Why Homeowners Insurance may be out of reach

I received an email today from an insurance agent with some important information that I is worth sharing. Written by Robert Davis with some tweaks and changes from me.

When someone buys a home in NJ, it is now required that all sellers fill out a disclosure form. If the buyer hires an attorney, they will order a CLUE report (see below.)

Often the sellers, don't remember some things that have transpired over many decades or it may be an estate, and the heirs do not have full knowledge of all that went wrong. A new section of the disclosure is about Flood Risk - a major concern in many towns in NJ.

Perhaps an executor, trustee or administrator of an estate could be uniformed, but the insurance claims will never lie. If someone has filed a loss report, there will be a record, but its not going to cover issues that occurred 10 - 20+ years ago. For that you need copies of old permits, inspections and a little luck to unearth a old problem.

Below are bullet points outlining the issues which are negatively affecting the Homeowners Insurance Markets in New Jersey.

• Carriers pull loss reports from CLUE (Comprehensive Loss Underwriting Exchange) on both the property being purchased as well as on the Named Insured to see any losses they have had on any prior owned properties going back 5 years (states only allow carriers to consider losses within the last 5 years but no further back.) IN the past, carriers would only look at losses on the property being purchased, now they also look at the insured themselves.
• Increased frequency and intensity of storms over the last 10 years are causing more and more expensive claims. Since most carriers write homeowners insurance in numerous states, the premiums they charge to NJ homeowners increase as the losses throughout the country increase. A wildfire in CA can cause the company to lose money thus they increase their premiums in the other states they write, as well as in CA in order to maintain profitability.
• Carriers are scrutinizing Credit Scores of the Named Insured more and more. If you have a less than stellar credit score, many carriers will refuse to write a policy for you.
• Homeowners insurance premiums are regulated by each state. In order to get a premium increase the carrier must first apply for the increase with the state and be approved before they can implement the increase. Pretty much all the carriers that write in NJ are losing money on their NJ book of business therefore they are applying for big premium increases with the NJ Dept. of Banking and Insurance. Most carriers are getting approval for premium increases but not for the amount of an increase that they feel they need to be profitable in NJ. As a result some carriers have decided they will no longer write any new homeowners policies in NJ -
• Travelers and Allstate are two big carriers that are currently not writing any new homeowners policies in NJ.
• Underwriting is getting more difficult as carriers scrutinize the condition of properties before they write them. Most carriers will not write a policy if the plumbing, HVAC, electrical, and roof have not been updated or replaced within the last 20 years. Many carriers will not write if the roof is over 15 years old and a few even require a new roof within the last 10 years – carriers are using Google Earth and some carriers are hiring 3rd parties to fly a drone over your property to examine the roof, the exterior of the home, as well as the grounds for any sign of issues that may lead to a claim.
• Most carriers will not write a policy if the property is over 75 years old unless it has been completely renovated within the last 20 years. It is even more complicated for home that is 100 years or older. Surplus Lines carriers will write on homes which are 100 years and older, however these policies come with many restrictions not otherwise on a homeowners policy written through an Admitted market.
• Often these Surplus Lines policies are typically very expensive.?

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Shared by Robert A. Davis, President Davis Insurance Agency, Westfield, NJ

[email protected] O: 908-233-8040 C: 908-397-4514

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