The Insurance Industry's Gone Mad

03/10/2003

What’s up with the Insurance industry? We’re all experiencing the pinch as insurance companies gleefully, yet forcefully pass on their financial woes to their reluctant customers. Everyone’s got a new insurance story it seems and there does not appear to be any relief in sight.

Here’s the latest scoop on how the industry we love to hate is currently inflicting itself on real estate in general. We all have heard that old oil tanks are a problem. Heating companies are routinely red flagging these, “Claim Causing Culprits” and for about a year or so these old tanks have been wreaking havoc with real estate offer negotiations. The rules set out by the insurance companies are getting tougher and tougher by the month. I had heard of one company that refused to insure a home with a five year old oil tank. The new owner was forced to switch to propane.

Knob and tube wiring is the most recent to fall victim to the insurance belt tighteners. Earlier this summer, knob and tube wiring was labelled by most insurance companies with caution. The general policy was, insurance would still be given but with the assurance that the suspect wiring would be replaced in 60 or 90 days. New information obtained from our real estate board just last week, indicates that as of sometime in August, policies will no longer be written on properties containing knob and tube wiring, period. This puts would be buyers at risk of being forced to rewire all or parts of older homes prior to completion.

As you can imagine, finding out that the home you have committed to purchase is not insurable is more than just a fly in the ointment. You see if you can’t get insurance, you can’t get a mortgage, which means in most cases, you can’t complete your sale. Which means you will probably get sued for not fulfilling you contractual obligation. In the past insurance coverage has always been the last thing you do before you move. It involved calling up your broker and getting him or her to send your lawyer a binder letter that bound coverage as of the closing date. Well it would seem those days are all but gone.

Sellers are not immune to the problem, if you sell your home and the Buyer is unable to get insurance, you’re likely going to be staying put, which means that if you have already firmed up on your new home and need the proceeds from your existing sale to complete the new transaction, I’m afraid, you will be getting sued as well. With changes moving at an incredible rate through the insurance industry there is only one way a Buyer and Seller can protect themselves. Make, getting homeowners insurance a condition of the purchase agreement not an afterthought. It’s a simple clause that requires the Buyer to obtain insurance prior to, “Firming-Up” the sale. That way if insurance is not available, both Buyer and Seller will have non pressured time to deal with the situation. Thanks for listening.

Till next month this is Rob Thompson saying, “Good Luck and Good Selling”!

Rob Thompson has been helping families make the right real estate decisions since 1985 and continues to do so with his team of professionals in the communities of the 416 and 31 corridors.

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