Property Insurance Going Up? 4-Point Inspections May Help Reduce Your Insurance Premiums
By Christopher Carter - Real Estate Broker Associate
November 9, 2023
Florida's Homeowners Insurance issues are well-known throughout our State and beyond. Coverage limitations, high premium costs, availability of basic coverage, and policy non-renewals are affecting property owners all across Florida. The contributing causes to this situation began decades ago, though are not the subject of this week's article. We will address those causes in an upcoming edition.
Depending on the location and type of residence, property insurance coverage in Florida can include:
• General Homeowners (Hazard, Liability)
• Windstorm (Hurricane, Tropical Storm)
• Flood (Rising Groundwater, Storm Surge)
Anything a property owner can do to reduce exposure to hazards, damage, and deterioration has the potential to reduce premium amounts paid to the insurance company. This is known as mitigating risk, and should be a priority for all Florida property insurance policyholders. Today, we are discussing one of the best ways to evaluate exposure to some of the hazard damage areas that result in the most frequent insurance claims.
Saving money on insurance premiums is always important, though not nearly as important as occupants finding and addressing property condition issues that can cause injury or health problems. The underlying purpose for Home Inspections and insurance 4-Points is to promote occupant/resident safety.
A 4-Point insurance inspection is a look at the primary areas of a Single-Family Home acknowledged as having higher incidence of damage and insurance claims. When/if deficiencies are found in these 4 main areas of concern, they can be addressed by the property owner and brought up to the insurance company's condition standards for underwriting a Homeowners policy.
The specific areas of inspection for an insurance 4-Point are: Roof, Electrical, HVAC & Plumbing.
4-Points are performed by licensed Home Inspectors, Contractors, or Building Code Inspectors, limited to visual inspection of these 4 specific areas and systems. They are not the same as complete Home Inspections which all buyers should have performed within the purchase contract's Due Diligence period.
The newer a house is, the less time has gone by for parts of it to deteriorate, break, or wear out. Plus - more recent building codes tend to have stronger standards than older codes, which is why 4-Points are required for older homes, and why newer houses are usually less expensive to insure than older ones.
For houses constructed 20+ years ago, insurance companies require the new property owners to have an independent 4-Point inspection performed before issuing a new Homeowners insurance policy. They could also ask for one at policy renewal in order for property condition information on an older home to be as current as possible.
Having one performed can also be a good idea for owners thinking about selling their Single-Family Homes. The next owner will also need to insure the property, and providing a pre-listing 4-Point can greatly increase potential buyers' comfort levels when thinking about making an offer. Florida's ongoing property insurance concerns have caused most buyers to include insurance availability and premium cost as important parts of their pre-purchase Due Diligence.
Without a 4-Point inspection, insurance companies assume that a given Single-Family Home has full exposure to hazards and damage, which usually means a full-price premium or in some cases declining to write coverage at all. This is because the actual condition of higher-risk parts of the property is unknown. Once the 4 primary systems and components in the property are inspected for condition and applicable code compliance, insurers may adjust premiums and possibly apply discounts to reflect actual exposure and risk.
Here are some examples of what inspectors look for in each of the 4 categories:
• Breaker Panel Condition & Amperage Capacity
• Wiring - Type, Damage, Proper Grounding
• Any Observed Deficiencies
HVAC (Heating, Ventilation, Air Conditioning):
• Proper Function
• Working Condition Evaluation
• Type & Condition Of Interior Pipes
• Evidence Of Leaks
• Connections To Fixtures & Appliances
• Water Heater Location, Age, Pressure Relief Valve
• Covering Material (Shingle, Tile, Metal)
• Age, Estimated Remaining Useful Life
• Visible Damage Or Deterioration, Evidence Of Leaks
A written 4-Point report must include supporting photos with comments, observations, and descriptions by the inspector. It goes from the licensed inspector directly to the property insurance company, with a copy going to the buyer (new policy) or current homeowner (renewal).
Because of the current state of property insurance in Florida, buyers of Single-Family Homes more than about 10 years old will likely need to have a 4-Point performed by a licensed inspector before their Homeowners insurance company will issue a policy. Even when not required by the company, it is strongly suggested in order to receive any possible adjustments or discounts to the premium. The cost for a 4-Point is most often paid by the buyer directly to the inspector or inspection company.
For current homeowners, it is a very good idea to get in touch with your Homeowners insurance agent every couple of years to see if an updated 4-Point might help reduce your premiums. Especially after doing upgrades, repairs, and renovations, homeowners should talk with their agents to update what the company has on file. A new 4-Point may provide details the company needs to accurately calculate risk exposure and apply premium discounts.
There is NO guarantee that a new 4-Point inspection will reduce your current property insurance premiums. Though keep in mind that when insurance companies don't have accurate, up-to-date information on file about a property's pre-claim condition, it can be much more difficult and time consuming for any future claims to be processed and paid.
There we are - a brief overview of how 4-Point insurance inspections are used in Florida. If you are a potential buyer of a Single-Family Home more than about 10 years old, understand their value in helping you receive an accurate Homeowners Insurance premium quote.
If you already own a Florida SFH, it may be a good idea to ask your insurance agent if having a fresh 4-Point performed on yours could have any effect on your premiums. Be ready to describe any updates, upgrades, and repairs you may have done in the past few years.
Very closely related to 4-Points are Florida Wind Mitigation inspections. 4-Points and "Wind Mits" are usually performed at the same time. Look for an article on them in the near future.
Editor's Note: Christopher Carter is NOT an attorney. He does not give legal advice. For interpretation and application to specific circumstances of anything you read in this article, you must speak with a Florida-Licensed attorney.
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