Most are aware by now that 2024 has been a very challenging year for the insurance industry. If you pay your car or home insurance bills, you have noticed the increases over the last several years. Not only have insurance companies been increasing rates to try to stay profitable, they have been making adjustments to home insurance policies to help spread out their exposure. By this I mean, to help share the cost of the more common losses and claims. Here are the two most notable home insurance claims in 2024.
1. Roof Coverage: From Replacement Cost to ACV or Payment Schedule
One of the most impactful changes in 2024 is the reduction in coverage for your roof. Most home insurance policies covered roof damage at Replacement Cost, meaning the home insurance company would cover the full cost of replacing a damaged roof with a new one of similar kind and quality. However, this is changing. Many home insurance companies will start with Replacement Cost and once the roof reaches a certain age, the insurance company will reduce the settlement coverage from Replacement Cost to an Actual Cash Value or Payment Schedule.
Actual Cash Value (ACV) Coverage: Some insurers are now moving towards covering roof damage based on Actual Cash Value (ACV). ACV coverage takes into account the depreciation of your roof over time. This means that if your roof is damaged, the payout you receive will be reduced based on the age and condition of the roof at the time of the claim. While ACV coverage can lower your premiums, it also means you might receive significantly less money if you need to replace your roof.
Payment Schedule Coverage: Another emerging trend is the use of Payment Schedules. Under this method, insurers provide a pre-determined payout based on a schedule that considers the age and material of your roof. For example, if your roof is 10 years old, the schedule might outline a specific payout amount that won’t necessarily cover the full replacement cost. This approach aims to provide more predictable costs for insurers while still offering some level of compensation for homeowners.
2. Increased Policy Deductibles
Another major change in 2024 is the increase in policy deductibles. A deductible is the amount you must pay out of pocket before your insurance coverage kicks in. There are a few key aspects to this change:
Higher All Peril Deductibles: Many insurance companies are raising the standard deductible amounts on home insurance policies. This change means that homeowners will need to pay more out of pocket when filing a claim. While this can help lower your annual premiums, it also means you’ll face higher costs in the event of a claim.
Separate Wind/Hail Deductibles: In addition to higher standard deductibles, there is an increasing trend of separate deductibles for wind and hail damage. These perils, which are common in many regions, often have higher associated repair costs. Insurers are now specifying separate, typically higher deductibles for claims related to wind or hail damage. For example, if your standard deductible is $1,000, your wind/hail deductible might be $2,500. This shift can significantly impact the out-of-pocket costs for homeowners in areas prone to these types of weather events.
What Homeowners Should Do
- Review Your Policy: With these changes, it’s very important to review your current home insurance policy. No one likes to find out at the time of the claim that you may have to pay $5000 to repair your roof. Understand how your roof is covered and what your deductible amounts are.
- Consider Policy Adjustments: If the new deductible amounts or coverage changes impact your financial comfort, consider adjusting your policy. You might want to explore different coverage options or even shop around for a new provider that offers terms more suitable for your needs.
- Stay Informed: Insurance policies and terms can change frequently. Stay in touch with your insurance agent to keep abreast of any updates that could affect your coverage.