These days present a challenge economically to many families, so cutting costs has become, and will stay the norm. Gone are the days where prices “are what they are,” with people paying bills and buying items without thinking twice about the cost. Unfortunately, the new mentality has trickled into the property insurance market, with many homeowners reducing their coverage while increasing their deductible to save money, leaving them exposed to many risks. As an insurance agent, it has become imperative, now more than ever, to properly explain the coverage and costs associated with each particular item, as well as the pitfalls of altering a policy or raising the deductible.

What we have seen recently in the water, fire and mold remediation/mitigation industry is an increased amount of confusion with respect to homeowners and their coverage/insurance. Also, many insurance agents are battling rising loss ratios, which may have to do in part with the increasing deductibles. Let me explain the connection: if a homeowner increases their deductible to $2,500, they obviously reduce their monthly premium, but they also open themselves up to paying more out of pocket expenses if something goes awry. Small costs that would have been covered, such as a water dry out (which averages $1,500), will now be paid by the homeowner instead of the insurance company.

As a result, we observe two things: 1) instead of paying out of pocket for a proper remediation, the homeowner tries to fix the problem themselves, typically resulting in improper drying which leads to mold and 2) disreputable companies are jacking up their bills to over the $2,500 deductible so the insurance carrier covers the costs, making the claim more “beneficial” for the homeowner as well as the “remediation” company. Both of these scenarios are detrimental to the agency and the carrier with respect to loss ratios. The first scenario typically leads to a mold loss, which on average is over $5,000, and the second scenario leads to inflated remediation costs, which can be upwards of $20,000. 

The reality is simple. If the damages are under the deductible, the homeowner is responsible to repair and pay for the damages, without filing a claim. With our average water dry out costing $1,500, the need to file a claim disappears and the responsibility falls solely on the homeowner. The unfortunate reality is that most insurance agents and homeowners don’t know who the reputable companies are and usually are taken advantage of in the quest to remediate the damages. Referring out a reputable, insurance carrier approved vendor removes the guesswork from two of the most important aspects of an agency- profitability and customer service. Once a reliable vendor is referred, the homeowner feels cared for and serviced properly, and the agency can rest assured that the remediation is done properly and the costs associated with the repairs are fair and honest.