Insurance on Older Homes


Is your home 40 years or older? Read this:

People’s Trust limits water damage coverage

DEERFIELD BEACH, Fla. – April 29, 2016 – Deerfield Beach-based People’s Trust Insurance has become the latest property insurer in Florida to exclude coverage of water damage on homes over 40 years old. Instead, the company offers $10,000 in limited water damage coverage as an option.

The company blamed the decision on sharp increases in non-weather-related water damage claims and losses.

The change took effect April 15 for new People’s Trust customers and will begin on June 15 for renewing customers.

Attorneys who represent policyholders in suits against insurance companies criticized the changes, saying they’ll leave customers unable to afford to repair their homes after a major water emergency. Major drainage pipe breaches, they say, often cause tens of thousands of dollars in damage to floors, walls, ceilings and contents.

People’s Trust notified agents of the change this month and is sending notices to renewing customers, spokeswoman Michelle Ubben said by email.

Responding to questions about the exclusion, People’s Trust said in an emailed statement: “Our new approach for policy sub-limits on older homes was needed in order to keep rates affordable and protect the financial strength of the company to ensure that we have the financial resources to be here when our policyholders need us most – whether it is after a storm or a true household emergency.”

The exclusion removes water damage – including penetration through roofs or walls and discharge from plumbing, heating, air conditioning units, sprinkler systems or household appliances – as a covered peril for any home more than 40 years old.

New customers will be able to purchase $10,000 in water damage coverage as an option, and renewing customers will see the limited coverage automatically added to their next year’s policies but can opt to remove it for a premium discount, Ubben said.

Water damage will be covered as before for homes 40 years old or newer, but policyholders will be able to “opt for the new coverage terms in order to enjoy a significant savings on their premiums,” People’s Trust said.

State insurance regulators approved the coverage changes in February after reviewing income and loss data submitted by the company.

In adding the exclusion for homes over 40, People’s Trust joins other Florida companies, including Federated National, Tower Hill, Heritage, United Property & Casualty and Southern Oak.

Ubben said People’s Trust, like many insurers in Florida, has experienced sharp increases in non-weather-related water damage claims over the past few years.

The number of such claims by People’s Trust policyholders increased by 61 percent between 2014 and 2015, from 3,697 to 5,941, according to data provided by the company. Of the 2015 claims, at least 2,253 resulted in losses of $10,000 or more. Meanwhile, the company’s policy count grew just 12 percent, from 135,006 to 151,552, between 2014 and 2015.

Lawsuits filed against People’s Trust also rose sharply in recent years – from 78 in 2013 to 751 in 2015, state records show.

The effect of the water damage exclusion is likely to be felt more strongly in South Florida, where homes are older than the state average and where insurers say a disproportionate amount of water damage claims originate. About 43 percent of all People’s Trust policies were in the tri-county area at the end of 2014, according to data submitted by the company to state regulators.

The changes come as property insurers are raising premiums and cutting costs in response to sharp increases in water damage claims and related litigation.

Coverage restrictions sought by state-run Citizens Property Insurance Corp. – and approved by state regulators in March – prompted a rush of identical requests by private insurers. Citizens has warned of steep rate increases in South Florida, including 10 percent annual rate increases in Miami-Dade County, if remedies aren’t found.

Citizens is creating an optional managed repair program inspired in part by programs in place at People’s Trust, Florida Peninsula and Heritage. Managed repair programs keep costs lower for policyholders who agree to report damages to insurance companies first and allow the companies to control who makes the repair.

Like Heritage and Florida Peninsula, Citizens plans to contract with an outside company to manage the program. People’s Trust is unique because it created an affiliated company, the Rapid Response Team, to directly handle the repairs.

Increased water damage claims at People’s Trust occurred despite the managed repair program.

Miami-based insurance agent Dulce Suarez-Resnick said she understands the need for companies to lower costs by imposing the water damage exclusion. “People’s Trust was giving it away [with lower premiums] and it was just a matter of time before it caught up to them,” she said.

But attorneys who represent homeowners were critical.

Joe Ligman, a Miami-based attorney, said limiting coverage to $10,000 for homes over 40 “is a joke as the burst pipe and collapsed drain pipe case are usually far greater in damage value than $10,000.”

Ely Levy, based in Hollywood, said, “What is even more troubling about the exclusion of all water losses is that the carriers pitch this to consumers like it will be beneficial for them when that is hardly the case.”

Kenneth Duboff, based in North Miami, said many homeowners probably won’t become aware of the change until “one day a burst pipe that has been hidden behind a wall or underneath the floor suddenly causes thousands of dollars worth of damage.” He added, “That type of catastrophe is exactly what a homeowner’s insurance policy should cover and the homeowners would reasonably expect to be insured against.”

Consumers who expect various companies’ insurance offerings to be more or less the same are in for a surprise, said Lee Jacobsen, vice chair of the Florida Justice Association’s property insurance legislative committee. “The pendulum has swung lately to [state regulators] letting companies do what they please,” he said, “and it’s only after a storm hits that we’re going to realize what’s been taken away.”

© 2016 the Sun Sentinel (Fort Lauderdale, Fla.), Ron Hurtibise. Distributed by Tribune Content Agency, LLC.


52% of Americans Plan to Buy A Home in Next Five Years.

According to the recently released BMO Harris Bank Home Buying Report, 52% of Americans say they are likely to buy a home in the next five years. Americans surveyed for the report said they would be willing to pay an average of $296,000 for a home and would average a 21% down payment. The report also had other interesting revelations.

Those Looking to Buy

74% of those looking to buy a new home will consult a real estate agent

59% said they will visit online real estate websites

37% will seek recommendations from friends and family

78% plan to get pre-approved before seriously searching for a home

Those Who Already Own

75% of current home owners set a budget before looking for a home. 16% ended up spending less while 13% went over their budget.

63% of American homeowners spent under six months looking for a new home before they made a purchase.

8% bought their home without participating in an active real estate search – or even any plan to buy at all – because a specific property caught their attention.

The last point is very interesting: Of those that purchased a home, 8% bought “without any plan to buy at all”. A property caught their attention and they acted on it.

Why are More People not Planning their Next Move?

Why are people that are considering a move not putting their home search to a plan, and instead, buying only when a property catches their attention? A recent article by Fannie Mae may give us that answer, there is evidence that a large numbers of homeowners are dramatically underestimating the equity they have in their current home. The report explains:

“Homeowners may be underestimating their home equity. In particular, if homeowners believe that large down payments are now required to purchase a home, then widespread, large underestimates of their home equity could be deterring them from applying for mortgages, selling their homes, and buying different homes.”

Bottom Line

Perhaps it is time to sit with a real estate professional to determine the actual equity you have in your house and take a look at the opportunities that currently exist in the real estate market. This may be the perfect time to move-up, move-down or buy that vacation home your family has always wanted.