insurance

[chris_39]

I am having trouble finding a company to insure my owner built small home.It is built in maine on posts and is super stable,has not moved from frost in 3 years.It is 24x20 1.5 story and very stucturally sound.It seems the insurance companies do not like the fact that it is posted and that i built it myself.Also they say i cant have a monitor heater as my main source of heat which by the way is very efficient and heats it just fine.They had no trouble selling me builders risk though even knowing it was on posts.I desperately need insurance on this building so i can refinance and add on.How are you guys getting insurance on these post and pier owner built homes?ANY HELP WOULD BE GREATLY APPRECIATED

[mountainmomma]

Hi Chris,

I just started working at an insurance company and MIGHT be able to give you some valuable feedback. Where do you live? Who will insure you would surely depend on that.
I work for an Insurance Center in Alaska that basically places people wth insurance companies that can meet one another's needs. There are a few companies that might insure you. My cabin is on logs and I have insurance through Umailik. Its an Alaskan company though. PIU might be a possibility. There are a couple of others that will insure just about ANY situation but they are really expensive.  They are undesireable enough that we, as agents HAVE to try every other alternative first. I'll give you those names if you really want them though.

Good luck. Also, having a source of heat other than woodstove makes you much more insurable. Having a smoke detetor by the way is also a valuable credit.

I was a little suprised though that the bank won't accept a builder's risk or COC (Course of Construction) insurance policy. To be honest, most insurance companies would be more weary about the fact that  you're in the process of building than the fact that its on wooden piers.

Good luck. I hope that I helped at least a little.

[Amanda_931]

The local Cotton States guy (not much help to those up north) told me a couple of years ago that there might be around a 25% surcharge for a pier foundation.

[Jackson Landers]

I'm a licensed agent (not in Maine) specializing in homeowners insurance so I could give you a few tips. Note that I'm not licensed in your state, have never seen your house and I work as a wholesaler, meaning that I don't do business directly with the public. Thus I make you no guarantees here.

First of all, is the foundation skirted? Sometimes an open foundation is what they are really afraid of rather than the posts per se. Enclosing it could help.

The next thing that comes to mind is the fact that you built the house youself. No company that I have ever placed insurance with has ever asked who built the house. They usually ask when it was built and they'll do an inspection to make sure it's in good shape.

As for your heating source, the insurance company could care less how energy efficient it is. Their issue is what the data is on that heat source's odds are of leading to a loss.  There are 2 reasons why they will reject to cover a certain heat source. The big one is fire. If your Monitor kerosene direct-vent system has been found to have a somewhat higher chance of causing a fire than other heating systems, then obviously they don't want to risk it. Plenty of other houses for them to insure. The other reason is odds of failure leading to frozen pipes and a water loss.  That's why they don't like houses that are heated with a wood stove.  Somebody leaves for the weekend and there's nobody to feed the fire. Pipes freeze and burst, water runs all weekend through the house and the company pays tens of thousands of dollars. I've seen this happen again and again.

If the heat source was rejected simply because they didn't know what it is, try describing it differently on the application. Call it 'a direct-vented oil furnace.' Which is truly what it is. Never lie on an application, of course.

What companies are you going to? I would suggest steering away from 'captive agents' like State Farm or Farmers. Not that I'm saying there's anything wrong with those companies - they are perfectly financially sound. It's just that their agents only represent that one company. They've only got one thing to sell you and if it doesn't fit, too bad. Look for an independant agent. Indpendant agents usually represent many different companies. Note that I say 'represent' because they don't actually work for the company. They just have access to the product. These are the guys you want. Because they will know what half a dozen different companies' underwriting standards are and will be more likely to be able to find you coverage for your unusual situation.

Do not volunteer information that is not asked of you. Never lie or misrepresent anything but if they don't ask on the application whether you built the house yourself, then don't mention it. Find a good agent who has a lot of different companies or who knows how to work with wholesalers to find coverage for situations that he doesn't usually run into. You should be able to find something.

This thing with the extra charge for post and pier foundations won't last forever. It's only fairly recently that John Raabe and a few others have come up with these new, standard methods for building really good post foundations. The insurance companies want to see several decades of loss data on homes with this foundation system before they can establish a sound rate for them. Lacking that data, they have no choice but to either err on the side of high rate or pass on insuring the home altogether.  They are dealing with millions and millions of dollars which they must account to their stockholders for.  Making a bad bet on a lot of new houses with a new foundation system would hurt them badly. So they'll wait and see.

[glenn kangiser]

Good info - thanks for posting that, Jackson.

[MountainDon]

Do not volunteer information that is not asked of you. Never lie...  

Great advice for life in general.   It's sometimes difficult to not add information innocently in trying to be genial. If a simple yes-no answer will do, that's often the best. I must admit I have to remind myself of this at times.   And a lie will generally bite you in the rear sooner or later.

[Jackson Landers]

One more thing, Chris. You're probably wondering why they were ok with doing the builders risk on a house with a post foundation but not with writing the homeowners as an on-going thing. Easy answer there. Nobody thinks that a post foundation is going to fail immediately. We can see that they are strong when they are built. What insurance companies are worried about is how those foundations will perform over the next 10, 20 or 30 years.

In most states insurance companies are not allowed to cancel coverage on a house that they have been insuring in the past when there have been no new losses and nothing has changed. So depending on what your state's laws and regulations are like, the company might have to take into consideration the fact that they may have no choice but to continue insuring the house year after year until some major loss results from problems with the foundation a decade from now. They probably can't just sign up for a year and then decide to non-renew you just on a whim.

Wheras the builders risk policy is of a very limited duration. They know that the post foundation will be fine throughout construction. Again, it's the long-term data on these foundations that doesn't exist yet.

These companies get burned badly on new construction systems all the time. When EIFS siding got popular in the 80's, builders started putting it on everything. But it didn't allow moisture to escape reliably and within 10 years you had billions of dollars in water and mold losses.  Or look at the first generation of polybutylene pipe that failed so disasterously (probably due to most plumbers not understanding how to install it right, but whatever). Again, hundreds of millions of dollars in losses resulted.

Every time that someone comes up with a new idea for a building system component it always looks great at first. And the manufacturer or designer wants to get it out there and into new houses as soon as possible.  Who waits 10 years to see how a new product actually weathers on a test home? Did they wait 10 years to see how this new pressure treated lumber that we're all using for posts will actually hold up to termites? Nope. Just you wait 5 or 6 years until electrolysis from using the older steel connectors with new, high-copper lumber causes decks and posts to collapse all over the country.  So you really don't know how these innovations are going to work out for a while.  If insurers decide that they're going to cover each and every great new idea that gets incorporated into new home construction then they will be out of business pretty quick.