Insurance companies and high net worth homeowners are sharing responsibility for prevention and mitigation of property losses. The trend – insuring a “loss proof” home – points to a change in thinking from post-loss compensation to pre-loss prevention. Insurance companies are encouraging owners of high value homes to reduce potential exposure to avoid losses in exchange for policy premium discounts and credits.
Insurance coverage solutions increasingly are a proactive dialogue between the insurance agent and/or broker and the homeowner to identify potential for loss and to initiate preventative measures and, thereby, mitigate claims. A significant majority of homeowner claims are triggered by property damage and theft. By managing exposure to risk, the homeowner can determine how to protect the property and its contents against various types of losses, such as water, fire and theft. In return, many insurance companies offer incentives for loss-proofing the home both before or after a claim occurs in the form of discounts or payment for installation of loss control devices.
Loss-proof homes take into consideration the owner’s lifestyle, as well as the property’s location and construction features. Precautionary steps to avoid or minimize loss in a home need not be an expensive upfront investment. Claims management has become highly sophisticated as insurance professionals utilize data collection to identify perils and/or risk factors that help in understanding the most effective ways to avoid risk.
- Water damage may be curtailed through the installation of water detection devices or automatic shut off valves.
- Fire hazard risks require up-to-date smoke and carbon monoxide detectors, which are now standard building code for new construction.
- Temperature monitoring systems may reduce the likelihood of frozen pipes, especially in secondary homes left vacant for long periods of time.
- Prevention of loss from burglaries or thefts is aided by technologically advanced home security systems that may include installation of perimeter video cameras and motion-activated sensors in addition to burglar alarms.
High net worth individuals are often targeted victims for theft and vandalism. Vacant second homes are especially high risk properties, unless protected by security guards in a private, gated community or security systems linked to local responders. Advanced technological security devices for individual protection and safety are emerging as a popular detection strategy. RFID chips, for example, can be installed to control a private home’s gated entrance and doors. This complex identification tool is a biometric system that can incorporate facial, voice and/or behavioral recognition.
Home buyers purchasing a home should review a Comprehensive Loss Underwriting Exchange (CLUE) report, which offers historical claims data for the property. The insurance agent can obtain the report for the property for the prospective home buyer to determine if there is a pattern of prior losses that would specify whether installation of a loss control device would be advantageous. The home buyer would then receive a premium discount for installation of devices, such as a water leak detection system or battery backup for a sump pump, as examples.
Significant claims linked to a major catastrophic disaster, such as hurricanes, tornadoes and wildfires are inevitable. However, preventive measures taken by the homeowner for protection against potential identifiable risks can help reduce the cost and inconvenience of even these types of losses, while increasing the safety to homeowners and their families. Homeowners further benefit from ongoing financial incentives through credits and discounts offered within the policy. The result is a win-win for the property owner and the insurance company.
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