Homeowner’s Insurance Underwriting - Part One

Insurance underwriting is all about risk – many factors go into the premiums carriers charge besides how much coverage is provided and what deductible is selected.

The Home and any Other Structures:

Facts:

Original Year of Construction. What type of construction is it? What is the total square footage? Is it a high value home - generally over $750,000? 

Updates:

When were the major systems updated (completely replaced) – roof, electrical including the breaker box, plumbing, HVAC?  Has the electrical service into the home been replaced – is at least 100 amps? 

Other Considerations:

Have there been any losses in the last 5 years?

Are all buildings used only for personal use?

Location:

Property located in high risk areas may not be eligible with many carriers. Natural disasters aside, what do underwriters look at:

Fire Protection: 

How far is the property from the first responding fire department? How long would it take for the fire department to arrive, and is there access to an adequate water supply. What firefighting equipment do they have – pumpers, ladder trucks, tankers, etc.  Is there a Mutual Aid Agreement? Is the department manned by paid staff or volunteers?

Other Considerations:

How far away are the closest neighbors? Can they see your home?

How many acres are included/do you own. Is there any farming or business/commercial use of/on the land? Any swimming pools, trampolines, ponds, creeks or other hazards?

Appearance of the property:

Underwriters consider the overall appearance of the property. 

Maintenance, upkeep, and general housekeeping of the outside and interior premises are indicators of physical hazards that the insurer may not want to accept or hint to broader problems with a prospective insured.

Personal inspection and photos help relay a true picture of the risk. Consideration of moral and morale hazards, or lack thereof, can be supported through the use of photos.

Poor maintenance of a property will often make the property ineligible for coverage with many carriers and the owner will have to seek coverage with a high risk carrier, resulting in higher premiums and possibly less comprehensive coverage.

Your History:

Previous Insurance Experiences:

Have you had previous insurance – some carriers require previous homeowner’s insurance – either having lived with your parents or a renter’s insurance policy for first time home buyers. Have you had any losses at other locations in the last 5 years? 

Personal Information:

What is your credit score/history? 

Have you been convicted of insurance fraud and or a felony? 

Are you a public figure?

Pets and unusual exposures:

Do you own or are you planning on acquiring any exotic pets or a dog with a bite history or breed with aggressive tendencies; i.e., Pit-bull, Chow, Akita, Rottweiler, Doberman, Husky, Malamute, Wolf or mixture with any of these breeds (this is only a partial list of breeds that may be ineligible.)

Do you have a home-based business?

Some items on the list are pretty common sense, but why does an Underwriter care what the house construction is? I asked one of my underwriters why his company would not write a log home – MOST homeowner’s policies are written on a replacement cost basis. Two homes each valued @ $300,000 have exterior damage from a grass fire…. on a house with vinyl siding, they replace the damaged siding or worse-case scenario have to reside the whole house. On the log home, they have to rebuild the whole house because there is no way to replace just a few logs.  So instead of a $10,000 claim the owner of the log home has a $300,000 claim.

Future blogs will look at these in more depth.