The ever increasing frequency of damaging hail events has taken a significant toll on the insurance industry and may have impacted you personally. If hail hasn’t affected your wallet yet, chances are it may at some point soon.
Many personal insurance carriers are struggling with high loss ratios (claims paid out versus premiums collected). They have taken premium increases year after year in an attempt to weather the storms. Some insurers are now choosing to go a step further by reducing coverage with more restrictive language and/or exclusions to minimize their participation in hail losses. These negative coverage changes can often be overlooked, miscommunicated, and or misunderstood by the policyholder. This results in the insured being unaware that they are severely uninsured or entirely uninsured for their losses until after a claim has been reported to the carrier.
Here are some examples of coverage changes that could have negative effects for you in the event of a hail loss:
- Several insurance carriers are moving from a standard flat dollar deductible (e.g., $2,500 for all covered losses) to a percentage basis – Usually somewhere between 1%-5% of the dwelling amount. For example, if your home insurance value is $500K, and your deductible is 5% for a hail loss, then any loss under $25,000 would be on you.
- Instead of a percentage, some insurers are requiring larger flat deductibles specifically for hail and wind claims – with some minimum deductibles offered as high as $25,000 or $50,000 per loss.
- Elimination of standard replacement cost settlements. This means using roof schedules (having variable payout tables with reductions on a payout of 15%-60%) to determine how much of the claim will be paid. This is based on the age of the roof, and the reduction is made in addition to a standard flat property deductible.
- Holdback provisions whereby claims checks are withheld from the insured until documented repairs have been completed and submitted to the carrier.
- In auto losses, particularly in higher-value import models, some carriers refuse to use OEM parts as a cost-cutting measure. In some cases, this can lead to safety concerns.
The insurance landscape around hail is changing as quickly as the seasons! As consumers, be advised that options exist, not all policies are equal, and one size does not fit all when it comes to coverage. Become vigilant around how your insurance program is structured and make sure you have a true expert in your corner who specializes in customized personal insurance solutions.
Material posted on this website is for informational purposes only and does not constitute a legal opinion or medical advice. Contact your legal representative or medical professional for information specific to your legal or medical needs.