What Insurance Companies Look for When Insuring Your Home - February 5th 2007
If you are like most people, you will probably never need to submit an insurance claim but it's important to check that you have adequate insurance coverage and make a complete inventory of your home. The inventory can be either written or videotaped. Include information such a serial numbers, make and model numbers, physical descriptions, and price of purchase (receipts, if possible).
Before an insurance company can arrive at an appropriate premium, it must first assess the likelihood - or risk - that you will submit a claim. For the most part, the lower the risk (e.g., a well-maintained home with updated wiring and plumbing) the lower the insurance premium. (Some insurance companies specialize in riskier clients and their homes.)
Your insurance representative will ask you a number of questions about your home. Insurance is based on good faith, so it's important that you give complete answers. Policies vary, but here are a few things about which your company will ask.
- Wiring: Some wiring (e.g., knob-and-tube, aluminum) can increase the chance of a fire, especially if the wiring has deteriorated or been damaged during renovations.
- Some insurance companies want a guarantee that a home does not have this wiring, some may give you time to have it removed, while others might request an inspection to ensure its safety.
- Galvanized/lead pipes: Galvanized or lead piping usually means that the plumbing is older, and older plumbing is more susceptible to cracks, leaks and other problems. Insurance companies generally prefer homes where the plumbing has been upgraded to copper or plastic.
- Electrical service: It is preferable to have breakers instead of fuses, and 100-amp service at a minimum. Fuses and lower electrical service can increase chances of a fire.
- Heat source: Oil-heated homes can present a costly environmental hazard, so your insurance representative will ask for many details about the age and condition of your tank. Insurance companies tend to prefer forced-air gas furnaces or electric heat.
- Wood stoves: These are a common source of house fires and carbon-monoxide poisoning, particularly if they are not properly installed and maintained. Insurance companies may want to inspect such installations. Consult your insurance representative before buying or renting a home with a wood-burning stove or installing one.
- Age of roof: Companies generally prefer it if your roof has been updated within the last 20 years. Some policies will pay only depreciated values, as low as 25%, for damaged roofs near the end of their designated service life.
- Other uses of your home: Companies will want to know if you have built or are planning to build a rental apartment into your home, begin operating a business there or make any other significant alterations to the structure or the way it's used.
Tell your insurer about major changes - If you plan to build a rental apartment into your home, begin operating a business there, or make any other significant alterations to the structure or the way it is used, be sure to tell your insurance company.