Home insurance comes in different forms and depending on which type of policy you choose your home insurance rates and coverage options will be quite different.
- HO-1: the most basic form of home insurance »
- HO-2: It is often referred to as "broad coverage" »
- HO-3: also referred to as "special" form »
- HO-4: is often called a tenant’s policy »
- HO-6: type of home insurance addressed condominium unit owners »
- HO-8: such policies are specifically designed for owners of old homes »
Home insurance is a very effective financial tool for protecting your most valuable asset. Learn how home insurance can help you protect your house and its contents against different perils.
Home insurance and the new wave of inspections
If you go back to the time you bought your first home, there was very little fuss or bother. You just handed over your money, hopefully received a copy of the policy, and then forgot about insurance until renewal. At this point, we come to an interesting statistic. Historically, most people renew with the same company. Only an average of about 10% change insurers in any given year. So most people have little or no contact with their insurers unless they are unlucky enough to suffer a loss.
This is all changing. All around the country, insurers are sending out letters warning their insured that teams of inspectors will be visiting to assess the exterior condition of their homes. In plain language, for once, the insurers also warn they reserve the right to cancel the policy if they find the condition of your home "unacceptable" for some reason. This has caused some annoyance in many homes because there's an obvious linkage with current events. Looking around at the recent bad weather, a lot of people suspect the insurers are looking for ways to reduce their risk in future storms and hurricanes. Homes that were acceptable without inspection twenty years ago, may now be rejected because the inspectors don't think you have been maintaining your property.
So what exactly is going to happen? In the first instance, this is going to be an external evaluation. Insurers do have the right to come into your home to look around but, there's no sign any are proposing to use this right on a casual basis. Presumably, it will be as a follow-up should the external inspection cause concern. This review could actually affect you in two quite different ways. First, you have a general duty to tell the insurer if anything significant has changed in the property since you first took out the policy. So, for example, if you have built a garage or obviously improved the property, you should have told the insurer. This affects the rebuild valuation. Indeed, you should be doing your own review of rebuilding costs every two years. You will be surprised how quickly the cost of labor and materials rises. A failure to keep the valuation up-to-date is one of the grounds on which an insurer can cancel a property.
Second is the reverse situation. This is the households that allow the property to fall into disrepair. The less money you spend on preventive maintenance, the greater the risk the insurer will think even a slight wind might cause damage. So this will be the main motive behind the inspections. The hope is it will encourage you to do all the repair work you've been putting off and make the home more secure. In the long term, this will reduce the number of insurance claims and boost the insurer's profit margins.
So if your home insurance company has sent you one of these letters, you should look around your property. If there's anything obviously wrong, you should put it right. Avoid problems if at all possible. Some people like to be positive. You can call and ask when the inspection is likely to take place. Talking with these home insurance inspectors gives you the chance to discover how you might make your home safer.