Category Archives: Homeowners Insurance

Solar power and homeowners insurance

On May 9 California became the first state to mandate that all new homes have solar power. The rules go into effect in two years, and are part of the state’s efforts to cut greenhouse gas emissions.

Under the new rules, individual homes must have rooftop solar panels, or a shared solar-power system serving a group of homes. Rooftop panels can either be owned outright and rolled into the home price, or made available for lease. The requirement is expected to add $8,000 to $12,000 to the cost of a home, according to the New York Times. However, savings from heating and cooling could add up to $80 per month.

To help homeowners understand whether solar panels are covered by homeowners insurance, we’ve put together this Q&A.

Q: Are my solar panels covered by homeowners insurance?
A. Yes. Most solar panels are considered a permanent attachment (like a deck) and are therefore protected by a homeowners policy. You will want to call your insurance company and make sure your panels are covered.

Q: How much coverage do I have?
A. Your insurance policy’s coverage limit is the maximum amount that it will pay toward a covered loss. Since solar panels can be expensive, make sure your coverage limit is adequate.

Q. Will having solar panels increase my homeowners insurance premiums?
A: Most likely, yes. Some carriers allow owners with solar energy systems to purchase an optional endorsement to cover the panels. Others include the coverage in the dwelling coverage (Coverage A), if the panels are on the roof of the home, or under “Coverage B,” if they are on the ground or on the roof of a detached structure. Either way, there are replacement costs associated with the panels that would likely increase homeowners premiums.  Homeowners can expect to benefit from solar with increased energy efficiency in the home, but time will tell if the economic advantage of having solar panels outweighs the incremental, upfront costs.

Just like residential sprinkler systems increase water-damage claims, it’s reasonable to expect that solar panels, when attached to roofs, might also increase the chances of roof claims because of damage caused by a windblown panel or a leak at the point of contact, as examples.

Q. What are some of the risks of having solar panels?

A: If a home catches fire, solar panels can be challenging for firefighters. The PV arrays increase the risk of electrocutions, slips and falls and other serious injuries. If the fire is on the roof, the concealed spaces between the panels make it very difficult to get them extinguished. Solar panels are always live, and contact with them with them can cause shock or electrocution. Fire departments are implementing programs to learn how to handle solar panels.

 

Hawaii’s Big Island Volcanic Eruption – What You Need to Know

By Michael Barry, Head of Media and Public Affairs, Insurance Information Institute

 

The number of structures destroyed by the eruption of the Kilauea volcano on Hawaii’s Big Island has climbed up to 35 today since the eruption first started on Thursday, May 3, sending sulfur dioxide into the air, and prompting the evacuation of at least 1,700 residents.

The issues impacting Hawaii’s Big Island:

  • The percentage of impacted property owners carrying either homeowners, business, or earthquake insurance is unknown at this time.
  • Moreover, no one knows how long the eruption will continue; in 1955, the Kilauea volcano erupted for about three months.
  • Lava Zones 1 and 2—deemed the most dangerous of the nine Lava Zones on the Big Island—are where the current crisis is occurring.
  • The U.S. Geological Survey (USGS) makes the Lava Zone designations and the federal governmental agency’s Zone ratings are considered when insurers assess their risks on Hawaii’s Big Island.
  • The Big Island was also the site of a 6.9-magnitude earthquake on Friday, May 4, the strongest quake to hit Hawaii in 40-plus years.  The earthquake was one of hundreds to be felt recently on the Big Island even though none of them caused any notable threat either to life or property.

 The insurance coverages which will come into play:

  • Lava-caused property damage is usually attributed to fire; fire-caused losses are covered under standard homeowners (h/o) and business insurance property policies.
  • Earthquake-caused property damage, or losses tied either to earth movement or land tremors, is covered only if the homeowner or business owner purchased an earthquake insurance policy in addition to a standard h/o or business insurance policy.
  • Few property owners in this part of the Big Island have earthquake insurance coverage.
  • Homeowners forced to evacuate their residences might have coverage through their h/o policy for additional living expenses (ALE) but ALE usually only kicks in when a home has been directly impacted by lava flow.
  • Lava and earthquake-caused (fire, falling objects) property damage to vehicles is generally covered under standard auto insurance policies so as long as the vehicle owner purchased optional comprehensive coverage.
  • More than 3 out of 4 drivers (78 percent) nationwide had comprehensive coverage on their vehicle as of 2015.

The insurers who cover these risks:

  • The top 10 writers of homeowners insurance in Hawaii appear below. (more here)
  • The Hawaii Property Insurance Association, the state’s not-for-profit property insurer of last resort, has since the 1990s sold property insurance to homeowners unable to purchase coverage due to the threat of an volcanic eruption in Lava Zones 1 and 2 on Hawaii’s Big Island.

The state government’s response to the crisis:

  • Governor David Ige (pronounced E-GAY) visited the Big Island on Friday, May 4, and met w/elected officials, first responders, and impacted residents.
  • The governor activated Hawaii’s National Guard to assist Hawaii County with monitoring sulfur dioxide gas emissions, facilitating evacuations, and providing neighborhood security.
  • Hawaii’s insurance regulator has posted a Lava Flow Insurance Information document aimed at consumers.

 

Thanks to Alison Ueoka, president, Hawaii Insurers Council (HIC) and Michael Onofrietti, senior VP, Island Insurance, and the HIC’s board president, for their help in developing this post.

The Kilauea volcano eruption – a primer on insurance coverage

Over two dozen homes have been destroyed so far when the Kilauea volcano on the island of Hawaii began erupting last week. Lava flowed into residential neighborhoods on the eastern side, as this Wall Street Journal video shows, and the island  has been shaken by hundreds of earthquakes, the largest one with a magnitude of 6.9 occurred on Friday.

The I.I.I. has a primer on volcanic eruption insurance coverage. Below are some highlights:

What’s covered

  • Most home, renters and business insurance policies provide coverage for property loss caused by volcanic eruption when it is the result of a volcanic blast, airborne shockwaves, ash, dust or lava flow. Fire or explosion resulting from volcanic eruption also is covered.
  • Homeowners and business owners’ policies also provide coverage for property damage, vandalism or theft due to looting if the occupants are displaced.
  • There is typically a 72-hour waiting period before business interruption coverage kicks in.
  • Damage to vehicles caused by lava flow is covered under your auto insurance policy if you have comprehensive coverage, which is optional. Direct, sudden damage to engines from volcanic ash or dust is also covered under most policies.

What isn’t covered

  • Most home, renters and business insurance policies do not cover damage from earthquake, land tremors, landslide, mudflow or other earth movement regardless of whether the quake is caused by or causes a volcanic eruption. Earthquake insurance is available from private insurers as an endorsement to a homeowners policy.
  • Damage to land, trees, shrubs, lawns, property in the open or open sheds (or the contents of those sheds) is typically not covered.
  • The cost to remove ash from personal property is generally not covered unless the ash first causes direct physical loss to personal property. There is also no coverage to remove ash from the surrounding land.
  • Damage that occurs to homes, businesses or vehicles over time due to volcanic dust is not covered under most policies.
  • Volcanic Effusion (i.e. volcanic water and mud) is not covered under a typical homeowners, renters or business insurance policy. However, it is covered by flood insurance, available through the National Flood Insurance Program.

 

 

Dog Bite Liability Claims by State – Interactive Map

Dogs provide millions of people with companionship, happiness and health benefits. But even dogs that are normally docile may bite when they are frightened or when defending their puppies, owners or food.

To educate pet owners about how to prevent dog bites The American Veterinary Medical Association (AVMA), the United States Postal Service (USPS) and State Farm Insurance are joining together for National Dog Bite Prevention Week (April 8 -14).

Dog bites and other dog-related injuries accounted for more than one third of all homeowners liability claim dollars paid out in 2017, costing almost $700 million, according to the Insurance Information Institute (I.I.I.) and State Farm®, the largest writer of homeowners insurance in the United States.

California had the largest number of claims in 2017 followed by Florida. Florida also had the highest average cost per claim at $44,700.

For more details see our interactive map below.

 

Assignment-of-benefits haunts Florida’s homeowners insurers

Third party abuse of assignment-of-benefits is having a negative impact on Florida’s homeowners insurers’ 2017 financial results, according to a recent S&P Global article.

An assignment of benefits occurs when a person with an insurance claim allows a third party to be paid directly by the insurance company. Usually this happens after a claim, when the insured assigns their benefits right to a contractor or whoever is making the repair the claim is meant to cover. A loophole in the Florida law invites abuse of the right and the ensuing litigation drives up costs.

S&P Global’s article showed how the loophole has dramatically increased costs at Florida’s Citizens Property Insurance Corp.

Hurricane Irma by itself made 2017 a challenging one for Florida’s Citizens: over $1 billion in net losses and loss adjustment expenses.

But increased litigation expenses (which show up in insurance statements as direct defense and cost containment expenses incurred (DCCE) – often referred to as allocated loss adjustment expenses) – those hurt a lot too. The ratio of homeowners DCCE incurred to direct premiums earned increased to 16.9% from 15.2% in 2016, the average such ratio for the first 13 years of Citizens’ existence was 2.9%. In other words, litigation costs are almost six times worse than they were just a couple of years ago.

Private insurers in Florida are also reporting the negative impact of litigated assignment-of-benefits claims.  Universal Insurance Holdings, Florida’s largest private property insurer, reported that about 12% of its claims from Irma had some aspect of assignment of benefits to them.

So far, legislative reform of assignment-of-benefits abuse remains in limbo.

Effective communication, not speed matters most in P/C insurance customer satisfaction, new J.D. Power survey finds

According to a February 22 news release by J.D. Power & Associates, claims experience satisfaction among homeowners filing property insurance claims has reached an all-time high, despite record-high property losses following a spate of hurricanes, earthquakes and fires in North America.

The J.D. Power 2018 U.S. Property Claims Satisfaction Study found that insurers that have achieved the highest levels of customer satisfaction have also been the most effective at managing customer expectations for the time it will take to settle claims.

“The last two years of record catastrophic losses have put P&C insurers to the test, and many have risen to the occasion, driving overall customer satisfaction levels to new highs,” said David Pieffer, Property & Casualty Insurance Practice Lead at J.D. Power. “While that overall performance is a positive for the industry, there is wide variability in the ranges of performance among insurers in different regions of the country and between different service attributes. Particularly noteworthy, customer satisfaction in Texas and Florida—two of the areas hardest hit by hurricanes—show below-average results, spotlighting areas where there is still room for improvement among insurers.”

The time it took to settle a claim is the single lowest-rated attribute in the study, with 1 in 7 respondents indicating that the claim took longer than expected. However, when time frames are properly managed, even groups that experience the longest time-to-settlement still rate their experience above the industry average of 8.45 (on a 10-point scale). Time-to-settle satisfaction ratings are 1.9 points lower when insurers miss customer timing expectations, even when the time frame is relatively short.

Click here for the full J.D. Power release and rankings.

The Week in a Minute, 12/8/17

The I.I.I.’s Michael Barry has been attending the National Association of Insurance Commissioners’ meeting. This week, I.I.I. Daily editor Jennifer Ha picks the week’s most important insurance stories.

  • Record winds are fanning the flames of three major wildfires in Southern California. Already 200 homes and buildings have been destroyed, and tens of thousands of persons face evacuation.
  • Damage claims related to the October wildfires that hit the state’s Wine Country have risen to $9 billion. The state tracks the losses reported to major insurance companies, and the recent losses are far greater than any other wildfire outbreak in state history.
  • The Federal Emergency Management Agency (FEMA) has filed claims with private reinsurers for the full $1.042 billion the agency has in coverage. The claims are being sought to help FEMA recover the losses of the National Flood Insurance Program (NFIP) from Hurricane Harvey. Meanwhile, Congress approved a short-term (December 22) extention for the NFIP.

I.I.I. members receive the I.I.I. Daily for the latest insurance-related news for free. Nonmembers can purchase a subscription. Contact daily@iii.org.

More Wildfires, This Time in Southern California

The worst wildfire season in the history of modern California is taking another bad turn, as three major fires have destroyed more than 200 homes and buildings.

Strong winds will be fanning the flames. The state’s foresters have issued a purple wind alert for Southern California, something they have never done before.

This follows a Department of Insurance report that insurers have incurred more than $9 billion in claims so far from the October fires, being $8.4 billion in residential claims, $790 million in commercial property, $96 million in personal and commercial auto, and $110 million from other commercial lines. County-level details here.

The New York Times has a 2-minute video summarizing why this year’s wildfire season has been so bad.

Their take:

  • Wet winter followed by hot summer. The moisture encouraged plant growth. The heat turned those plants to tinder.
  • Longer fire season, perhaps linked to climate change.
  • Growing residential areas. Development is encroaching on forests.
  • Santa Ana winds. As noted above, the winds are blowing harder this year.

I.I.I. Facts + Statistics on wildfire can be found here. Here’s a prior Terms + Conditions post on filing claims. (It was written for the October fires, but the message will not have changed much.)

California Wildfires: What’s Next?

More than a dozen fires have burned more than 1,500 structures in Northern California, with more than a dozen dead as of Tuesday afternoon.

CNN lays down the facts:

  • More than 119,000 acres burned, much of it in wine country – Napa and Sonoma counties.
  • Fires surged behind hurricane force winds (79 mph gusts) – about the same speed as Hurricane Nate at its landfall a few days ago.
  • Nearly 35,000 are without power.
  • No rain is forecast for the next seven days.

Cat modeling firm RMS notes that the fires, taken together, are already the fifth most destructive in state history, as measured in the number of homes destroyed.

The Insurance Information Institute has background information on wildfires here.

The The Insurance Industry Charitable Foundation (IICF) has opened the IICF California Wildfire Relief Fund to assist in the growing need across the state.  To donate click here.

Our thoughts obviously are with all of the families in peril right now.

Janet Ruiz, I.I.I.’s California representative, notes that wildfires differ from other catastophes like hurricane or tornado, in that the loss is more likely to be a total loss — the entire home burns along with its contents. Compounding the tragedy, often that includes the receipts and other evidence of ownership that make it easy to document what has been lost.

Her other thoughts:

  • Coverage for alternative living expenses (reimbursement while waiting to return home) may be available through your insurance company. Money you spend on housing, food, clothing, etc as a result of a mandatory evacuation may be covered.
  • After you have returned, report your claim right away to your insurance company. Insurers have multiple tools available to handle claims. Many will be onsite at local assistance centers or processing claims via mobile apps, online claims, call centers and more. Call your agent if you need additional assistance. Insurance companies are also proactively reaching out to people they know are in affected areas and may have a loss.

 

The October issue of Latest Studies

The October issue of our Latest Studies digest is now available.

In this issue:

  • Wharton, The Congressional Budget Office and B.E. Journal of Economic Analysis & Policy all have recent reports on the National Flood Insurance Program
  • Lloyd’s of London on the future of cargo insurance
  • The latest on marijuana impaired driving from the National Highway Traffic Safety Administration
  • J.D. Power on U.S. homeowners insurance customer satisfaction

And more…..