Home On The (Front) Range

06/13/2018 – I woke up this morning to news of a major hail storm that came through the Southern part of our city in the early hours. These storms that are bringing baseball size hail are so common now that insurance companies are treating the Front Range, the area along I-25 East of the mountains from Pueblo to Fort Collins, as an unfavorable risk for home insurance. With high loss ratios every year for a decade, they need to find ways to mitigate against losses.

There are only a few things that insurance carriers can do. In order to be admitted by the Department of Insurance they have to offer insurance in the entire state. In other words, they can’t carve out areas for exclusion. Of course, insurance companies can increase rates but competition, the DOI and policy restrictions can limit these solutions. So what else can insurance companies do to share the risk and limit their losses?

1. ACV for wind/hail claims or on roofs. Many insurance companies are going to either Actual Cash Value or some sort of depreciation schedule on roofs. Most often these clauses go into effect when the roof exceeds 15-20 years of age but some will start the depreciation from day 1. You definitely want to check your policy to see if you have Replacement Cost coverage or ACV.
2. $5000 deductibles for Wind/Hail. We prefer this to the ACV policies because at least it is a solid number that we could budget toward. With ACV coverage, the payout depends on the condition of your roof at the time of the claim, the cost of materials at that time, the age of your roof and these variables make it impossible to know how much to budget for a potential claim. We know that for many (most) of our clients $5000 is a huge number, but it’s better than knowing it is somewhere between $3000 and $10000.
3. Cosmetic Damage Exclusions. This limits claims as it sounds, if the damage does not hinder the function of the item, that damage is considered cosmetic and is excluded. So your siding and roof may look terrible, your garage door might be banged up but, if it still functions, damage is excluded.
4. Stripped down policies with pick and choose coverages missing standard coverage items that most people expect to have on their policy.
   1. Extended replacement
   2. Ordinance and Law
   3. Water Backup
   4. Replacement cost contents

Navigating your home insurance options is more complicated today than it was 13 years ago when I started in this business as a captive agent. Pay attention and if you receive a quote for 50% less premium than you are currently paying, your radar should sound the alarm and you should find out what coverage has been limited or excluded.