Failed homeowners insurance inspection: What to do next

What happens if you fail a house inspection?

If you fail a house inspection, your home insurance can be canceled or nonrenewed, which means the company will drop you before your policy term ends or won’t renew it when it expires. In some cases, you can complete repairs to prevent this.

“An insurance company may require repairs or non-renew your policy,” says Travis Grassel of the Iowa Department of Insurance and Financial Services. “If they have requested repairs, discuss the inspection with your insurance agent and see what needs to be repaired, and if repairs are made, what will happen with your insurance policy and premium. The insured will most likely need to do the repairs in order to keep the insurance policy.” 

If you receive a notice that you’ve failed the inspection, you should:

• Review the inspection report the insurance company gives you
• Pay attention to the deadline for all repairs that must be made
• Hire reputable contractors in a timely manner
• Provide detailed proof to the insurance company within the timeframe given

Not all inspection failures will result in a policy being canceled or non-renewed. In some cases, the insurance company may change your coverage.

“Discuss the cancellation or nonrenewal with your agent,” Grassel says. “Maybe there is something you can fix to get the policy reinstated. If so, understand the terms of your policy after the reinstatement. If you can’t work out something with your insurer, talk to an independent insurance agent about finding other coverage.”

“The inspection may find that the roof, for example, has wear and tear and may place any claims on a replacement schedule or actual value basis,” he says. “Also, read and understand the terms of your policy after an inspection. As stated the coverage for your roof or other outside structures may have changed as a result of the inspection.” 

Easy fixes can be made on your own, such as trimming overgrown bushes and trees and replacing smoke alarms. Most things, however, are better left to reputable contractors who will do the job so that it’s up to code. If plumbing, electrical or other work is not done correctly, you risk failing the inspection again.

If the fixes are done and the insurance company accepts the work, your insurance company will usually renew the policy with no further issues. In some cases, due to the condition or age of your home, your premiums might go up because the insurance carrier has determined it’s riskier to insure.

If your insurance is canceled because of the failed inspection, you should start shopping around immediately for new coverage. Other insurance companies may be willing to insure you. Don’t wait, especially if you have a mortgage. Most lenders require insurance, and in some states, it’s required by law, for example, for government-backed loans.

Why does my insurance company want to inspect my house?

Your insurance company wants to inspect your home for a few reasons, but the most common are to assess risk and to calculate replacement cost.

“Insurance companies use underwriting to assess the risk involved for insuring your house for a premium,” Grassel says. “Thus, an insurance company may inspect your house for several reasons. First, the company wants to assess the replacement cost associated with the property. Second, the company needs to determine their risk, and both of these factors are used to determine the premium amount charged to insure the home.”

The condition of your home matters to insurance companies because you’re more likely to file a claim if your house is in disrepair or vulnerable to the elements. For instance, if there are low-hanging tree branches that could easily fall during the next storm, you’re more likely to put in a claim for roof damage. The insurance company wants to head off that possibility by inspecting your trees and roof ahead of time and making sure branches are pruned.

Another reason for a home inspection is to look for renovations and improvements. The insurance company needs to know if you’ve upgraded things in your home. They calculate the replacement cost of your home based on what it would take to rebuild it at the current cost of labor and building materials.

What happens if you can't get homeowners insurance after a failed inspection?

If your home has failed an inspection and you are having trouble finding an insurance company willing to write you a policy, you may need to take additional steps.

First, find a local agent who knows the market and may know of an insurance company that works with difficult-to-insure homes. You may have to consider a specialty insurer or a more limited policy, such as an HO-8 home insurance policy that’s meant for older homes.

If you still can’t find coverage, you may have to turn to your state’s insurer of last resort. Not all states have one, but most do. These programs are designed to help people get coverage when they’ve been turned down on the private market.

Insurance companies that don’t require a home inspection 

Most insurance companies require an inspection, but not all. Some may allow you to provide an appraisal rather than having an actual inspection done.

Other insurance companies will allow what’s called a four-point inspection, which is a brief inspection of just your electrical, plumbing, HVAC and roof instead of your entire house and property.

Depending on the age of your home, an inspection might not happen immediately or only when you are buying new coverage or changing coverage.

Many insurance companies only do a quick walk around your property. Others send a drone to fly by and take some pictures. Others simply look at real estate pictures online.

In any case, you should expect some sort of inspection.

How to prepare for home insurance inspection

Before the inspection, follow these steps to ensure your house will pass:

• Do a walk around on your property
• Trim overgrown trees and bushes
• Inspect your foundation
• Fix broken windows and cracked siding
• Make sure all your plumbing is working
• Check the electrical
• Examine the roof for moss and any damage
• Tidy up and remove debris or items lying around

Identify any issues that can be fixed before the inspection. Not all inspections come with a warning, so it’s a good idea to do all of these things regularly. 

How often do insurance companies inspect homes?

It depends. Sometimes your insurance company will schedule an inspection because you’re changing coverage or buying a new policy. Other times it’s been many years and there’s never been an inspection, so your insurance carrier wants to assess the current replacement value of your home. In other cases, older homes might be flagged for an inspection. 

It’s not something that happens frequently, but it’s best to be prepared.