.