Getting a home insured

What you can do to help and advise clients.

by Ron Walker   The cost of homeowners insurance has skyrocketed. REALTORS® report that premiums increased 40%-200% over last year, and the typical policy has less coverage. Several insurance companies refuse to insure a home if prior claims were made on the home. Yet underwriting guidelines are inconsistent from company to company and, in some cases, even within the same company. Legislation likely will be proposed to address the less-than-reputable practices by insurance companies, remediators, and homeowners that have led to current problems. But what can REALTORS® do or advise clients to do in the meantime? The following are a few suggestions from TAR’s Legislative Insurance Task Force.

Act within the option period

Promptly after the contract becomes binding, encourage the buyer to speak with an insurance agent and obtain quotes for insurance within the option period. A buyer may wish to review the extent and cost of coverage as part of his due diligence when deciding whether to exercise the option to terminate.

Shop around

Suggest that the buyer speak with an independent insurance agent who works with several underwriters. Consumers may be confused by the term insurance agent. Some agents represent only one company, while others represent the consumer and write policies through a number of companies. Suggest that the buyer ask the insurance agent who the agent represents. If the buyer does not work with an independent insurance agent, suggest that he seek out multiple quotes. The cost for coverage now varies significantly from company to company. The levels of coverage also vary nearly as much.

Learn about the options

Suggest that the buyer seek education from the insurance agent or the Texas Department of Insurance’s Web site (www.tdi.state.tx.us) on the differences between the HO-B, HO-A, HO-W, and HO-A Enhanced policies, as well as exclusions for ensuing mold, water damage, and ensuing damage from plumbing leaks (e.g., slab repair). It is likely that, in addition to the ones named here, insurance companies will soon market other types of policies.

Get the seller involved early

When taking a listing, suggest that the seller speak with an insurance agent for the purpose of determining whether a typical purchaser may or may not have any difficulty in obtaining insurance for the property. The seller may then work to resolve any issues with the insurance company during the listing.

Look for "clues"

When the buyer receives a quote for insurance that seems reasonable, suggest that the buyer ask if the agent or company has obtained a copy of all necessary CLUE reports. Many companies use the Comprehensive Loss Underwriting Exchange (CLUE) to review the property’s and applicant’s insurance claims history for the preceding three years. Under current law, an insurance company may cancel coverage of a newly issued insurance policy up to 90 days after the date it is issued. Initial reports indicate that currently some insurance companies exercise this right because the company or agent failed to obtain a copy of the CLUE reports before closing. The apparent negligent failure of the insurance company to timely run the CLUE reports before closing may penalize the buyer.

Correct their mistakes

If the homeowner or applicant believes that the CLUE report is inaccurate, let the homeowner or buyer know that federal law gives the homeowner or buyer the right to challenge wrong information. If an insurance company based part of its decision to deny coverage on a CLUE report, the homeowner or applicant can get a free copy of the report by calling the Equifax Insurance Consumer Center at 800/456-6004. Before calling, the homeowner or applicant will need the CLUE reference number from the company’s denial letter. CLUE is a registered trademark of Equifax Inc.

Prove the house is in good shape

If insurance is not available because of prior claims or because of the property’s condition, suggest that the seller or buyer follow the Voluntary Inspection Program (VIP) or the Marketing Assistance Program (MAP) at the Texas Department of Insurance. The VIP offers owners of well-maintained homes a way to show insurers that they deserve coverage. Under the VIP, a home receives a "certificate of insurability" if it passes an inspection. The TDI maintains a list of inspectors and inspection fees are limited to $50. A certificate of insurability creates a presumption that the property is insurable. With a certificate, an insurance company may not refuse to sell or renew a policy because of the home's condition unless the insurer reinspects it and describes the deficiencies in writing. A certificate is good for three years as long as no substantial changes occur. A certificate also establishes insurability for the MAP. The MAP uses a computer bulletin board to match people having trouble finding home insurance with insurance companies that might be willing to provide the coverage.

Get more information

If your client later has an insurance issue arise, direct him to the TDI for useful information. Specifically, the following brochures summarize homeowners’ rights and obligations: Protecting Your Home from Mold, Effectively Handling Water Damage and Mold Claims, Homeowner’s Insurance: A Guide for Texas Consumers, and Helping You with Your Insurance Complaint.

Photo © Comstock Images.

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