Potential Insurance Issues regarding Electrical Systems in Homes (Rio: sale, real estate)

[Sunshine Rules]

One of the local home inspectors, Craig Marquette, that I work with from time to time puts out a monthly newsletter. I always take the time to read his emails because he is a good source of information.

This past month's newsletter was a real eye opener.

Craig is saying that there have been some major recent changes in insurance underwriting guidelines that will affect home owners/buyers going into the future. The changes he is talking about are to non-deficient electrical components in "working condition" that were not an issue in the past.

Components such as electrical panels and aluminum branch circuit wires that insurance carriers are no longer willing to insure without either being repaired or replaced. According to Craig, the latest ineligible electrical component is multi-strand aluminum branch wire. Craig says it is in 50% of the homes and condos built in the 1970's - 80's and some in the early 90's. The wire is mainly found on major appliances.

He says changing out the electrical panels and aluminum wires in an average size home can cost as much as $3500, changing out just the electrical panel can cost around $2500.

How does this impact home buyers? You are under contract to purchase a home and one of the issues with the wiring mentioned above is found. Under most contracts, if the wiring is in working condition the buyer cannot demand the seller replace it. But insurance companies are telling you they won't write you a new insurance policy on this home until the electrical items in question are changed out. So who pays for the electrical work? Seller is not obligated, buyer doesn't own the home yet and doesn't want to pay for the upgrades.

So what can you do as a home buyer or seller? As a seller, have an inspection of your electrical compotents before you put your property on the market if it is in this age range to see if your home falls into that 50% of homes with these electrical components in question.

As a buyer, make sure your home inspector is aware of the situation and does a thorough investigation of the electrical system of the home you are buying. Talk to your insurance agent as well to see where the company stands on this. At some point they may create an insurance addendum to cover this situation -- but you can always have your real estate attorney draft an addendum for you to use with a purchase contract.

The reality is that insurance carriers can (and do) change guidelines at any time and for whatever reason. Those with homes with roofs that are 15 years old or older know what I am talking about.

Marquette Inspections (and I am sure many others will follow) plans to address the issues for buyers by:
1) altering their four point form and inspection form to add these electrical components to the reports
2) identifying the components and their condition on the inspection summary with recommendations to contact an insurance agent for advice as soon as possible


Knowledge is key when purchasing a home.

[coastal chic]

This is good info for buyers and sellers. This has been going on for over a year now. The Citizens Four Point inspection form has had this information about aluminum wiring included on the form (which a lot of other insurance companies also use) since September of 2012. Some inspectors are using the NACHI inspection forms, or some other forms, but since most people are insured with Citizens, they should really be using the Citizens form. Most insurance companies will accept the Citizens form.

The problem, like you stated, is that buyers don't "need" the four point inspection until they go to bind insurance coverage. At that stage in the game, it's too late and everyone has a problem on their hands.

Same with bad roofs. If the roof hasn't been replaced in the last 10 years, you'd better get a roof certificate completed as well. If the inspector can't certify that there is at least 3 years of life on the roof...you now have a problem getting insurance. Some roofs in Florida only last 12-15 years. There are huge variables for how long a roof will last here.

Most people believe a roof is good until it leaks. This isn't the case. A roof is a maintenance item, and a very costly one. People tend to put if off as long as they can. But think of a roof like the brakes on your car. You wouldn't wait to replace your brakes until after they fail. Cracking, missing, or peeling shingles; dips or bows in the sub roof; sparse amount of granules left on the shingles in areas; all of these things signal a roof needs to be replaced, not just a leak.

[d4g4m]

If you like your home owners insurance, you can keep your home owners insurance. PERIOD.

[beninfl]

Originally Posted by d4g4m

If you like your home owners insurance, you can keep your home owners insurance. PERIOD.

Except when its sunny!

[TamRE]

I have had a listing and sale with aluminum wiring. In both cases the owner did not even know they had the aluminum wiring in their home and did already have insurance, but the new owner could not get insurance until the update was complete. Here is some information on the options.

Houses with Aluminum Wiring
The state-owned Citizens and all other private insurers in
Florida had said they would no longer write new insurance policies on homes
with aluminum wiring because it's considered a fire hazard. As a result,
homeowners wanting to sell their residences, or shop other insurers, would
have had to spend $5,000 to $20,000 to rewire their homes with copper
wiring to make them insurable.

Seeing this had created a major issue with homeowners, Citizens Property
Insurance Corp. researched the problem and approved two
alternative methods to make aluminum branch wiring safe and insurable.
These two repair methods are:

-- AlumiConn: An aluminum-to-copper plug that's connected to existing
aluminum wiring at each receptacle, making aluminum wiring run cooler with
a safer connection, according to King Innovation, manufacturer of the
connector.

-- Copalum: This connector is considered an acceptable repair method by
the U.S. Consumer Product Safety Commisison. Copalum permanently
connects old technology aluminum wire to a short length of copper wire. The
copper wire is then terminated to outlets, fixtures and appliances.

The work must be performed by a licensed electrician.