By Todd Mason
Star-Telegram
The customers always write:
Don't sweat it if you already have homeowners insurance, I counseled in a column describing why Tarrant County citizens have hail to pay in property coverage.
Ha! you answered.
Geico is pulling out of the Texas homeowners market, leaving many policyholders "up the proverbial estuary with no means of locomotion," as one caller put it.
In other cases, home buyers are lining up insurance and closing the transaction only to find a cancellation notice in the mail a few weeks later. "It's a major problem for us," said Terri Smith, a real estate agent with Re/Max All-Stars, who says three of her clients found themselves stranded.
I'm revisiting the subject today because it's an important one. Homeowners insurance isn't optional as your mortgage lender sees the world, and losing your coverage can prove to be costly.
Your current insurance company can't penalize you for weather- related claims. The Texas Department of Insurance says you can't be dropped unless you file three or more claims in a three-year period that aren't the result of natural causes.
Apply for a new policy, however, and insurers are completely on their own in classifying you as a standard or substandard risk. Some of Geico's former customers say they're hearing rates from other insurers that are almost double their present premiums.
What's more, insurers demand high deductibles on policies, sometimes as high as 2 percent or 3 percent of the home's replacement cost. With a 3 percent deductible on an $80,000 home, the homeowner bears the risk for the first $2,400 of the next roof.
"We have two standard carriers and they are extremely restrictive," said Tim McClendon, a Wm. Rigg Co. vice president and president of the Tarrant County Association of Independent Agents. Carriers may become bolder "if we can get through this year without a major hailstorm," he said.
Should you be bolder and take a higher deductible? The answer is "no" if you're on a first-name basis with roofing contractors.
Consider some Allstate quotes on a $100,000 home. A deductible of $1,000 instead of $500 saves $72 a year on this hypothetical $589 premium. At that rate, homeowners need seven years to get back the extra $500 they'd pay to replace a roof. That's a poor bet in some Arlington neighborhoods.
Paying an extra $47 a year for a $250 deductible makes less sense. With insurance companies looking for ways to reduce rooftops in Tarrant County, it's silly to file piddling claims and risk losing your coverage.
Stay under three claims and your carrier can't drop you unless you file a fraudulent claim or you allow substandard or hazardous conditions on property to go unrepaired.
An exception, as Realtor Smith learned: Insurers don't need a reason to drop new policyholders during the first 90 days.
The solution: Do your homework and insist that the agent do the same. Agents suggest hiring a roofing contractor to inspect the structure as the best way to avoid nasty surprises. Routine real estate inspections sometimes miss roof conditions that raise eyebrows in insurance circles.
At the same time, the insurance company is going to be looking at your credit record and your history of making insurance claims. The insurer uses computer databases to check on your answers so there's no point in finessing these questions.
Be alert for errors in these reports. The Comprehensive Loss Underwriting Exchange, operated by Equifax, is the leading database for insurance claims. CLUE charges $8 for a copy of your report unless it has been used as the basis for "adverse action," in which case it's free. Call (800) 456-6004.
The report will instruct you on how to fix errors on a CLUE report. Suffice it to say, this chore isn't one you want to tackle a week before closing.
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The original story ran the previous week.
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updated 6:38 AM on 7/17/96