Homeowners insurance and other types of insurance such as flood insurance are often required by mortgage companies. Be prepared to provide an estimate of what it may cost your clients for insurance. As part of your marketing plan, you should be prepared to provide references for insurance brokers.

Homeowners Insurance

Insurance is a business often misunderstood because of the complexity of rating properties. All we usually know is that the rates go up. There is much however that you as a real estate agent can understand and pass along. The biggest thing you can offer to your buyer clients is the condition of the roof. Number two is how orderly the property is. No trees over the roof, junk in the yard, or safety hazards such as missing handrails. Home buyers do not know these things generally so it’s up to the real estate agent to understand what insurance inspectors look for.

The best way to learn is to spend time with a real estate broker. Go to lunch periodically and pick their brains about the latest trends. Years ago, insurance companies rarely inspected homes, now they inspect far more frequently.

Homeowners insurance is regulated by the state. Insurers come and go. A typical insurance company will come to an area with a goal of creating x new clients or writing X$ of policies. If risks are greater than forecasted or they reach their goals, they will stop writing new policies. When fewer insurance companies are available the cost rises. Most buyers have no idea about how the insurance system works, they just pay their bills.

They do not know it’s better to buy a full-year policy rather than 6 months or monthly. Real estate agents should learn enough to discuss why their policy quote will be high (if that’s the case). Agents can lessen the shock by being up front with their clients that due to the fact they are located in a natural disaster zone (if that is the case), a wind and hail policy will be required.

Discuss the deductible, the fact that it can cost thousands of dollars out of pocket in the event of a named storm or tornado. The best agents know that a fully informed client will be easier to work with when they see the actual numbers for these costs.

Flood Insurance

If the properties that your clients want to see are located in a flood zone, discuss this with them. Explain what flood zones are and how lenders will require flood insurance if the property is not in a 500+ year flood zone or better. Show them where to find the flood map or print one for them. Explain the typical cost for a flood policy for the first year and that it is a one-year policy with a maximum insured value. FEMA offers flood insurance and independent carriers also offer flood insurance.

What determines the cost of insurance

The frequency of inspections varies greatly depending on several factors:

• Insurance Company Policies: Some companies inspect all new policies, while others only inspect high-risk properties or those in specific areas.
• Buyer’s credit report: A good credit report above 720 will have the biggest impact on insurance policy pricing in a manner similar to obtaining a mortgage
• Home Age and Condition: Older homes or those with known issues are more likely to be inspected.
• Claim History: Homes with frequent claims might be targeted for inspections. CLUE report
• Geographic Location: Areas prone to natural disasters often have stricter inspection requirements.
• Insurance Coverage Amount: High-value homes may undergo more thorough inspections.
• Home maintenance: Install a whole-house surge suppressor and receive a discount. Add a monitored alarm system for an additional discount.

How has the average homeowner’s insurance policy increased in cost?

Basically, homeowners insurance is offered by companies after looking at the items above and using their own proprietary software to produce a price. Explain the CLUE report which is like a credit report for a house. The CLUE “Comprehensive Loss Underwriting Exchange” records all claims against a property. We are often told that they do a seven-year look back. It’s not possible to be sure that old ones actually drop off.

The CLUE report is not just for houses, it is for every insurance claim including autos you have ever reported. This system even records serious inquiries you have made to your agent and decided not to pursue. Even if the claim was denied, it’s still there and will be a factor.

The following is a sample of a CLUE report so you can see what data is gathered. Now you know why the last thing you want to do is make a claim against your property insurance when the amounts are small and you can manage them. Even a call to your agent may be included in a report even when you do not actually make a claim.