By Dawn Whalen
Whalen Realty Group at F.C. Tucker Company
Having the right insurance and enough coverage is critical in the event of an accident or damage. The key is to work with a knowledgeable, licensed insurance agent who can describe what coverage is necessary to protect against major and common accidents and weather-related events.
Why some homes have trouble with insurance coverage
Home insurance is required if the homebuyer intends to carry a mortgage. Some homebuyers may find that the home they want to buy is considered uninsurable. This generally means: One, the property is not in good enough condition to qualify for Federal Housing Administration (FHA) insurance and therefore an FHA loan. Two, the insurance company(ies) determined the house is too great of a risk to insure.
A home built in the 1920s can be difficult for a company to insure because the repairs and maintenance are more expensive. Upgrades to meet modern building codes may be necessary. Buyers interested in older homes should speak with a licensed insurance agent about what, if any changes, need to take place before it can be insured.
Another common hurdle is the property’s claims history. If the home has multiple claims it can be flagged as a higher risk home. For example, if a house has a basement and the previous homeowners filed regular claims for basement flooding, then the insurance company may consider the property too high risk.
Earthquakes in Indiana
Indiana sits near two seismic zones for earthquakes: the Wabash Seismic Zone and the New Madrid Seismic Zone. Although these two zones are closer to western and southwestern Indiana, their impacts can be felt throughout central Indiana and communities north. A knowledgeable insurance agent can provide quality guidance as to whether or not a property should consider this add-on coverage.
Flood damage v. water damage
Determining where the water came from is the best way to know if damage was caused by a flood or is simply water damage. Damage caused by an overflow or rapid accumulation of outdoor water, such as rivers, ponds and ditches may be covered under flood insurance. If it’s the result of a faulty sump pump, broken dishwasher or leaky roof, then the claim would be under water damage and not a flood. An exception might be if several residents in a neighborhood are experiencing the same water issues. Insurance agents can help determine if flood insurance is a good idea.
Area floodplains can change as a result of neighborhood and commercial developments. It’s important to find out if a property is near or in a designated floodplain. Homes located within a FEMA-designated flood zone may be required to purchase insurance to secure a mortgage.
How to cover rising building costs and inflation
Inflation and supply chain backups have caused building material costs to rise significantly the past few years, which is why it’s important for homeowners to ensure their policy includes “inflation coverage” or “inflation protection.” Regardless, the insurance company will rebuild or replace a home or belongings at current market value. According to the National Association of Home Builders, building supply costs have risen 33% since 2020.
Questions to ask an insurance agent
Ask an agent the additional following questions regarding a home insurance policy:
- How much coverage is for personal property (the items inside the home, such as clothes, electronics, furniture, etc.)?
- Is the home insured for replacement cost or actual cash value?
- Does the home need sewer and water coverage?
- Is there a separate deductible for wind or hail damage? How much is the deductible?
- Are additional living expenses covered (living in a hotel if the home is too damaged to occupy)?
Research insurance companies and agents, and discuss home insurance options. Having sufficient home insurance can make a world of difference in the event of a catastrophic accident or storm.
Dawn Whalen is owner of Whalen Realty Group, at the F.C. Tucker Company, and has worked in residential real estate for more than 17 years. She’s a licensed realtor, broker, is a member of MIBOR and a Homes for Heroes preferred realtor. She can be reached at Dawn@whalenrealtygroup.com.