Why is it called a Four-Point Inspection?

Let’s get right to the point. A four-point inspection focuses only on the most important issues a house may or may not have. It was created after Hurricane Andrew struck Florida in August 1992, which was the most expensive hurricane in Florida’s history at the time.

The Category 5 storm left scars in the landscape and on insurers’ balance sheets for more than a decade. With so many homes damaged, insurance companies were desperately looking for a quick solution for the future. A comprehensive inspection may benefit the buyer, but for insurance purposes, that is too much. They needed a method to figure out which homes are risky deals to insure and which ones are not. A squeaky door or a cracked tile is not relevant. The fine print of the insurance policy states that normal wear and tear is not insurable or covered under standard homeowners insurance. Insurance is designed to cover sudden, unexpected, and accidental events—not the gradual aging, deterioration, or routine maintenance of a property

Therefore, insurance companies had to come up with a different plan.

If the small stuff is not important – what is?

The Four-Point Inspection was invented

The goal was an inspection that is easy to perform and covers the most expensive issues of a house. The state-run Citizens Insurance was the first to come up with a new way to address the issue. The four-point inspection was quick and easy to do and addressed the major insurance-relevant problems of a building.

This form of inspection was so convincing that every insurance company asks for a four-point inspection today.

Why did the Four Point Inspection become so successful? This type of Inspection consists only of a visual survey of the following four primary components:

1. Roof
2. Electrical System
3. HVAC (Heat, Ventilation & Air Conditioning)
4. Plumbing

Insurance companies are looking for those four systems to be in generally good working condition. However, age and wear and tear are also considered. A seventeen-year-old A/C and a 30-year-old tile roof are, in many cases, no longer insurable.

They need to fulfill their intended function because they represent the vital signs of a home. If the home is older, insurance companies want to see that those systems are up to date and do not break within the near future.

Insuring an older home can be a headache

Insurers have become increasingly reluctant to issue Homeowner Insurance Policies on older homes. 20-plus-year-old homes are already considered “older.” Their common concern is that there may be conditions in an older home that could soon become a liability to them. It is well-known that insurers tend to avoid liabilities and risks like the plague. Their goal is to make money – not to spend money.

Therefore, they come up with a list of issues that need to be addressed before they sign a policy.

Frequent problems are:

Some older electrical panels, like Federal Pacific Electric, need to be replaced. They are a fire hazard. The cutoff for a roof is now at 25 years. A non-functioning A/C will cause mold problems, and old or leaking faucets may burst one day and flood the home.

What will the inspector do? He will check the permits for installation dates. He will check the plumbing, electrical, and the A/C. He will document everything with photos and send the report to the insurance company. The insurance company will read the report and come back with a solution.

The solution could be: The insurance company declines to write a policy at all or asks for repair, replacement, or fixing. Depending on the severity of the issue, the company will wait until it is solved before the policy takes effect, or it will write a timeline into the policy. The home is insured, but the owner has four weeks to resolve it, or the policy will get canceled.

New or newer homes have fewer or no of these problems as often as older homes. The newer the home, the newer it is built to the latest building code.

Two different types of home inspection with two different goals

The Four Point Inspection is primarily of interest to the insurer. The insurance company demands it, and without it the homeowner will not get a policy.

However, there is also another type of home inspection. According to the sales contract, the buyer can order a comprehensive home inspection through a chosen home inspector. After signing the sales contract, the buyer has 1 – 15 days to hire someone to do the inspection. This is not a “must”; he can waive it, but it might be worth spending the $300-$500 to do the task.

This inspection catches all the things that are not important for the four-point, but may be costly for the homebuyer. A non-functioning dishwasher, a stove with a broken burner, a stuck sliding glass door in the living room, or a broken tile in the laundry room are no big deal per se, but you might want the seller to fix it before the deal closes.

Will insurance companies take your broader 80-page report that you already paid for? No, probably not. As mentioned before, they like their short one, because they don’t care about the dishwasher and the stove.

Can you decline the broader 80-page inspection? Yes, you can. It is totally up to you if you want to deal with all those repairs once you hit the 15-day timeline in the contract.

Can you decline the four-point inspection? No, you can’t. This one is not mentioned in the sales contract because it is an agreement between you and your chosen insurance company. If you say “NO,” the insurance company will say “NO” also, and your home may become a “dream home.”

Let’s finish the blog with a final word about home insurance in Florida. There is one important feature that has a severe impact on the premium: Hurricane Protection. If all the openings of the house, windows, doors, and garage doors are protected or hurricane-graded (like impact windows), you are good to go. If not, the premium will reflect the missing protection.

Interested in buying a home in Venice or Englewood, FL? Find your happy place here! Thinking of selling your home in the Englewood or Venice area?  Request a complimentary and personalized Market Analysis here.