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How to Solve the HO Availability/ Affordability Crisis (Part 2 of 2)

Author: Bill Wilson

In Part 1 of this article, we explored the premise that homeowners coverages are generally too broad and deductibles are too low. In this part, we'll take a look at the exposure from a risk management perspective. Included is a simple, downloadable checklist that you and/or your insureds can use on a regular basis for loss prevention.


Repeating from Part 1....

Loss control is virtually nonexistent

Combine a low deductible with minimal consumer education about loss prevention and you'll find little, if any, incentive for insureds to seriously practice sound loss prevention.

In commercial lines, loss control services for larger and/or more hazardous risks are commonly offered by insurers. In fact, in some cases, compliance with loss control recommendations is mandatory to make a risk acceptable to the underwriter and failure to comply is often a grounds for cancellation.

Perhaps, considering the account size or sophistication of the market, this approach has not been pursued with regard to personal lines. I believe, however, that a risk management approach to controlling personal lines losses is an idea whose time has come.

Below are two homeowners loss prevention checklists, one in Word format and the other in Adobe Acrobat (PDF) format. The Word document is available for use only by IIABA member agencies who are permitted to include their own logo and agency information and share it with their customers. The PDF version is available for the internal use of other parties but cannot be otherwise modified or redistributed.

Here are the two documents, followed by a brief explanation of the checklist items (this explanatory list also includes other web site resources not on the checklist itself): 

Word Home Loss Prevention Checklist (IIABA members only)

Home Loss Prevention Checklist (all others)


Home Loss Prevention Checklist Instructions

Fire Protection
•  Approved and properly charged and maintained fire extinguishers in garage and near kitchen. Household members should be trained in the proper use of an extinguisher; otherwise, this could result in delays in notifying the fire department or the spread of fire, e.g., through the improper application of extinguishing agent to a grease fire.
•  Fire/smoke alarms properly distributed throughout the premises…replace batteries at least twice annually. Contact your local fire department for advice on placement of detectors. Consider changing the batteries when Daylight Savings Time changes each spring and fall.
•  Carbon monoxide detector. This should normally be placed near a heat producing device such as a water heater, dryer, etc.
•  Avoid storing flammables in the home or garage…use a small, detached storage shed. Many homeowners will store up to five gallons of gasoline for yard equipment and often in unapproved (non-UL listed) containers.

•  Extension cords should be used only temporarily, check for fraying. Extension cords are not designed to be permanent electrical circuits...they should only be used for temporary tasks.
•  Don’t overload electrical outlets. A single wall outlet can only support so much amperage, so do not overload circuits with several devices.
•  Use surge protectors on major appliances, TVs, PCs, etc. All easily damaged electrical equipment should have surge protection, including TVs, PCs, video game consoles, DVD/VHS players, etc.
•  Label all circuit breakers and check regularly for tripping. Indicate what area is controlled by each breaker. Also, if you are running "behind the scenes" equipment like a sump or septic pump, be sure to check the circuit breaker controlling that device at least weekly.

Plumbing & HVAC
•  Inspect entire plumbing system for leaks. At least quarterly, check all visible piping and fittings in crawl spaces, underneath sinks, etc. for leaks.

•  Install a pressure reducing valve if hydrostatic pressure exceeds acceptable standards. If your neighborhood is in a high pressure zone, contact a plumber to install an in-line pressure reducing valve. That will significantly reduce your exposure to leakages around fittings and fixtures, not only avoiding water damage claims, but also future costly repairs.
•  Know where your primary water shut-off valve is located and keep a valve key on hand if needed. Have your plumber show you where your main water cut-off valve is located and keep the appropriate tools handy to shut of the water if necessary.
•  Inspect water heater, pan, piping, and vent…know how to operate gas shut-off if necessary. Have your plumber show you how your water heater works and its safety features. If you have gas heat, have a utility representative demonstrate how to safely shut the gas off if necessary.
•  Avoid using space heaters, either electrical or kerosene. The best thing you can do is don't use them at all but, if you must, keep them well away from any combustibles and avoid tipping.
•  Change HVAC filters at least monthly and clean ductwork at least every three years. HVAC ducts can be a breeding ground for dust, fungus and bacteria and may provide evidence that you have a hidden moisture problem.

•  Maintain tub and shower caulking and grouting around tile and fixtures. These areas should be completely water tight to prevent moisture from entering wall and subfloor areas, leading to wet rot and mold.
•  Remove mildew weekly with a mild bleach solution. This will minimize wear on grout and caulking.
•  If moisture builds up on ceilings or walls, check and correct bathroom ventilation. Many bathrooms have grossly inadequate ventilation due to undersized fans or exhaust vents that have come loose and do not properly exhaust to the exterior.

Other Interior Areas
•  Check basement and crawl space for dampness and take corrective action such as French drains, sump pump, etc. Crawl space ground areas should be completely covered with a plastic vapor barrier and the area should be free of wood and other debris. If a basement area is musty, have it inspected and consider using a dehumidifier.
•  Consider treating exposed crawl space wood with a borate solution to prevent mold and insect damage. After eliminating the source of moisture or water accumulation, contact a reliable contractor such as a pest control company to spray your crawl space with a borate solution. This will inhibit fungus growth and also deter termites, carpenter ants and other wood boring insects.
•  Check ceilings and attics for evidence of water damage…correct immediately. As soon as a water spotting is detected, take corrective action to eliminate the source to prevent further damage (as required by your homeowners policy) and prevent mold growth.
•  Check attic and crawl space ventilation to prevent moisture build-up. Make sure that attic and crawl space vents are working properly and moving sufficient air to prevent moisture build-up. A qualified home inspector can do this for you.
•  Check for ceiling, wall and joint separations and cracks and take corrective action as warranted. This could be indicative of a moisture problem or of settling, neither of which are covered by your homeowners policy.
•  Check floors for creaking that could indicate structural or moisture problems. Over the years, some creaking is normal, but it's better to check and take corrective action in the event that there is a cause other than normal wear.

Exterior Areas
•  Check roof for wear, torn or missing shingles, and mildew. These areas should be repaired immediately. You may hire someone for a close inspection or simply use a pair of binoculars. Have mildew build-up removed every few years...for most homes, the cost will be less than $250.
•  Check chimney flashing, rain cap, mortar, and caulking. Chimneys are a major source of leaks and water damage. If water gets between the walls and chimney casing (for pre-fabs), it can go undetected for years. While flashing is the usual culprit, the chimney cap often is a source if it has been even slightly dislodged by heavy winds. Likewise, more ornate brick chimney work often requires sealing and caulking which will wear over time. Consider sealing, grouting and caulking at least every three years.
•  Check gutters for debris…consider a protective system such as Gutter Guard. Leaves, maple seeds, bird or squirrel nests, shingle granules or pieces can often clog up gutters, causing them to overflow or even backflow into the interior.
•  As possible, remove snow/ice accumulations from roof and prevent ice dams. Do not risk your life to remove snow, but hire someone if necessary and seek professional advice on how to prevent ice dams.
•  Make sure downspouts direct water well away from foundation. Water that is allowed to accumulate near the foundation can seep under basements and crawl spaces or leach through block walls.
•  Grading should slope away from foundation. Contact a landscaper if you have excessive water pooling near your home or evidence of heavy moss and fungus on the foundation wall.
•  Check window and door sills and framework for weathering and moisture retention. This could be a sign of poor drainage or water that is seeping into the window or door casing. Storm windows and doors may help, but consider consulting with a qualified contractor for advice.
•  Inspect fireplaces and roof areas for creosote build-up and clean annually. This is usually a task best suited to a qualified chimney sweep.
•  Inspect exterior brick and siding for gaps, missing mortar, etc. Missing brick mortar, cracks, and separations between walls, windows, doors, etc. can allow water into the structure.
•  Clean vinyl/aluminum siding to prevent weathering. Also note any separations or wear that can permit water to enter and accumulate between the siding and structure.

•  Contract for quarterly termite, ant and other inspect inspection and treatment services. This is absolutely critical...your homeowners policy does not cover damage caused by insects.
•  Before buying a house, ask your agent about obtaining a “CLUE” report on it. This report may reveal past problems that have not been disclosed to you by the seller.

Crime Exposures
•  Install adequate deadbolt locks. These inexpensive locks have been shown to deter even professional thieves.
•  Consider a burglar alarm system, particularly one with central station service. Alarm systems will also deter burglars.
•  Keep shrubbery trimmed low and away from windows and doors. Don't give a burglary a place to work undetected.
•  Use exterior lighting, particularly motion sensored. Again, this will deter burglars who prefer invisibility.
•  Keep vehicle doors locked when parked on the premises. Do not keep valuables in cars such as electronics, large numbers of CDs, laptop computers, Christmas presents, etc.
•  Start a Neighborhood Watch program. These programs DO work...visit your neighbors and work with your local law enforcement agency to establish a program in your neighborhood.

Liability Exposures
•  Repair pavement cracks, loose steps, railings, and decks. Likewise, keep objects and debris off your premises to minimize slips and falls that can result in liability claims.
•  If you are considering acquiring a dog, check with your agent for breeds that could cause insurance problems. Some insurers are averse to dogs or particular breeds of dogs and may refuse to renew your policy or they may apply a surcharge. On the other hand, the right kind of dog can be a burglary deterent.
•  Check with your agent if you are considering installing a swimming pool or purchasing a trampoline. Again, some insurers are averse to certain types of facilities they believe increase exposure to lawsuits. In particular, trampolines have been shown to present quite serious exposures.

Home Inspection & Loss Prevention Web Sites
  Home Inspection SuperSite
  The Old House Web Home Repair
  Travelers Home Inspection & Maintenance Tips
  Home Repairs & Etc.
  National Fire Protection Association

I've enjoyed your two article on homeowners coverage.

One thing I've wondered is why contractors aren't leaning toward building homes that are more conducive to keeping water under control. For example, if a washer (clothes or dish) overflows it can end up soaking the entire floor it's on if not found quickly. Wouldn't it be great to have a secondary-backup system that catches the water and sends it down the drain?

The Wall Street Journal had an article recently on multimillion dollar condo's that had a water problem and developed mold. Hard to believe someone would pay $500 to $800 per square foot (as quoted in the article) for something that ended up with such a problem.

– Rick Mayhew, CPCU, CIC, CLU, ChFC
St. Louis, MO


Just as a follow-up on your article, please go to this Insurance Journal article to get an up-to-date report on SC's progression towards addressing the topics in your article of availability/affordability (from an economic point). Your info is great and definitely needed to address the insured's education on why carriers are taking actions being taken in today's market.


The highlights you addressed (deductibles, loss control and property forms providing too much coverage) combined with the economic impact of rate adequacy by way of "deregulation" of age-old methods used by many (49 to be exact) states to preview and approve rate changes filed by carriers doing business in that state, you should have the ideal supply/demand model where the INFORMED buyer (the insured that has been schooled on your suggestions) meets the seller (the carriers offering the coverage) in a competitive market (many existing carriers and new carriers entering the state to attain their share of the market since they could charge a financially sound rate and give their stockholders a better estimated rate of return).

The basic rules of economics should and could not only "fix" the short-term HO availability/affordability issues but would solve the long-term economic issues also needing consideration for carriers relationships with capital providers to the insurance environment. Looking at the problem the way SC is by limiting government regulation/mandates and allowing the economy to work and price/provide a product/service is the only way we were taught a free market system would work when we were in school to learn economics. Thanks for your articles.

– Robert H. Morse, III, CIC
Harry Morse Insurance
Charleston, SC

Return to  Part 1

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