RISKS TO LOOK FOR BEFORE YOU BUY

A home’s location, construction or age can dramatically increase insurance costs

When house hunting, the price of homeowners insurance probably isn’t top of mind. But homes with hidden risks can make getting coverage difficult, expensive or both.

This could be a particularly important concern for first- time homebuyers and those moving from cities to suburban or rural areas who may not be aware of common hazards, says Jennifer Naughton, risk consulting officer for North America for Chubb, an insurance company.

Three out of 10 city dwellers told a Chubb survey in August that they were considering moving out of the city because of the coronavirus. Meanwhile, the number of first- time homebuyers in the first half of 2020 rose 4% compared to a year earlier as lower interest rates made mortgages more affordable, according to Genworth Mortgage Insurance.

Where’s the nearest fire hydrant?

A homeowners insurance premium can depend in part on distance to the nearest fire hydrant and fire station, Naughton says.

Some homes are at such high risk of wildfires and severe weather — hurricanes, tornadoes, windstorms or hail — that private companies won’t insure them. Without insurance, you can’t get a mortgage, so you’d need to turn to state- run risk pools such as Beach and Windstorm Plans or Fair Access to Insurance Requirements Plans, better known as FAIR. These policies typically cost more and cover less than regular homeowners insurance.

Talking to the neighbors and a local insurance agent can give you a better idea of what costs you might face.

Water damage is a big deal

Getting coverage for an older house with outdated wiring, heating systems or plumbing can be a challenge as well because of the risk of fire or water damage.

Homebuyers may be able to lower their insurance costs by updating those systems and by installing water sensors or a wholehouse monitoring system, which shuts off the water supply if a leak is detected, Naughton says.

Flood risk is also a concern, Naughton says. Flooding isn’t covered by regular homeowners insurance policies, and typically only homes in the highest- risk zones are required by mortgage lenders to buy special flood policies.

But the federal government’s flood maps may understate the risk to many properties, especially as hurricanes get stronger and bring intense rainfall along with larger storm surges.

You can get quotes for flood insurance from the National Flood Insurance Program as well as a few private insurers.

Earth- shaking risks

The U. S. Geological Survey says 16 states, including Illinois, are at high risk for a damaging earthquake in the next half- century.

Earthquakes are another hazard excluded from homeowners policies, although some private insurers offer earthquake policies, and people in the Golden State can buy coverage from the California Earthquake Authority. Deductibles range from 5% to 25% of the policy limit.

Certain types of houses may be at particular risk of earthquake damage, including those built before 1980 that have a stem wall — a wood- framed first floor that rests on a concrete perimeter — or a cripple wall, which is a short wooden wall between the foundation and the wood- framed first floor. Both types can be made more secure by anchoring them to their foundations with bolts and braces.

Post- and- pier houses, which rest on pilings rather than on a continuous foundation, would need to have a concrete foundation created to make them safer.

Living spaces above garages or other large openings, also known as “soft story” buildings, and homes on steep hillsides should be evaluated by structural engineers for their vulnerability to damage.

Obviously, there’s no such thing as a riskfree house, and you may decide that you’re willing to pay the price of higher insurance or mitigation costs. But that’s a choice you should make before you buy, rather than finding yourself stuck with a bill after it’s too late.