In the last six months, a number of brand name insurance companies, who write home owner policies, have been declining home insurance coverage based on roof age and wear issues. While this sounds like a common and sensible practice, roofs that are 8, 12, 15 years old are frequently not getting coverage.
Commonly, the agent will ask the new home owner the general age of the roof and binder coverage is sought for the real estate purchase. The insurance company will then have one of their licensed representative drive by fill out a descriptive form and take a few pictures to be submitted to the underwriters. A phone call and or a notice letter is sent stating whether or not they are going to provide insurance coverage to the residence. All this you hope will happen just before the closing but legally can still happen days or weeks after. If prior, this can hold up the sale. And, if the latter, the new home owner may be given only 60 days to put on a roof or have coverage cancelled. In fact, I’ve personally have a client who purchased a home, owned it about 2 months only to receive such a cancellation letter unless a new roof was installed in 60 days.
A Wisconsin home inspector has guidelines for providing information to clients on condition and wear, and maintenance needs when they do a home inspection. The concerns and criteria can vary and are different for each home inspection evaluation, and are based on manufacturers guidelines and common industry standards of practice. However, home owner insurance underwriting criteria is not directly correlative to these guidelines nor a home inspection evaluation.
The insurance underwriting criteria seems rather basic and simple, that being, that the roof is dubious if over 8 years old,” any” wear evident is a problem. The insurance companies are making a business decision on their risk exposure, and now they don’t want “any” concerning roofing systems. Recently there has been a significant increase in the number of complete roof replacements claimed as total losses when hit by hail across the State of Wisconsin. In fact, insurance companies have been absorbing huge losses in Wisconsin and across the country that they have begun the practice of Cherry Picking and endorsing only what they perceive to the best roofing systems. While this may sound reprehensible and limiting, I suggest that you investigate such matters when seeking insurance to make sure that your carrier does not engage in this type of activity as there are only a few who don’t.
We recommend being aware of these recent insurance business practices and how this might affect your real estate transaction and your client’s needs.