| Homeowners' insurance is a must for any owner | | | | Insurance companies generally are expected to |
| of residential real estate. It has been around for | | | | pick up the tab and then sue the repair contractor |
| many years, coming to the rescue of many real | | | | or original builder for reimbursement. This attitude |
| estate homeowners. Leaky pipes and their | | | | has caused a lot of litigation - between insurers |
| subsequent damage have been causing | | | | and residential real estate owners, as well as |
| homeowners grief for an even longer time. | | | | between insurers and parties assumed to be |
| Homeowners' insurance has alleviated such | | | | responsible for the toxic mold. They often lose |
| problems by underwriting the cost for repairs. | | | | court cases for reimbursement, as well as |
| I remember as a child my father making repairs | | | | incurring attorney fees and court costs. Is it any |
| with money from our homeowner's insurance | | | | wonder insurance companies have become |
| policy. He told me that there was never a claim | | | | gun-shy of small water damage claims that could |
| too small, unless it was within the deductible range. | | | | lead to costly repairs and litigation later. |
| While my father's information was correct for the | | | | Administrative Costs |
| times, the rules for small claims on residential real | | | | Another reason for the change in attitude toward |
| estate have changed. Submitting a small claim | | | | water damage claims is the change in real estate |
| today, especially for water damage, could cost | | | | insurers' business practices. Since the early 90s, |
| you multitudes more in the future. | | | | real estate insurers have looked for more |
| A California Insurance Department study showed | | | | practical ways to increase profits. Through |
| that 25 percent of insurance companies refused | | | | studies, they found that small claims created the |
| to renew policies for residential real estate | | | | same large administrative costs as the larger |
| owners, who made one or two non-water | | | | claims, even though the payouts were small. They |
| damage claims within the past three years. The | | | | now weed out residential real estate customers |
| figure rose to 32 percent, when the claims were | | | | who make small claims. |
| water damage-related. This means the insurers | | | | Alternative Game Plan for Real Estate |
| are paying the legitimate claims but are apt to | | | | Homeowners |
| drop those real estate customers at policy | | | | Today, it is better not to make small damage |
| renewal time. | | | | claims of any type. Real estate homeowners |
| Additionally, all insurers share claims information | | | | should increase their deductibles to $1,000 or |
| through the Comprehensive Loss Underwriting | | | | $2,500. This reduces their premium costs by as |
| Exchange (CLUE) database. Not only are you apt | | | | much as 30 percent. They are covered for large |
| to be dropped by your current residential real | | | | damages but not paying for services (small |
| estate insurer, but others may not approve you. | | | | claims) that they are not receiving. |
| The study also showed that 62 percent of the | | | | With the larger deductible, the premium savings |
| top 13 insurers in the state of California refused | | | | can be placed into a savings account to pay for |
| applicants with only one-to-two claims in the past | | | | small claims that would earlier have been |
| three years. | | | | submitted to the insurer. Whenever used, the |
| If another insurer does approve you, it will most | | | | money should be replaced as soon as possible. |
| definitely be at a much higher premium rate that | | | | After seven-to-ten years of submitting no claims, |
| will add up over the years to a much larger | | | | most real estate insurers will qualify you for a |
| amount than the small water damage claim you | | | | claims-free discount, saving you even more |
| made. | | | | money. |
| So, what has changed? | | | | Is It Worth It? |
| Toxic Mold | | | | In deciding if you should submit a claim (even a |
| Litigators have jumped on the toxic mold lawsuit | | | | larger one), first determine if it is worth the |
| bandwagon. Toxic mold comes from water | | | | possibility of losing your policy and/or paying |
| damage repairs that were incorrectly made or | | | | higher rates. Add up all the repair costs. |
| only partially cleaned up. It can literally make the | | | | Determine how much the real estate insurer will |
| real estate residents very ill. Some toxic mold is | | | | pay, based on your policy. Subtract your |
| created by homes that were not quality built and | | | | deductible. Is the remainder only a couple hundred |
| allowed water to seep in between the outer and | | | | dollars or substantially more? Now, determine if it |
| inside walls. There have been a few | | | | is worth it. Remember, even moving to another |
| multimillion-dollar homes in California that had to be | | | | state will not escape the CLUE database. |
| totally leveled due to toxic mold. | | | | |