Homeowners Insurance Isn’t Always Guaranteed
Meanwhile, the average home buyer, particularly if purchasing a home for the first time, may wait until the last minute to obtain homeowners insurance. And why not? Isn’t it just a matter of picking up the phone, talking to your trusted agent who has already insured your belongings and your car?
Yet, more and more home buyers are discovering that obtaining homeowners insurance is not so simple, and it is often for reasons they couldn’t possibly predict.
“People are used to calling one day before the closing and getting homeowners insurance,” says mortgage broker Kevin Casey. “When it gets difficult to get insurance, it keeps people from closing. They still close on the house, eventually, but the consequences are that they often end up with a higher rate,” he explains. And in the current market, with rates generally moving upward, such a delay is likely to be costly.
Casey gives his own recent home purchase as a case in point. “I’m in the business, so I should know the insurance situation, right?,” he says. “And I do. I mean, the house was fine. I called, and [my agent] started asking me all of these questions. No problem. It was smooth sailing until he asked,Ã?¯Ã?¿Ã?½ “Do you live on a hill?'”
Casey was surprised by the question, and even more surprised to think his homeowners insurance could be jeopardized by such a circumstance. But that, and a nearby creek, made obtaining coverage something of a challenge.
Nor is the example unusual. A wide variety of factors, from the age of a home to the roofing materials used, can cause an insurance company to deny coverage or offer only higher rates.
Casey notes that he has also seen homes denied coverage, or seen home buyers have difficulty obtaining coverage, if a previous owner made claims against his or her homeowner’s policy for water damage or mold. “If a house has two water claims, a company often won’t insure it,” he says. “That makes it particularly important for the real estate agent to make sure their client knows whether claims have been filed,” he explains.
While some prospective home buyers might just be catching on, the real estate community is well aware of the situation. That makes enlisting the help of a knowledgeable realtor key in the process. Sharon Whipkey, an Oakland-based realtor, says that she encourages her clients to avoid last-minute letdowns by starting the process early. “I encourage my home buyers to line up their homeowners insurance right away, so they have the insurance well before close of escrow.”
Nancy Rogers, Public Affairs Officer of the Bay East Association of Realtors, says to expect action very soon. “This is definitely of concern to the Realtor community,” Rogers says. “At the state level, we’re forming a Homeowners Insurance Availability Task Force. As it forms, they will definitely be getting to work. This is an issue that is of great concern to us. It is on our radar, and on our agenda for the coming year,” she explains.
Nor has the issue been ignored by the California Department of Insurance. While not as prominent as the health and workers compensation crises, the Department’s web site provides basic information, and asks consumers to let them know when they encounter difficulty in obtaining homeowners’ insurance in California.
Perhaps, with both the private sector and public sector involved, a headline-heralding crisis along the lines of the workers’ compensation debacle can be averted.
