Homeowners often ask, "Why does my insurance company want to inspect my house?" The answer is simple: Home insurance inspections are crucial for identifying potential risks like outdated electrical systems and structural damages from water or foundation issues. These inspections are a risk management tool, not just for the insurance provider to determine the right level of coverage, but also to protect both the homeowner and the insurance company by ensuring all parties are aware of the condition of the home.
At a glance:
- Home inspections help price coverage through identification of risks.
- Inspections provide peace of mind by identifying issues before they become major issues.
- Homeowners can take steps to assist home inspections, such as ensuring electrical systems are in working order, and by repairing existing property damage.
What are home insurance inspections?
Home insurance inspections are assessments of a property's condition. These inspections evaluate the home's structure, systems, and potential hazards. For example, a roof inspection needs to be conducted, as the roof's state can significantly affect the inspection's outcome.
So, how often do insurance companies inspect homes? While the frequency can vary, inspections are more likely if the home is older, has a history of damage, is located in a high-risk area, or if there's insufficient information available on the property.
The results of a home inspection are used to determine the risk involved in insuring a particular property and may estimate the replacement cost value. However, don’t confuse this with a buyer’s home inspection or an appraisal.
- An appraisal is an estimate of the property’s value, which is determined based on similar homes in the area while taking into account the home’s age, features and size.
- A home inspection, which typically occurs prior to closing, is initiated by the buyer and examines the home for issues.
- A home insurance inspection, on the other hand, is initiated by the insurance carrier to identify potential issues, risks, and general insurability.
Are home inspections required for insurance?
Do you need an inspection for homeowners insurance? While not always required, insurers often try to mitigate risk through home insurance inspections. Subsequently, they are not uncommon. Each homeowners insurance company can decide whether to request one from a prospective—or current—policyholder.
Homeowners can typically expect insurance providers to request inspections on homes with the following characteristics:
- An older home and / or hasn’t had an inspection in the previous 10 years
- Have a history of damage and loss claims
- Located in a high-risk area, such as a flood or earthquake zone or coastal region
- Have insufficient information available to calculate the replacement cost value
Importance of home inspections
Home inspections help insurance companies avoid risky properties. A crucial aspect of these inspections is understanding what will fail a home insurance inspection. This question concerns many homeowners as it directly influences the insurability of their property. Common failure points include:
- Significant structural damage: Any major compromises to the integrity of the home’s foundation, walls, or roof can lead to a failed inspection. This includes large cracks, sagging, or other indicators that the structure may not be safe or sound.
- Outdated electrical systems. Electrical systems that do not meet current safety standards, such as knob-and-tube wiring, or systems with known issues like faulty wiring, can pose a significant fire hazard.
- Poor roof condition. A roof that is in disrepair, showing signs of significant wear, leaks, missing shingles, or nearing the end of its expected life span might fail an inspection due to the risk of water damage and the high cost of replacement.
- Plumbing issues. Old or faulty plumbing, including leaky pipes and outdated materials, can result in water damage and mold, leading to a failed inspection.
- Inadequate or unsafe heating systems. Heating systems that are not in working order, are improperly installed, or are considered unsafe (such as certain types of space heaters) could cause a failure.
- Presence of hazardous materials. The presence of hazardous materials like asbestos or lead-based paint in older homes can be a significant health risk and reason for inspection failure.
- Evidence of pest infestations. Active infestations of termites, rodents, or other pests can lead to failure due to the potential damage pests can cause to the structure and interior of the home.
- Water damage and mold. Signs of ongoing water damage or mold growth can indicate poor home maintenance and potential health risks, leading to a failed inspection.
- Lack of safety measures. Absence of basic safety features, such as smoke detectors, carbon monoxide detectors, and secure railings, can result in a failed inspection due to the increased risk of accidents and injuries.
- Poor overall maintenance. A general lack of maintenance that affects the home’s condition and safety can also lead to inspection failure. This includes broken windows, damaged flooring, and deteriorating exterior surfaces.
If an inspector identifies a problem, the insurance provider may require the homeowners to address the issue(s) in order to maintain their home insurance coverage. If the inspector deems it a failed inspection, the insurance carrier may choose to cancel the policy.
In addition, insurers are looking for “pride of ownership.”1 Ideal policyholders do their part to protect their home and prevent losses by maintaining the property's structures and internal systems (like plumbing, wiring, etc.) or by installing safety measures, like fences around pools or security systems.
Identifies potential risks
Most importantly, insurance inspections are used to assess the condition of the property and any risks identified at that time. Risks are any conditions in the home that could cause damage to your possessions or property, such as fire, flood, or mold. By identifying these risks, insurance carriers and independent agencies can help homeowners address potential issues, avoid future claims, and mitigate risks.
- Unpermitted additions or renovations. Home improvements and repairs made without proper permits which may not meet local building codes and could affect the home's insurance coverage and value.
- Lack of GFCI (Ground Fault Circuit Interrupter) protection. Absence of GFCI devices in areas with moisture like bathrooms and kitchens, which prevents electrical shock.
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Aging appliances. Older appliances that pose risks of malfunctioning, leading to potential hazards such as water leaks or fires.
Determines coverage needs
If a home has a high risk of damage, insurance carriers may require additional coverage, such as flood insurance or earthquake insurance. Some insurance inspectors and home insurance providers may alert homeowners of earthquake or flood risks, at which point, the policyholder can choose to seek out additional coverage.
However, it is important to note that not all insurance inspectors alert homeowners to insurance coverage gaps. Therefore, it is important that homeowners educate themselves on the history and current condition of the property, the geography of the area, and the prevalence of natural disasters in the area.
Impacts cost of coverage
Depending on the outcome of an inspection, insurance companies may offer a lower premium. If the home requires repairs, the inspection may result in higher than expected insurance premiums.
Home insurance inspections determine replacement cost coverage for the insurer. This is not to be confused with your home’s market value. Replacement cost factors in the labor and materials necessary to rebuild your home in the event of a total loss. This means the homeowner may need to pay more in premiums—or risk paying large out-of-pocket sums for uncovered losses.
Provides peace of mind
More than anything, home inspections provide homeowners with peace of mind, knowing the home has been evaluated by a professional. Inspections help homeowners identify any potential issues with their homes before they become major headaches—and avoid costly repairs down the road.
Planning for home insurance inspections
What does a home insurance inspector look for?The home inspector may conduct both an interior and exterior examination of the home. From the roof to the basement and everything in between, exterior inspections will focus on structural integrity, water damage and other hazards. An internal inspection will typically include inspections of the HVAC system, electrical and plumbing systems.
Each carrier has its own requirements for home insurance inspections; some require full interior and exterior examinations, while others may only require an exterior inspection. Some providers, like Openly, utilize the latest technology to provide homeowners with the ability to conduct DIY inspections via an app on their mobile devices.
Interior inspections
Interior inspections typically involve an examination of the home's structure, systems, and appliances. A few ways homeowners can prepare for an interior inspection include:
- Collecting documents showing the home’s square footage, updates or renovations
- Ensuring all systems and appliances are in working order and repair or replace, if necessary
- Cleaning and decluttering the home
- Repairing handrails, leaky pipes, and smoke detectors
Exterior inspections
Exterior inspections typically involve an examination of the roof, siding, and foundation. To prepare for an exterior inspection, the homeowner should:
- Remove debris or clutter around the perimeter of the home
- Repair damaged siding, particularly on older homes
- Ensure gutters and downspouts are clear and in good condition
Home inspections are important for homeowners and insurers
Ultimately, home inspections are an essential tool for insurance providers and homeowners alike, helping to protect properties and minimize the financial impact of unexpected events. While not always required, homeowners should be prepared for the possibility of an insurance inspection and take proactive steps to ensure their home is in good condition, which reduces potential risk.
If the results of the home inspection determine that more comprehensive coverage is necessary, consider talking to an independent agent about Openly, where you’ll receive not just a premium and comprehensive policy, but also the service and empathy you’ll need in the event of an insurance claim.
Frequently asked questions
Q: What specific areas are scrutinized during a homeowners insurance inspection?
During a homeowners insurance inspection, the insurance inspector closely examines key areas that could pose risks to the insurer. This includes the structural integrity of the dwelling, the condition of the roof, electrical and plumbing systems, and any signs of potential liabilities. The inspector may also assess additional features like swimming pools or trampolines which could influence general liability concerns.
Q: Does my home's age and location influence the insurance inspection process?
The age and location of your home are critical factors during a home insurance inspection. Older homes may present more risks due to dated construction and wear and tear, which could impact the dwelling coverage aspect of your homeowners insurance policy. Additionally, if your home is located in areas prone to natural disasters or high crime rates, this might affect the assessment and recommendations of the insurance inspector.
Q: Will enhancements to my home's safety systems affect my insurance policy post-inspection?
to your home’s safety can positively impact the outcome of your insurance inspection and subsequently your insurance policy. Upgrades like modernized fire alarms, burglar alarms, and reinforced locks can lower perceived risks, potentially reducing premiums for your homeowners insurance. It’s advisable to discuss these upgrades with your insurance agent before the inspection.
Q: How can I prepare for an insurance inspection to ensure the best outcome for my homeowners insurance policy?
To prepare for an insurance inspection, ensure all areas of your home are accessible and any recent repairs or improvements are well-documented. Address any apparent maintenance issues and consider updating safety features. Inform your insurance agent about significant changes to the property since these can affect the outcome of the inspection and, in turn, your insurance policy.
Q: In case of discrepancies in the inspection report, how should I proceed with my home insurance company?
If you find discrepancies in the inspection report, contact your home insurance company or insurance agent promptly. Provide clear evidence or documentation, such as repair receipts or photographs, to contest the findings. Clear communication and accurate records are key to resolving any issues and ensuring your insurance policy reflects the true condition of your property.
* We provide this information to help you understand insurance. Any coverage is subject to the terms of your policy. Please refer to your policy and declaration page for complete coverage details.
1 Insurance Risk Services. “The ABCs of Home Insurance Inspections.” 13 April 2021. Accessed 29 March 2023. https://insuranceriskservices.com/blog/the-abcs-of-home-insurance-inspections/
