In insurance, an inspection is a detailed examination or review by an insurance company or representative. The inspection process can include inspection contingency, a visual examination of the condition, value, safety, and potential issues, and an inspection report
The purpose of an insurance inspection is to determine the potential risk the insurance provider is taking by insuring the item or property. It helps the insurance carriers to put an insurance premium on the policy and set appropriate coverage limits accurately. This process may involve various types of inspections, such as physical and mechanical inspections of the item or property.
Inspections can cover a wide range of aspects depending on the type of insurance. Examples of inspection include an exterior inspection for a home insurance policy where an examination of the roof’s condition, the electrical system for any potential electrical issues, the plumbing in case of water damage, and other structural elements for structural issues like inspecting the foundation for cracks, having loose bricks or making sure the building codes are up to date are being done.
These inspections can be crucial when a potential buyer wants a new property. An inspection contingency requires a professional home inspection within a specific time frame before a real estate contract can become binding. It ensures that the buyer receives vital information and allows them to negotiate repairs, sale price, or even walk away with their earnest money altogether
On the other hand, an auto insurance provider might want an inspection of the vehicle’s mechanical condition, mileage, and any visible leaks or visual signs of damage.
Suppose the inspection report by the insurance inspector reveals high-risk conditions or potential hazards. In that case, the insurance company may require the policyholder to address these issues before they issue or renew a policy. Alternatively, they may increase the premium to account for the higher level of risk.