When you insure a building with a new insurance company, the company will send an inspector to inspect the property. This inspection is done by company safety engineers, or hired contractors, and happens soon after the insurance takes effect. The purpose is to identify ‘hazards”, or conditions which increase the chance of a loss, insured or not.
These can be valuable: your insurance company is your risk partner for the property, writing the checks when things go wrong. And all losses, insured or not, are distracting to the core business operations (and income stream) of the property.
Timing of the inspection:
Most insurance inspections occur within 30 days of the new policy. Many inspections need to view the interior of the residence as well. The company will usually contact you and arrange for the inspection, but conduct unannounced inspections on occasion.
Bear in mind that inspectors are paid to perform inspections, not to try to get an appointment with you. Failure to agree on a date or delaying an inspection more than once will set into motion non-compliance complications that will make insuring the property more expensive and difficult for the future. Our advice: just get it over with.
The inspection typically takes anywhere from 30 minutes to a couple hours, depending on the size and nature of the property. Commercial properties take longer than habitational. The owner or an authorized person with full access is often needed to be on-site for the inspection.
Additional Purposes of an inspection:
The first objective is to make sure the building is insured properly: that the policy's coverage reflects the cost to rebuild in the event of a total loss. When we first prepare a property for shopping the insurance we often use replacement value software to determine the rebuild value. The software is good, but every property is unique, and public records are limited. The most accurate way to validate the cost to rebuild for you is via an on-site inspection.
Hazards are conditions which may lead to a loss - insured or not. To identify conditions where a loss might occur: safety items we see commonly in habitational (apartment) buildings include a deck with no handrails, or potholes (trip and fall hazards) in the sidewalk, or other susceptibility to loss, most commonly water.
What will be inspected?
Expect that the inspector will ask to see each room including the basement and all mechanicals: HVAC systems, sprinkler and other plumbing, roof, and so forth. They will take pictures from both inside and out to help tell the story to an underwriter. Underwriters are sponges for risk-based information, and the inspection fills in what the submitting agent or broker had not disclosed.
The inspector will usually measure the property to validate dimensions information. If dogs are permitted in a habitational property (rented house or apartments), they will ask about written rules for tenants. Dogs account for about 30% of personal liability claims payments, so this is one example where clear and enforced tenant rules matter.
They’ll inspect the roof condition, and inspect gutters and downspouts for flow and connections. Trees or bushes over the roof will degrade the roof before its time, and roofs are important: they keep buildings dry.
Here’s a tip before the inspector arrives: Debris in the yard or in common areas is a sure sign of lax property management. The little things matter. Keep the property as clean and tidy as possible.
If you are buying a new property, disclose everything to your insurance agent or broker up front, particularly if you are planning any construction beyond cosmetic improvement. The pricing of the risk is very different for a functioning and rented habitational or commercial building than a vacant building or an active construction site. Underwriters don’t like surprises, and have the right – within limited time frame – to get off a policy if conditions are not what were presented for initial pricing. Both situations can be addressed by our agency but it is always best to disclose these plans when setting up the policy. The insurance company’s contractual right to cancel a policy for misrepresentation gives them all the leverage.
One benefit of a home insurance inspection can be that discounts or credits are identified by the inspector that the customer was not aware. For example, some properties with central fire and burglar alarms do not realize their system also has a low temperature sensors.
The other benefit of course is that a risk professional has examined the property and identified areas most likely to lead to a loss. As the party with the financial interest in preventing losses, carriers will ask for some changes, and demand others, depending on the perceived risk severity.
What happens after the inspection?
When the inspection is complete, a written report goes to the insurance company. They review and confirm the coverage amount and outline concerns (called recommendations’). As mentioned above, some recommendations are just that; many are requirements: for example: if a sprinkler system has not been tested within its required cycle, or if a roof leaks. They’ll forward the report to you or through the agent or broker. As agent / brokers, we are adept at communications between the underwriter and property owners. The most important part is opening up a dialogue with the insurance company. We are experienced with these and will assist with crafting an agreeable action plan.
Keeping costs down – for you, for everyone
Having your property inspected keeps the cost of your insurance down in several ways. It begins with reinsurance, the insurance that companies buy to protect the company from large catastrophic losses. Companies that conduct the most rigorous inspections get deeper discounts on reinsurance, a cost passed along to the customers. Companies that identify and prevent losses will have lower costs before using their reinsurance and continue to offer the better prices.
If you are thinking about buying a property and need a great risk partner to help you navigate this part, contact the experts at Gordon Insurance.