Even though this article is a little dated, it is still very pertinent today.
Source: Jan. 2003, Ohio Realtor
As Fran Noe, a Realtor, and her husband, of Phoenix, planned their retirement home, insurance was the last thing on their minds. After all, they'd had 23 years of continuous coverage with the same insurer before they'd sold their home and temporarily moved into a rental unit. But as their new home neared completion, their insurance carrier refused to write a homeowners' policy for them. The reason? A $900 claim for landscape damage done to the front yard of their old home by a drunk driver more than a year ago. Otherwise, their insurance record was pristine - no claims in 10 years and an 800+ FICO credit score.
"I was shocked to be treated this way after 23 years as a paying customer!" Noe exclaims. "I asked if they were kidding." Then Noe started calling insurance companies - and called most of the major carriers. "They all told me about the same thing - no coverage. I started crying. I was afraid we'd be out of a house forever because we couldn't get insurance."
Noe's story is becoming all too common. Realtors across the country are increasingly aware of the role insurance availability plays in the real estate transaction.
The current homeowner's insurance crisis isn't unprecedented. A higher-than-average number of natural disasters occurred in the 1990s. As a result, homeowners in areas by major disasters such as the Northridge earthquake in California ($15 billion loss in 1994) and Hurricane Andrew in Florida ($15.5 billion loss in 1992) faced significant spikes in insurance premiums. what's different this time is that significant premium increases and availability issues aren't just limited to a few areas. They're surfacing everywhere from New York to California.
The efforts of many states to keep consumer insurance rates low also helped produce shortfalls in insurance liquidity. Also, insurers kept premiums artificially low in the 1990s - despite the rising cost of claims - as they competed for market share.
The declining stock market also contributed to the falling resources of insurers. In the late 1990s, insurance companies had annual market returns of between 18% - 35% to offset losses and keep premiums low. But when the Dow fell 5% in 2001, the companies couldn't count on stock gains to offset the losses of $7.9 billion in 2001.
A significant number of claims on a property or by a homeowner can trigger rejection and might ultimately create a stigma that would make a property unsalable or a prospective buyer uninsurable. But pinpointing the causes of rejection isn't always easy. Even when owners don't receive compensation from the insurance company, a claim entered in the CLUE database can come back to haunt them. Some companies even noted when a customer calls in with a simple query about coverage.
The Insurance Task Force indicates that while the inability to secure insurance is sometimes delaying transactions and undoubtedly raising costs, a few transactions are actually falling through.
Ultimately, Fran Noe did get coverage. After going to other companies, she called her original insurer once more and got a manager to take another look at her policy, seeing that the damage to her front yard wasn't her fault.
7 Consumer Recommendations
Keep credit clean - Insurers believe consumers with good credit scores tend to keep up their homes.
Opt for a higher deductible - If buyers can afford to raise it up to $1,000, they could save up to 25% on premiums.
Avoid smaller claims - Don't chance recouping costs on a negligible claim. You may pay for it with higher premiums or even denied coverage in the future.
Get pre-qualified for coverage - It may protect you from having to scramble for coverage as soon as possible.
Find out who is writing insurance - Many state insurance depts maintain lists of insurers who's currently writing policies.
Having problems, see if lender has an insurance subsidiary - You may have a better chance of getting a policy.
Go the extra mile - Persistence and a chance to talk to a live person may make a difference in your ability to get insurance. If you feel a past claim shouldn't be held against you or wasn't yours, ask to speak to a manager.
