Division of Insurance Encourages Homeowners Policy Review During National Homeownership Month
On June 11th, the Massachusetts Division of Insurance issued a timely reminder to homeowners during National Homeownership Month, urging them to conduct comprehensive policy reviews to ensure adequate protection of what is often their most valuable asset.
The Division’s announcement is particularly relevant to Massachusetts agents, as they possess the necessary client engagement and knowledge to guide insureds through the complexities outlined in the Division’s bulletin.
While most of our readers will be familiar with the Division’s points on homeowner coverage and claims, it never hurts to recap what the industry’s regulator is focusing on for our insureds.
National Homeownership Month
National Homeownership Month traces its origins to 1995, when President Bill Clinton first declared National Homeownership Day. He expanded the declaration to National Homeownership Week in 1998. President George W. Bush extended the observance to the entire month of June in 2002, creating an annual platform to celebrate the role of homeownership in building communities and fostering individual wealth.
Homeownership rates have increased from 46.5% in 1900 to approximately 66% today, marking a significant milestone in achieving the American Dream.
The Division’s Take On Educating Insureds on Homeowner Coverages
The Division’s guidance centers on a fundamental principle: adequate Coverage requires ongoing vigilance. The Division emphasizes that homeowners must understand the full cost of rebuilding in the event of a total loss, which could extend far beyond the original purchase price or the current market value of the insured’s home.
Dwelling Coverage Analysis
The Division explicitly directs attention to Coverage A limits on the Declaration Page, emphasizing the need for annual discussions between agents and clients about dwelling coverage adequacy. The Division acknowledges the dynamic nature of reconstruction costs, particularly in Massachusetts, where skilled labor shortages and fluctuations in material costs can significantly impact replacement values.
The Division recommends factoring recent renovations, additions, and personal property changes, including furniture and electronics, into coverage calculations. A kitchen renovation completed three years ago may represent tens of thousands of dollars in additional replacement costs, while technology upgrades throughout the home can substantially increase personal property values.
Current Market Realities
The Division’s emphasis on “today’s labor and materials” costs reflects the post-pandemic realities of the construction market. Supply chain disruptions, inflation, and skilled labor shortages have fundamentally altered the cost structure of home reconstruction. The Division recognizes that coverage levels adequate five years ago may now be insufficient in today’s market.
Deductible Strategy: Balancing Cost and Risk
The Division’s guidance on deductibles addresses the critical consideration of out-of-pocket exposure when losses occur, noting that while higher deductibles result in lower premiums, homeowners remain responsible for paying the full deductible amount before insurance coverage takes effect.
Multiple Deductible Structures
The Division notes that Massachusetts homeowners face potentially complex deductible structures, particularly regarding catastrophic perils. The Division explains that standard homeowners deductibles may differ significantly from hurricane or wind/hail deductibles. The Division’s reminder about catastrophic coverage deductibles proves particularly relevant given Massachusetts’ exposure to nor’easters, hurricanes, and severe thunderstorms.
Exclusions and Coverage Enhancement Opportunities
The Division’s discussion of policy exclusions provides clear guidance on common coverage gaps. The Division emphasizes that standard homeowners policies typically exclude flooding and generally exclude mold and fungi resulting from slow leaks, as well as general wear and tear.
Flood Insurance Education
The Division encourages consideration of flood insurance, even for properties outside high-risk flood zones, recommending discussions about both National Flood Insurance Program options and private flood insurance alternatives.
Endorsement Opportunities
The Division specifically mentions sewer backup and heating oil leak endorsements, both highly relevant to Massachusetts properties. The Division notes that sewer backup coverage addresses basement flooding resulting from overwhelmed municipal systems, while heating oil coverage protects against environmental cleanup costs associated with aging underground tanks common in older New England homes.
Claims Process Preparation
The Division’s claims guidance emphasizes preparing rather than reacting, encouraging homeowners to maintain accessible copies of their policies and understand reporting requirements before losses occur. The Division emphasizes the importance of insureds promptly reporting any losses to their insurance companies.
Public Adjuster Considerations
The Division acknowledges the complexity of significant loss scenarios, noting that homeowners should consider hiring public adjusters for large property claims when they feel unsure or overwhelmed by the process.
Contractor Verification
The Division emphasizes contractor licensing verification, stating it is “imperative that homeowners check the license status of any professional hired to perform repairs to their home with the appropriate state licensing agencies.”
Resources and Support
The Division provides several resources to support both agents and their clients. The Division has developed a guide to understanding Declaration Pages and offers a Post-Disaster Claims Guide to help navigate difficult claim periods. The Division’s Consumer Services Unit (617-521-7794) and website resources (mass.gov/home-insurance) provide additional support for questions about insurance coverage.
The DOI reminder, Declaration Page Guide, and Post-Disaster Claims Guide
Readers can access the full DOI reminder at “Division of Insurance Encourages Review of Homeowners Insurance Policies During National Homeownership Month“.
Readers may also access the Division’s Declaration Page guide at Understanding Your Homeowners Insurance Declaration Page; The Division of Insurance and NAIC claim guide are also available at Post-Disaster Claims Guide.
