Relationship between building inspections and insurance

Suppose you’re buying a home or commercial property. Getting it inspected by professionals is not just a wise decision – it’s an absolutely building inspection that can save you a lot of money and headaches down the road. But did you know that building inspections also greatly impact your insurance coverage and costs?

Building inspections matter for insurance

• When you get homeowners or commercial property insurance, the insurance company suffers a significant financial burden. If your property gets damaged or destroyed, they’ll have to pay a large sum to cover repairs or rebuild costs.
• Insurance providers rely heavily on building inspections conducted by licensed professionals to assess this risk and set appropriate premiums. These inspections evaluate the property’s overall condition, checking for any existing issues, substandard construction, or potential hazards.
• A clean inspection report with no major red flags tells the insurer that the property is in good shape and less likely to suffer major damages. This allows them to offer lower premiums since the risk of claims is reduced.
• However, suppose the inspection uncovers problems like structural defects, outdated electrical or plumbing systems, or hazardous materials. In that case, the insurance company will consider the property at higher risk. They may charge higher premiums, restrict coverage for certain types of damage, or even deny insurance altogether in extreme cases.
• The ripple effects of a poor inspection report are substantial. Not only could your insurance costs skyrocket, but you may also need help finding an insurer willing to cover the property. This underscores why getting an expert inspection before buying is so crucial.

Insurance requirements for building inspections

Many insurance companies have specific requirements when it comes to building inspections.

• Require inspections from licensed professionals meeting certain qualifications
• Mandate periodic re-inspections every few years to reassess property condition
• Ask for specialized inspections (e.g. for termites, asbestos, mould) in high-risk areas
• Have checklists of items that must be evaluated during the inspection

A vital building inspection requirement leads to coverage denial, cancellation of an existing policy, or higher rates. Insurance providers are strict about inspection protocols because they use this information to price risk accurately. Working with a reputable, licensed inspection company familiar with insurance guidelines is important. They know precisely what the insurers are looking for and how to document the property’s condition comprehensively.

When issues are found during inspections

If the inspection report identifies any issues, you’ll need to address them quickly for your safety and to secure proper insurance coverage.

• Complete repairs to fix defects or code violations
• Replace outdated systems like old electrical panels or plumbing
• Remediate environmental hazards like asbestos, lead, or mould
• Obtain permits and approvals from local authorities

Once the issues have been properly resolved, getting a re-inspection and a new report is critical. This documentation shows the insurance provider that problems were fixed according to the code, reducing liability. Without this proof, they will likely maintain higher rates or restricted coverage.

Some insurance companies allow a temporary “admission” period after binding coverage. If you opt for this, you must complete the required repairs and provide re-inspection reports within the set timeframe to maintain full coverage at the bound rate. When buying real estate, the inspection process begins before you get involved. Most states require sellers to disclose issues or defects with the property, which gives you a starting point during your due diligence.