The Coverage For Your Roof On Your Homeowners Insurance May Be Changing

Scientists tell us that 2012 was the hottest year on record in the United States.  Global warming is here and we are seeing more frequent and more intense storms. This puts a lot of pressure on rates for property insurance in general and homeowners insurance in particular.   In North Carolina that means more frequent and more intense windstorms and hailstorms.  Wind and hail losses in North Carolina in 2011 sent the homeowners insurance marketplace into a tailspin.  One the one hand, insurance companies were taking huge losses in home insurance while on the other hand the insurance commissioner was unwilling to allow them the rate increases that they needed as he was facing re-election.  The result has been a continued chaotic home insurance marketplace in our state.

To protect themselves from further losses and without any chance of getting rate increases the insurance companies started to look at other options.  The first and most obvious move was to require that a client included their more profitable auto policy in order to qualify for home insurance.  Next, the insurance companies drug out an old and arcane technique known as  the consent to rate letter, to try for rate increases on a policy by policy basis.  Along with that came mass cancellations and nonrenewals of existing home insurance policies and a few insurance companies cancelled all of their policies in our state and left the state entirely.

Now we all know the old saying that you can’t squeeze water out of a rock.  So if an insurance company can’t get the rates they need to be profitable but want to stay in the home insurance business, what are their options?   Well the next place they have to look is at the coverage they provide in the policy with an eye toward reducing that coverage.  In North Carolina, the cause of the most losses on home insurance has been wind and hail claims, especially to roofs.  So we are now beginning to see some of the larger insurance companies in our state taking action to reduce the coverage in their policies for these kinds of claims. 

One way to reduce the costs of claims from roof damage is to change the policy language so that when a roof is damaged the amount paid out for the claim is based on the depreciated value of the roof instead of the replacement value of the roof.  At this time, most policies in NC still provide replacement cost protection on roof damage claims but that is changing quickly.  Several big companies have already begun to change their policies to pay claims based only on the depreciated value of the roof.  And as the big boys go, so goes the entire market when it comes to this kind of thing.

Let’s take an example to help illustrate what this might mean for you, a NC homeowners policy holder.  Assume that you have a 20 year roof on your house that is 15 years old when a hailstorm blows through your neighborhood and damages your roof.  With a traditional replacement cost policy your claim would equal the cost of putting on a new, 20 year roof.  For the sake of this example, let’s assume that new roof will cost $20,000.  Now, if your policy coverage has been modified to limit roof claims to the depreciated value of the roof instead of replacement cost, then your claim will be for only $5000.  This is because your roof only has ¼ of its value left on it based on its age so you only receive ¼ of the replacement cost of your roof.  Imagine having to come up with $15,000 right away to repair your roof after a bad hailstorm.

Some insurance companies are taking an alternate approach to this problem.  Their strategy is to have a different, much higher deductible for wind and hail claims while leaving the replacement protection for your roof intact.  Already we see some companies implementing a mandatory $2000 deductible on all home insurance policies for all claims related to wind or hail.  While I find this usually to be better for the consumer than restricting the roof valuation, it is still another bite out of the consumer’s pocket.

For the sake of the consumer, I would prefer that all policies have the same coverage language.  But with these changes, now a consumer must carefully watch his mail for notices regarding changes to his or her homeowners insurance policy.   If your roof is failry new then depreciated value may be better for you than a large wind and hail deductible.  However, if your roof has some age on it then you would be better served taking on a larger wind and hail deductible and keeping your replacement coverage on your roof.

At Clinard Insurance Group, we represent a number of insurance companies that have not changed either their deductible plan or the valuation for roof claims.  But, as the bigger insurance players in our market begin to make these changes, you can bet that those will smaller market share will take notice and start to make changes to their coverage language in their policies.  This makes it more important than ever that you stay in touch with your insurance agent and that you fully understand exactly how your policy will work in a wind or hail claim.  If you would like our help with your home insurance, your auto insurance, your business insurance or even your life insurance, please call us, toll free, at 877-687-7557.

Certificates of Insurance And Your Contractors Insurance Policies

Contractors work often involves close coordination with other entities from other artisans to general contractors to even banks and architects involved in a project.   Keeping the information flowing freely between all of these parties on the same job is critical but does require some front end knowledge and planning on your part.  The more hurdles you can jump before you start the job, the easier it will be for you to get your work done without interruption and the easier it will be to get paid once the work is done.

General contractors, or any other contractors above you in the food chain who hire you will need to be able to prove that you have the necessary levels and types of insurance protection.  Failing to do so could mean that you can’t get on the job site in the first place or it may mean you have difficulty collecting payments for your work once it is completed.   So anything you can do to smooth out this process should be done before you start trying to collect the pay for your work, or better yet, before you sign the contract itself or take the job in the first place.

Every construction job is different and each one will carry different requirements for insurance for subcontractors.  If your general contractor is organized and efficient, then they will probably want to have all of your insurance proof documented before you are allowed on their job site.  Typically these general contractors will need details about your commercial auto insurance policy, your general liability insurance policy, your workers compensation insurance policy, and sometimes even require you to carry a commercial umbrella insurance policy.  Your contract with them will likely spell out exactly how much insurance coverage is required for each line of insurance.  So, one step you can take in advance is to share the contract wording relating to insurance requirements with your insurance agent.  This way your agent can help make sure in advance that you will be able to satisfy these requirements.  Once this has been done, have your agent send a certificate of insurance to your general contractor before you start work.

Now let’s take a quick look at this process from the perspective of your communication with your insurance agent.  In order for your agent to issue a certificate of insurance to the general contractor or some other party, you will need to be able to provide them with the name and address of the certificate holder.  Have this information in hand before you call your agent to request the certificate of insurance.   Also, look through your contract to check and see if any special wording is required on the certificate of insurance.  Some contracts will require that you add the general contractor as an additional insured to each policy.  This may be something that your insurance company is willing to do or they may require an additional premium from you for this policy change.  In some cases your insurance company may even say that they will not add this additional insured to your policy.  Other contracts may require or request special wording that may change the nature of one of more of your insurance policies.  These special wording certificates often require the approval of the insurance company underwriter.  No matter which way this goes, you can speed up the process if you discover any special wording requirements ahead of time and let your agent know about them when you first call.

By doing this advance work on your insurance certificate requests, you may be able to save yourself time and often a lot of trouble in the certificate ordering process.    You don’t want to find out, late on a Friday afternoon, that you don’t have the correct insurance policies in place to satisfy your contractual obligations to your general contractor.  Failure to do so could delay when your general contractor is able to pay you. 

At Clinard Insurance Group, in Winston Salem, North Carolina, we insure hundreds of contractors of all stripes, located all across North Carolina, South Carolina, Georgia and Tennessee.  We have insurance programs in place for carpenters insurance, plumbers insurance, landscapers insurance, electricians insurance, painters insurance and many others. We work very hard to fulfill all certificate of insurance requests from our clients in under 30 minutes.  We also have a free phone app for your Android or Iphone that will allow you to request certificates of insurance from us with a few keystrokes on your phone.  If you need help with any of your business insurance policies, please give us a call, toll free, 877-687-7557.