We hope this newsletter finds you well - enjoying football, cooler weather, and fall traditions with your loved ones.
Our subject this quarter is the ever-changing terms and conditions in the homeowners insurance industry. Specifically, how the insurance companies are adjusting deductibles and handling roof replacement.
Deductibles:
For many years, companies have always used a definite dollar amount for deductibles related to your homeowners policies. An example being $500, $1,000, $2,500 fixed dollar deductible. Many insurers are moving to a percentage deductible based on upon the dwelling value listed on the policy. For example, a $300,000 dwelling value at a 1% deductible would be $3,000, a 2% deductible equates to a $6,000 deductible. A 5% deductible equates to $15,000.
With the percentage method of setting deductibles, you must also keep in mind inflationary increases for the dwelling limit. Every year the insurance company will increase your dwelling limit to keep up with the rising costs of labor and materials. Being that the deductible is a percentage of the dwelling limit, this increase in coverage will subsequently impact your deductible. Raising it each year.
Also, keep in mind that it’s become common place to have a split deductible for wind and hail, separate from all other deductibles. The wind and hail deductible is typically a higher deductible than the other deductible covering non-wind/hail claims.
Roof Coverage:
A second subject related to homeowners insurance is a sliding scale payout for a claim, in regards to the age of the roof. Many insurers are moving away from a complete replacement of a roof when damaged by wind or hail. Wind and hail events have ravished the Midwest over the past several years. The insurance companies are forced to make changes to roof coverage to remain profitable, that means that we, as policyholders, will have more ‘skin in the game’ when it comes to replacing roofs when damaged by wind or hail. I like to explain the new way of handling roof claims to be similar to how the industry handles auto claims. For a total loss to a car, you only receive the value left in the car at the time of the accident, factoring in depreciation. Similarly, depreciation will be factored into the roof claim settlement. Not all companies will call it depreciation, some implement a roof schedule, the general idea is the same in that the policyholder will have to pay for a percentage of the roof in which the policyholder’s responsibility will increase each year as the roof ages.
The insurance companies all handle the settlement options a little differently, but most are tying it to the age of your roof. This will be why your account manager is asking for the age of your roof at renewal time, so that if you had replaced your roof, you may be entitled to a larger claim payment and potentially a discount.
We understand that the deductible and roof coverage changes are quite different than what most of us have been used to and want you to be prepared should you experience a claim. If you would like to know what your deductible is or how the roof coverage applies to your home, please contact your Account Manager.
Thanks for being a customer,
Scott
