Iowa Residents Face Big Bills and Mortgage Risks Due to Reduced Roof Coverage

Iowa’s largest insurance companies have significantly reduced their coverage for roof replacements, leaving many homeowners with substantial out-of-pocket expenses. This shift comes in response to a rise in claims due to frequent hail and wind storms in the Midwest. Customers, including Vadim Shapiro of Clive, Iowa, have faced unexpected financial burdens as insurers like Pekin Insurance now pay only the depreciated value of damaged roofs, rather than the full replacement cost.

Shapiro’s experience highlights a growing problem. After his roof was damaged by storms, Pekin Insurance paid only $9,600 based on the roof’s age, far short of the $25,000 needed for a new roof. Such changes in policy have often gone unnoticed by homeowners, resulting in significant financial strain when damage occurs.

The trend of reduced coverage has broad implications, potentially impacting the home lending market. Fannie Mae and Freddie Mac, which guarantee about 70% of U.S. mortgages, require homes to be insured at replacement cost. They have temporarily paused this requirement to assess the situation further. The reduction in coverage has forced many homeowners to take on additional debt or live under damaged roofs until they can afford repairs.

The insurance industry defends the changes, citing the need to keep premiums affordable amid rising claims. However, consumer advocates and industry experts argue that these adjustments are unfair to homeowners and could destabilize the housing market. As the situation evolves, many Iowans are left grappling with increased premiums and inadequate coverage.