Homeowners Self Insurance

[Sunset]

A lot of the problem is what I view as fraud. Roofers going door to door telling homeowners that they can get them a new roof free, the homeowner assigns their insurance benefits to the roofer who then collude with lawyers to sue insurers for the cost of the new roof claiming it was damaged by wind or a hurricane when in fact it was really just an old roof that needed to be replaced because of old age and normal wear and tear.

I've seen the roofers going door to door here, after a hailstorm.

After the 2nd time, I went on the roof with a guy to see, because:

1. I didn't want him damaging the roof
2. I wanted to know if it was really damaged or not

After I could see the actual hail damage, I told him I'd call my insurance agent. He kept offering to "call for me" but I refused , as I've seen poorly roofed houses.

After the insurance agent came, inspected and approved the claim, I went with a local long established roofer, so I'd get it done properly and have someone to call if it leaked 3 yrs later.

 

[OldShooter]

... I saw one proposal for a countrywide catastrophe pool, but it helps people in the high-hazard states only if the people in Idaho and Michigan pay more than their fair share. It never happened. ...

And a good thing too! In my part of the country we don't have hurricanes, we don't have earthquakes, we don't have wildland fires, and tornado and flood damage is financially fairly negligible. I resent being teed up to pay when the hurricanes come and, vastly more important, when the "big one" California earthquake takes out an expanse of homes and infrastructure that should never have been there in the first place. grrr...

Want natural disaster insurance? Fine. Pay for it.

That said, I agree that insurance companies are part of the problem. Basically, insurance/pooled risk is a socialist idea that doesn't fit too well into a capitalist box. So, we get games.

 

[Out of Steam]

Serious question: what can the government do?

People want to live on the coasts.
The government can't prevent hurricanes although they can enact and enforce building codes that might mitigate damage.
They CAN regulate insurers, requiring that they use credible catastrophe models (and those have improved by leaps and bounds) to estimate potential windstorm losses. They can (and do) also require them to have adequate reinsurance in place.

It sounds like Florida has mitigated the risk substantially with post-Hurricane Andrew construction, and insurers may force extensive renovations or replacement of older houses.

 

[pb4uski]

Serious question: what can the government do?...

A couple things they can do and will be considered at a special session of the state legislature starting on May 23.

First, is to limit claims on roofs over a certain age to actual cash value (adjusted for depreciation) rather than replacement cost... so if someone has a 15 year old roof has a claim then they can't get the insurer to cover the cost of a totally new roof butjust the cost of the remaining uselful life of the roof... so if the roof had a 25 year life then they would get 10/25 or 40% of the cost of a new roof.

The second thing, an probably more importantly, would be to put limits on what lawyers can collect for fees for claim lawsuits. The problem is that much of the legislature are lawyers, so let's see what happens there.

...since 2013, insurance companies made $15 billion in payouts in Florida, but less than 10% of that went to policyholders. More than 70% of it went to attorneys. What's more, the Sunshine State is a standout nationwide. More than 75%, three quarters of all property insurance litigation in the entire country originates in Florida.

https://www.wbur.org/onpoint/2022/05/03/inside-floridas-property-insurance-crisis

 

[Aerides]

First, is to limit claims on roofs over a certain age to actual cash value (adjusted for depreciation) rather than replacement cost... so if someone has a 15 year old roof has a claim then they can't get the insurer to cover the cost of a totally new roof butjust the cost of the remaining uselful life of the roof... so if the roof had a 25 year life then they would get 10/25 or 40% of the cost of a new roof.

Wow...in Fl that would mean blue tarp roofs forever after the next hurricane comes through. Taking the difference between 10k reimbursement and 30k for a new roof makes a new roof a non-starter for most working people.

would guess that doesn't make premiums come down, but you can pay a higher one for replacement cost if you want to opt in....having just shopped around too get under $4k per year that would suck if they pass that.

ETA..I wonder if the reason for this push is because of Roofclaim (which I view as a scammy BS company).

 

[MichaelB]

Roofs are a problem, mostly those built before the current Miami Dade building code was put in place. This is reflected in the premium, however, so I think it’s not the driver here. I recall a pretty fierce debate back in January about plumbing, which the insurance lobby said was a bigger financial issue and prone to much more exploitation. Residential underground plumbing is deteriorating and leading to very large claims. Roofs can be inspected for $150. Not so plumbing.

 

[CardsFan]

A couple things they can do and will be considered at a special session of the state legislature starting on May 23.

First, is to limit claims on roofs over a certain age to actual cash value (adjusted for depreciation) rather than replacement cost... so if someone has a 15 year old roof has a claim then they can't get the insurer to cover the cost of a totally new roof butjust the cost of the remaining uselful life of the roof... so if the roof had a 25 year life then they would get 10/25 or 40% of the cost of a new roof.

The second thing, an probably more importantly, would be to put limits on what lawyers can collect for fees for claim lawsuits. The problem is that much of the legislature are lawyers, so let's see what happens there.



https://www.wbur.org/onpoint/2022/05/03/inside-floridas-property-insurance-crisis

Wow...in Fl that would mean blue tarp roofs forever after the next hurricane comes through. Taking the difference between 10k reimbursement and 30k for a new roof makes a new roof a non-starter for most working people.

would guess that doesn't make premiums come down, but you can pay a higher one for replacement cost if you want to opt in....having just shopped around too get under $4k per year that would suck if they pass that.

ETA..I wonder if the reason for this push is because of Roofclaim (which I view as a scammy BS company).

Actually, the proposal pb4uski cites makes a lot of sense. No different than most car tire warrantees. Or, more directly, the insurance payout for a used car that was totaled.

Here in MO hail damage is the big thing for roofs, and I personally know many folks that had 20yo roofs replaced for free (frankly, I don't know anyone besides us that just replaced the roof, at their cost, because it was 25yo). I am guessing the insurance co. thinks this is cheaper than a claim for major damage due to a roof leak, but it really is an abuse of insurance, IMHO. Sooner or later the insurers will make a change.

 

[Sunset]

Wow...in Fl that would mean blue tarp roofs forever after the next hurricane comes through. Taking the difference between 10k reimbursement and 30k for a new roof makes a new roof a non-starter for most working people.

...

Can they afford to own a house if they can't afford to replace a roof.

What would these same people do where no hurricanes come through, but the old roof needs replacing

Put blue tarps on every 6 months

 

[bigcmagor]

Neighbors roof is worn out at 20+ years. Buckets needed for several rooms in the house during rain type of worn out. Roofing contractor told them the roof was damaged by hurricane Irma and should be covered by insurance. Insurance claim was denied, so they lawyered up and sued. Insurance settled just before Christmas. The settlement check was promptly burned up in Orlando @ $500 per night lodging accommodations and entertainment. I wonder how they can buy insurance at any price now since they surely were cancelled and still have a bad roof.

 

[pb4uski]

You can't fix stoopid.

 

[Koolau]

Man, you really gotta wear out a roof to have leaks in several rooms. Our last roof replacement was because much of the roof had lost virtually all of its sparkly little rock covering (down to bare shingle substrate or whatever it's called.) We never had a leak but were concerned we might begin to have leaks. YMMV

 

[ncbill]

What we found here in our townhome complex (~60 units, ~20 buildings, so essentially tri-plexes) is that in the last few years whenever someone bought a unit the insurance company would send out an inspector, but only after closing.

Said inspector would then tell the new owner that the roof required immediate replacement or they'd drop their insurance...HOA pays for roof replacement here, so we had to scramble to get it replaced even though our long-time independent roofer said roofs on most of our buildings still had years of life left.

Long story short, we decided to go ahead an accelerate our roof replacement schedule because of what I'm happy to call flat-out blackmail by the insurance companies.

Fortunately we were able to spread the cost over several years (~$100/month for 5 years) for the unit owners, but still it was an expense not justified so early for most of our buildings, and required a special assessment not covered by the monthly HOA fee.

 

[Midpack]

I wouldn't consider self insuring due to potential liability claims, but there might be an alternative along the same lines the OP was getting at. In another thread there's been a big discussion about replacement values being seriously understated for anyone whose policy began more than a couple years ago. Increasing the value to a more up to date value will increase premiums obviously. Instead of self insuring, maybe just consciously decide to leave replacement values deliberately low to keep premiums down some (or even lower replacement value?) - knowing that if you do have a total loss event, you'll be paying a larger portion of replacement costs. Just an option, not recommending anything...

 

[MichaelB]

Man, you really gotta wear out a roof to have leaks in several rooms. Our last roof replacement was because much of the roof had lost virtually all of its sparkly little rock covering (down to bare shingle substrate or whatever it's called.) We never had a leak but were concerned we might begin to have leaks. YMMV

The problem in Florida is not wear. Hurricane winds loosen the roofing nails, their coating breaks, exposing iron, which rusts. The wood around the nail begins to rot, and the rot spreads. This happens in multiple spots and is difficult to observe until it is advanced, so the outer roof can actually be in decent shape but the underroof is rotten in multiple places. Once it starts to leak it just turns into an endless cycle of repair. There’s no doubt most houses built before the ‘02 building code change have this risk. It’s also the reason it’s so easy to claim a roof is damaged after a storm.

Building code was changed in ‘02 and roofs are better now. The two items that make the biggest impact on underwriting and premium calculation are wind resistant windows & doors, and roofs meeting the new standards. So, much of this is already reflected in premiums.

 

[youbet]

How do renters get umbrella coverage for personal liability?

 

[Time2re]

How do renters get umbrella coverage for personal liability?

They buy a renters policy which includes the underlying liability coverage required by the umbrella.

 

[FLSUnFIRE]

I looked into self insuring years ago but could not buy a liability only policy. My flood and property coverage at the time cost me about 5% of the market value at the time and if something happened, I would rebuild a much nicer house on my lot.


I thought about transferring my house to an LLC and then renting from myself to get a renters policy for liability... not sure if it would work and would have to think about general liability for the LLC too. I ended up getting married and buying a house I couldn't self-insure before I pulled many strings and researched it further.

 

[Chuckanut]

Serious question: what can the government do?

People want to live on the coasts.
The government can't prevent hurricanes although they can enact and enforce building codes that might mitigate damage.
They CAN regulate insurers, requiring that they use credible catastrophe models (and those have improved by leaps and bounds) to estimate potential windstorm losses. They can (and do) also require them to have adequate reinsurance in place.
They can use taxes collected from people not living on the coasts to subsidize rates but that's generally not popular.
Forcing companies to provide coverage at less-than-adequate premiums just means they leave the state.

I saw one proposal for a countrywide catastrophe pool, but it helps people in the high-hazard states only if the people in Idaho and Michigan pay more than their fair share. It never happened.

My solution: after a major event, you collect your insurance and if you want to rebuild, fine, but no insurance company will be forced to cover you and no government money will bail you out if it happens again.

Maybe I am wrong but I heard that Florida requires any seller of a home to get a new roof put on at 15 years, regardless of the roof's actual condition. That would seem a good place to start reducing costs.

 

[Koolau]

The problem in Florida is not wear. Hurricane winds loosen the roofing nails, their coating breaks, exposing iron, which rusts. The wood around the nail begins to rot, and the rot spreads. This happens in multiple spots and is difficult to observe until it is advanced, so the outer roof can actually be in decent shape but the underroof is rotten in multiple places. Once it starts to leak it just turns into an endless cycle of repair. There’s no doubt most houses built before the ‘02 building code change have this risk. It’s also the reason it’s so easy to claim a roof is damaged after a storm.

Building code was changed in ‘02 and roofs are better now. The two items that make the biggest impact on underwriting and premium calculation are wind resistant windows & doors, and roofs meeting the new standards. So, much of this is already reflected in premiums.

Thanks. That makes a lot of sense. One of our back-ups (if the whole Paradise thing doesn't work out) is to move to FL. Only area I've ever found appealing is St. Augustine. It's good to know about the issues to help weigh the pros and cons. Actually, at this point, DW and I would probably just move back to the old homestead in the midwest. During winter, we'd just stay indoors like many folks in FL do in the summer time.

 

[pb4uski]

Maybe I am wrong but I heard that Florida requires any seller of a home to get a new roof put on at 15 years, regardless of the roof's actual condition. That would seem a good place to start reducing costs.

I don't think that is correct. We sold my mother's Florida home a few years ago with an old roof... we disclosed when the roof was last replaced and disclosed a couple leaks that had been repaired and that was it.

We were required to replace the electrical panel and breakers though... about $1250 as I recall.

 

[Koolau]

I don't think that is correct. We sold my mother's Florida home a few years ago with an old roof... we disclosed when the roof was last replaced and disclosed a couple leaks that had been repaired and that was it.

We were required to replace the electrical panel and breakers though... about $1250 as I recall.

Are you not allowed to sell "as is?" Perhaps it is a law that electrical must be fixed. I could imagine being in a situation in which "faults" would cost too much for an owner to fix. (Perhaps an elderly person is selling in order to go into a nursing home and has no other assets.) I've always seen "disclosures" negotiated for reduced price or some other owner inducement. Not making a value judgement, just haven't seen a "requirement" to fix. YMMV

 

[pb4uski]

Are you not allowed to sell "as is?" Perhaps it is a law that electrical must be fixed. I could imagine being in a situation in which "faults" would cost too much for an owner to fix. (Perhaps an elderly person is selling in order to go into a nursing home and has no other assets.) I've always seen "disclosures" negotiated for reduced price or some other owner inducement. Not making a value judgement, just haven't seen a "requirement" to fix. YMMV

Not sure if we could have avoided it... it may have been that the replacement was forced by the insurer rather than the state... IOW, the buyer could not get home insurance until the panel and breakers were updated. I didn't fight it too much as the cost wasn't very significant compared to the selling price.

 

[Koolau]

Not sure if we could have avoided it... it may have been that the replacement was forced by the insurer rather than the state... IOW, the buyer could not get home insurance until the panel and breakers were updated. I didn't fight it too much as the cost wasn't very significant compared to the selling price.

Okay, got it. Makes sense. I'm sure it wasn't a big deal, but a bit of a pain to find someone to do the work.

 

[VanWinkle]

Yeah, Florida is a mess with respect to insurance. I wish our governor would lead there rather than waste his time with political revenge against Disney... but to enact insurance reform would be hard.

Our Association insurance is up for renewal this month and the best quote is 45% over last year and without the new roofs that we just added it would have been higher. That quote was from the incumbent insurer, the next lowest quote would have been more than double that. Our agent had one Association whose insurance increased from $150k last year to $575k this year... they shopped it around and couldn't find a better deal so they sucked it up and renewed.

This post makes me want to quit looking at a second property in Florida as costs can't be known in the future. At least if I rent, I can pay the higher costs and not have to sell to get out of the state. Maybe Arizona or Texas(away from the coast) would be better target areas for purchase. I've been renting in Florida for 6 years, but it appears the costs will rise sharply in the next year or two.

 

[Mr._Graybeard]

A lot of the problem is what I view as fraud. Roofers going door to door telling homeowners that they can get them a new roof free, the homeowner assigns their insurance benefits to the roofer who then collude with lawyers to sue insurers for the cost of the new roof claiming it was damaged by wind or a hurricane when in fact it was really just an old roof that needed to be replaced because of old age and normal wear and tear.

I understand that several Florida insurers went into receivership this year. If they were gouging policyholders, apparently they didn't gouge enough.