Re-Inspection: The Insurance Loophole

Loophole may not be the most accurate term to describe a scenario you may happen up during your home buying experience. However, we’ve heard many clients call it that – a loophole offered by the insurance company based on the re-inspection. Here’s what you need to know if you ever wander into this territory.

The scenario you may run into

After getting a home inspection report you find out the house you want to buy did not pass the four point inspection. Now you need time to get the issue(s) fixed while also trying to stick to your closing date. That’s not always easy. In addition, you cannot receive home insurance on a home that does not pass the four point inspection. So, how do you close on the home without the house insurance?

The common solution to the problem

Most home insurance companies will work with you. They want you to close on your home too, keep that in mind. So this is the offer they will make: we will give you home insurance on a 30 day conditional. This means you have 30 days from the day you sign off on your home insurance to have the issue(s) fixed and the home reinspected. As long as the house passes the re-inspection the policy will continue as agreed upon. Seems like a good deal? It can be.

Giving you home insurance based on your re-inspection

There are two potential results of this route. The first is you say yes, you have the issue(s) fixed, and the home passes the re-inspection. The best part is you don’t have to delay your closing. You can close on the home and do whatever needs to be done after. Keep in mind, once you close on the home all issues are now your responsibility. So if you need to have something fixed and it turns out to cost more than you expected, you will be footing the bill. The second potential result is you are not able to make the fixes necessary to keep your policy within the 30 days. You still get to keep your house, but likely the home insurance policy will change and they exclude the issues from your coverage. So in other words, if you need a new roof and you are not able to have it replaced within the 30 days, the insurance company will not cover your roof until it is replaced.

On the upside, it does mean that you are able to close on the home. So that’s a done deal. You also have home insurance for everything else. And you can always renew or change your policy once you’ve made those changes. The most important step is to make sure you have a very thorough home inspection to begin with. Be sure to call Divinity Inspections for your home inspection needs.