03/11/2024
If you’re a homebuyer or realtor in this market - this post is for you! 🏡 I have a few insurance things you should consider before putting an offer on a new place, or listing a property.
The insurance market is not the same as it was 5 years ago, and houses can have characteristics that can really mess you up from a pricing or coverage standpoint.
When interest rates (and payments) are higher than they have been, things like high home insurance can affect a deal. Remember, your payment is P&I, Taxes, and insurance, (assuming you escrow).
Mess with the payment, you mess with the buying power.
4 things to pay attention to;
1️⃣ Roof Age - insurance companies have been getting slaughtered on roofs for years now - but they are changing that. If you’re looking at a house with a roof greater than 10 years old, you’re going to start seeing limits on carriers willing to write your home. (Less competition = higher prices) More than 15 years old and you start getting into limited carriers AND coverage limitations. 20 years old…yeah good luck. 🤣 Negotiate a roof replacement into your deal.
2️⃣ Fire Protection Class - carriers use to care about this a lot, then they stopped caring as much as- but now they do again. This is the rating of the quality of the responding station to your location. Scale is 1 - 10, 10 being “if you’re houses catches on fire it’s burning down 100%” and 1 being “oh I live in Murfreesboro.” 🔥 This rating factors into your rate with most companies, and we are seeing restrictions placed on the higher class (8-10) or huge surcharges because of it. Be weary of location. In city limits usually gets city fire, outside gets county (volunteer firefighters possibly).
3️⃣ Age of the Home - this is going to seem strange, but there is currently a “no man’s land” in getting low home insurance rates. We see this on houses older than 20 years old, but less than 30 years old.
Now I’m not saying that you can’t get insurance, that’s not what I meant at all. But if you fall in that zone - you’re going to see overall higher rates than you would think. Reason being is those homes are “too old” to be considered new, but not old enough to have had major systems (hvac, plumbing, electric, roof) replaced yet and loss frequency is higher on them.
4️⃣ Precentage Deductibles - now these are not going to affect you getting a house, but they will affect you down the road. A lot of carriers are switching to these, and you as the buyer need to be aware of what you are signing up for.
Now full disclosure, some people can afford a % deductible and in those instances they are fine. But what I don’t like, is people hear a precentage and the deductible “seems” less.
Example - you have a 500,000 home - which is a lower deductible, $2500 or 1%?
Well if you’re not paying attention, 1% seems like it should be less, but in reality that $5,000. Carriers are doing up to 5% deductibles. Think about that.
So if you see a % deductible, make sure you understand what you are signing up for. Nothing is worse than discovering your deductible is higher than you thought - after you’ve had a claim. 🤷♂️
Hope this help! Happy home buying! 🏡
