Watch Your Language!
Many of our customers have described reading their homeowner’s policy as equivalent to having a tooth pulled! We agree that it can be a challenge and would like to help. Thus, we give you a collection of explanations and suggestions to streamline the process.
In regard to homeowner’s policies, the insurance industry employs two methods to reduce the profit impact of weather-related losses.
The first and easiest option is to raise rates. It seems obvious that if insurers have more money coming in from policy holders than they pay out in claims, they’ve solved their problems. The real “problem” though is that in Ohio we enjoy robust competition within the market, resulting in some of the lowest rates in the nation. Ohio leads the U.S. in the number of insurance companies competing for consumers’ business. This competitive environment forces companies to keep rates within a reasonable spectrum, aiming to prevent large scale exodus.
A second approach to reducing profit loss – and what we are seeing a lot of behind the scenes – is restriction of coverage. If insurers can limit the types of claims they cover, cap policy limits, or increase the amount of cost-sharing with the consumer, they have effectively reduced their liability and potential for loss.
Readers of our newsletter over the past year have seen many references to the coming cost increases. We now see an equally threatening force coming from amended policy language. That is why reading your policies this year will be so vital.
A few takeaways that can make the deciphering process easier:
- Quantity: If you can’t read the whole policy, at least read the first couple of pages. Here you will likely find a note from the company on policy changes. They may be difficult to understand, so feel free to call us if you have questions. We have translators standing by to help.
- Declarations (DEC) page: This page shows an overview of general policy limits along with information on property and liability limits, and pricing. Good for a quick overview.
- Covered losses: Generally only a couple of pages long, this section highlights exactly what your policy covers. Five minutes here can be a real help.
- Exclusions: Here is where the policy gets thick! Reading this can seem like an effort in passing the LSAT’s. Or perhaps a kidney stone (oh mama). Do spend a few minutes looking at topics that are an obvious worry, i.e. the property and water back-up sections, among others. What you don’t know CAN hurt you.
No Lack of Depreciation
One area under general attack from homeowner’s insurers is possibly the most indispensable bit of your home – your roof. Over the last couple of years, insurers have veritably lost their shirts replacing roofs. Increased weather-related claims, aggressive marketing from the storm repair industry and a down economy have led to historic levels of payout. Now, the bill has come due, so to speak. When reviewing your policy, look for changes to both your deductibles and policy language regarding roof coverage. If covering damage to your roof is now referred to as “actual cash value,” instead of the previous “replacement cost,”< take note! This settlement term factors depreciation into the equation.
These coming policy changes are industry wide, and will become the new norm. Pair these with a shift in policy language and the situation gets complicated. Spending a few minutes now – reading your policy and sharing concerns – could make all the difference when it comes time to file a claim.