Insurance Inspection: Home Edition

An insurance inspection is when an insurance company evaluates your home to determine the replacement cost of the property and its contents. It is usually carried out when a homeowner is buying insurance, renewing an existing policy, or making significant changes to their coverage. The inspection helps insurance companies assess the risk of future claims and calculate monthly premiums. It also ensures that the homeowner is not underinsured in the event of a claim.

What is the purpose of an insurance inspection?

An insurance inspection is a way for an insurance company to assess the replacement cost of a home and identify risks to avoid future claims. It is usually carried out as part of the underwriting process when a new policy is being taken out or an existing one is being renewed.

The inspection helps the insurance company to evaluate the overall condition of a property and any associated risks. This allows them to set accurate premiums and coverage limits, and adjust these if necessary. For example, if the replacement value of a home is higher than initially thought, the insurer may increase the premium.

Insurance inspections are usually carried out by a qualified inspector who will examine both the interior and exterior of a property. They will take notes, measurements and photographs, and their report will be detailed. The inspector will concentrate on the electrical, plumbing, and HVAC systems, as well as safety features such as smoke alarms, fire extinguishers, and anti-theft devices. They will also verify that the details of the property match those listed on the policy.

Home insurance inspections are not always essential and are done at the insurer's discretion. However, certain situations may make an insurance inspection necessary, such as the age of the property, switching insurance companies, or if the insurer can't determine the replacement value of certain items.

When is an insurance inspection required?

An insurance inspection is carried out to determine the replacement cost of a home and its contents, and to identify any risks to avoid future claims. While not always essential, they are sometimes required by insurance companies and are done at the insurer's discretion.

• Older homes: Older homes are more likely to require an insurance inspection as they are considered more susceptible to damage and pose a higher risk to the insurer. This is especially true if the home has not been inspected in a long time or if it is a new customer with an older home.
• High-risk areas: Homes located in areas prone to natural disasters, such as hurricanes, earthquakes, wildfires, or windstorms, may require an insurance inspection. This is to assess the risk of damage and determine the appropriate coverage and premiums. For example, in Florida and some Gulf Coast states, homeowners may undergo a wind mitigation inspection to assess their home's ability to withstand wind damage.
• New home purchase: When purchasing a new home, an insurance inspection may be required to assess the risk and determine the appropriate coverage. This is separate from a standard home inspection, which is often done for the buyer's peace of mind to check for structural issues.
• Renovations or remodelling: If you have made significant renovations or remodelled your home, an insurance inspection may be necessary to reassess the replacement cost and identify any new risks.
• Policy renewal: If your insurance policy is up for renewal and it has been a long time since your last inspection, the insurer may require a new inspection. This is to ensure that the home's condition and replacement cost are up to date and to identify any new risks.
• Switching insurance companies: When switching insurance providers, the new company may require an inspection to assess the home's condition and determine the appropriate coverage.
• Inability to determine replacement cost: If the insurance company cannot easily determine the replacement cost of certain items or the home as a whole, they may require an inspection to get a more accurate valuation.
• High-value homes: If you own a high-value home, the insurance company may require an interior inspection to assess the home's contents and determine the appropriate coverage.

It is important to note that insurance inspections are not always mandatory, and the decision to conduct one is often made on a case-by-case basis by the insurer. However, it is in the interest of both the homeowner and the insurance company to accurately assess the home's condition and identify potential risks to avoid future claims.

What does an insurance inspector look for?

A home insurance inspector will assess the risk potential for liability and future claims. They will also provide specifics about the home to create a valuation, which is useful to ensure the dwelling coverage is adequate in the event of a major loss.

The inspector will assess the home's structure and appliances to help determine risk. They will concentrate on the electrical, plumbing, and HVAC systems if an interior inspection is necessary. They may also check safety features such as smoke alarms, fire extinguishers, and anti-theft devices.

• Loose or missing shingles on the roof
• Unsecured gutters or debris inside and visible
• Cracks or loose bricks in a chimney
• Hanging branches over the home’s structures, especially dead limbs
• Cracks or leaks around doors, siding, and windows
• Uneven sidewalks or chipped stairs, which could be a safety hazard
• Carbon monoxide and smoke detectors to ensure they work
• Pest or water damage in the attic or basement
• Any sign of leaks around plumbing fixtures
• Cracks or bubbling of the walls which could show water damage
• The age and condition of the home’s electrical system
• The condition of the flooring and walls
• Attic spaces and crawl spaces
• Anti-theft measures, such as a home security system or deadbolts
• Chimneys and fireplaces, if you have them

How does an insurance inspection benefit the homeowner?

A home insurance inspection is a way for insurance companies to assess the replacement cost and risks associated with a new homeowners insurance policy or the renewal of an existing policy. It helps determine the risk to the insurer and potential claims that would be reported on the policy. The results of the inspection can be used to determine the insurance premium.

Risk Assessment and Loss Prevention:

Home insurance inspections help identify potential risks and liabilities in and around the home, such as structural issues, outdated systems, or safety hazards. By identifying these risks, homeowners can take proactive measures to mitigate them, reducing the likelihood of future losses and enhancing their overall safety.

Premium Determination and Discount Opportunities:

The inspection results can influence the insurance premium. If the inspection uncovers no significant issues or highlights improvements, the insurer may offer a lower premium or discounts on the policy. This can result in financial savings for the homeowner.

Verification of Replacement Cost:

Insurance inspections provide a detailed assessment of the home's structure, appliances, and other features. This information helps establish an accurate valuation of the property, ensuring that the dwelling coverage is adequate in the event of a major loss. This can give homeowners peace of mind, knowing that their insurance coverage is sufficient to rebuild or repair their home if needed.

Identification of Necessary Repairs:

During the inspection, issues such as electrical, plumbing, or structural problems may be identified. This provides homeowners with valuable information to prioritize necessary repairs and maintenance, improving the overall condition and safety of their home.

Policy Adjustments and Continuity:

A home insurance inspection can help ensure continuity of coverage by identifying issues that need to be addressed to meet the insurer's requirements. By making necessary repairs or improvements, homeowners can maintain their insurance policy and avoid potential cancellation. Additionally, if the inspection reveals that the home is in good condition, the insurer may be more inclined to continue the policy without significant adjustments.

What happens if you fail an insurance inspection?

Failing a home insurance inspection doesn't mean you're out of luck, but it can have some serious consequences. If issues are found with your home's interior or exterior, your insurance company may give you a deadline to fix them to continue coverage. If they deem your home too risky, they may cancel your policy or deny you coverage.

If you're issued a deadline to fix issues, you'll need to provide proof of repairs, which could include receipts from work completed and pictures showing the finished project. Some damage may also require a follow-up inspection.

If your policy is cancelled, your insurer will provide a cancellation date, giving you time to find a new insurance company. If you can't find a private insurer, you may need to contact your state's insurance department to find programs for high-risk homes. Some states have Fair Access to Insurance Requirements (FAIR) Plans to help people who can't get coverage in the voluntary market.

You can also apply for another home insurance policy with a different company, but keep in mind that they will likely want to conduct their own home insurance inspection, and the same issues that caused the cancellation of your previous policy are likely to resurface. It's best to address these problems immediately.

Frequently asked questions