The Inside Scoop On Homeowners Insurance in Northwest Arkansas

A few weeks ago, we had the opportunity to have an expert on homeowners insurance present to our agents. Shelly Parson has been an agent with Farmers Insurance for almost 25 years and has some amazing insights to share with our team.

We are so thankful that she was able to come and share her expertise with our office. To recap and highlight what she spoke about, we asked her to write up a summary so we could share it with you!

What is Going On with Homeowners Insurance?

Homeowners insurance rates are soaring at an alarming pace, creating substantial challenges for policyholders and the real estate market. This is happening across the nation, as well as locally here in Northwest Arkansas. Insurance carriers are increasingly limiting new policies, or in some cases, halting the issuance of new homeowners policies altogether.

They are also implementing higher minimum deductibles, non-renewing existing policies, and shifting from full replacement coverage to actual cash value, particularly for roofs. Additionally, insurers are conducting pre-bind inspections and re-inspections of existing policyholders’ properties.

Alarmingly, a few carriers in Arkansas have even gone out of business. These disruptions and financial losses in the insurance industry are unlike anything I have seen in my 24 years as an insurance agent.

What is Causing This Disruption?

The disruption in the homeowners’ insurance market can be attributed to several key factors. One major issue is the increase in severe weather events, leading to a dramatic rise in wind and hail claims. Non-weather-related water damage claims have also become more costly.

The inflation in construction materials and labor has added to the financial strain on insurance companies. Additionally, roofing fraud and regulatory restrictions have further exacerbated the problem.

These factors combined have caused insurance companies to lose billions of dollars year after year, culminating in the current crisis.

How This Could Impact the Real Estate Market?

The escalating costs and availability issues surrounding homeowners insurance are set to have significant repercussions on the real estate market:

• Increased Costs: The rising cost of homeowners insurance could make homeownership more expensive, potentially impacting affordability for many buyers in Northwest Arkansas.
• Availability of Insurance: With insurance becoming harder to secure and, in some cases, unavailable, buyers may find it challenging to obtain the necessary coverage to secure a mortgage.
• Roof Coverage Changes: Many insurers are moving away from offering full replacement cost coverage for roofs, opting instead for actual cash value or scheduled settlements for roofs over seven years old. Some mortgage lenders may not accept policies that do not provide full replacement costs, complicating the financing process for buyers.

What Can You Do to Help Your Buyers and Sellers?

To navigate these challenges, here are some steps that can help:

• Secure Coverage Quickly: Encourage buyers to secure homeowners insurance coverage as soon as possible to avoid any delays or issues.
• Be Mindful of Insurability: Understand that some properties and some buyers may be more difficult to insure, and plan accordingly.
• Encourage Repairs: Advise sellers to complete necessary repairs, trim trees, and remove debris to make their properties more attractive to insurers. Especially with the recent storm and tree damage we have experienced these past few months.
• Document Roof Age: Obtain documentation of the roof’s age and completion date from sellers, as well as include this information in the seller disclosure.
• Roof Inspections: Request home inspectors to document the roof’s age as part of their inspection or recommend obtaining a specific roof inspection from a licensed and reputable roofing company.
• Claims Advice: Advise sellers not to file insurance claims unless there is documented evidence of damage that is likely to be covered by insurance (e.g., wind or hail damage) and the cost of repairs will exceed the policy deductible.

Arkansas vs. Other States

Arkansas is faring better than some other states in terms of homeowners insurance issues. But we are not immune to the ongoing challenges. It is crucial to stay informed and proactive to navigate these changes effectively.

We just want to give another shoutout to Shelly Parson for providing us with this awesome and insightful info! It was so great to have her in person, presenting this knowledge on what we should expect in NWA.

If you have any questions about insurance, reach out to Shelly and she can help answer all your questions!! Just give her a call at 479.271.8818 or email her at sparson@farmersagent.com