"Buying a House in Alabama: How Does a FORTIFIED Roof Lower Your Wind Insurance Premium?"

You want to know whether the home already carries a FORTIFIED designation, and you want to see the certificate, before you write the offer. Alabama requires property insurers to build a wind discount into the rates they file for a home built or retrofitted to that standard. The certificate proves it, and it belongs to the property rather than the seller, so it comes to you with the sale.

I'm Jeff Moran, a mortgage broker in Bluffton, South Carolina, originating since 1996, NMLS #483943, through C2 Financial Corporation, licensed in fifteen states, including Alabama.

Your homeowners premium is collected inside your monthly mortgage payment, so on an Alabama purchase the roof over the home you are buying is one of the inputs to the payment underwriting measures.

Why is your insurance premium a mortgage question at all?

On most purchase loans the lender collects your homeowners insurance monthly and pays the carrier when the policy renews. That is what an escrow account does. The premium is divided by twelve and it goes into the payment alongside principal, interest and property taxes.

Underwriting measures that whole payment against your income. So a premium that comes back a few hundred dollars a year lower does two things at once. It lowers what you pay every month, and it lowers the housing number inside the ratio underwriting measures.

This is also why the insurance quote wants to happen early. I have written separately about getting an insurance quote before you write the offer, and that holds anywhere. Alabama gives you a second reason to call early, because there is a specific question to ask about the specific home.

What does Alabama actually require an insurer to do?

Alabama Act 2009-500 is codified at Ala. Code §§ 27-31D-1 through 27-31D-5, and it has been in force since May 14, 2009. It tells property insurers to build a premium discount or rate reduction into their rates and rating plans when a home is built or retrofitted to resist loss from a hurricane or another catastrophic windstorm.

The chapter splits the two situations a buyer runs into.

Section 27-31D-1 covers new construction, where the home was built to hurricane mitigation construction requirements or to the FORTIFIED standards adopted by the Institute for Business and Home Safety.

Section 27-31D-2 covers an existing home that was retrofitted to the FORTIFIED Home hurricane standard or the FORTIFIED Home high wind and hail standard. That is the section most resale buyers are living under, because the home was already standing when the work was done.

Two details in the statute decide whether any of it reaches you.

The adjustment attaches to wind coverage. It applies to policies that provide wind coverage, and it can apply to the wind portion of the premium or to the total premium where the insurer does not separate wind coverage in its rate filing. If the property is covered by a separate windstorm policy, that is the policy the discount belongs to.

The property has to be certified. The property qualifies only after inspection and certification by a FORTIFIED evaluator credentialed by the Institute for Business and Home Safety. Good roofing work with nobody credentialed to sign off on it does not reach the statute, however well the roof was built. The Alabama Department of Insurance windstorm mitigation handout says the same thing in the department's own words.

I am not going to print a discount percentage here, and you should be careful of anybody who does. Each company works out the size of its own adjustment when it files its rates, and it has to show the actuarial work behind the number it picked. So the amount differs between companies and it changes when they refile. What does not change is that every company filing rates in Alabama has to give some adjustment on a qualifying home.

How do I find out whether the home already has one?

You would want to ask the listing agent whether there is a FORTIFIED certificate on the home, and for a copy of it showing the FORTIFIED ID number, while you still have room to price it accordingly. If your offer has already been accepted, the inspection window is your next chance to raise it.

Three things about the certificate are worth knowing before you ask.

It belongs to the property. The designation is issued to the home rather than to the person who owns it, so it transfers with the sale and you inherit it at closing.

It runs five years. Each certificate carries its own ID and a five year term, and renewal is a separate step the FORTIFIED redesignation process sets out. A seller who re-roofed four years ago is handing you a certificate with about a year left on it, so the date on the paper tells you more than the year of the roof does.

A new roof is not automatically a FORTIFIED roof. The standard is about how the roof deck is sealed and fastened down and how the edges are finished, and the evaluation and the paperwork are what make it count with a carrier. A seller who says the roof is three years old has told you nothing about whether §27-31D-2 applies. The FORTIFIED program's own answers are a reasonable place to send a seller who is not sure.

Which carrier has to honor the certificate, and which one does not?

Chapter 31D works through filed rates. An admitted carrier is licensed in Alabama and files its rates and its policy forms with the Alabama Department of Insurance, so the statute reaches the rating plan it files.

A surplus lines carrier is a different animal. It is not licensed in Alabama, it writes through a licensed surplus line broker, and it does not file rates with the department. That freedom is the reason the surplus lines market can write a property the admitted market has declined. It is also the reason the certificate does not compel a discount there the way it does on an admitted policy.

Coastal Alabama sends more homes to that market than most places do, so this is a live question rather than a technicality. What it changes is that you would want to ask your insurance agent two plain questions before you accept a quote:

1. Is this an admitted carrier or a surplus lines carrier?
2. Was the FORTIFIED certificate applied to this quote, and what did it change?

An agent who has the certificate in front of them can answer both of those in a minute, and an agent who has never been shown it has nothing to apply.

What about the grant that pays for a FORTIFIED roof?

The Alabama Department of Insurance runs Strengthen Alabama Homes, which grants money toward bringing a roof up to the FORTIFIED standard. The award is currently capped at $10,000, and the work has to be done by an approved contractor and signed off by a credentialed evaluator, which is what produces the certificate at the end.

The program runs county by county on a published application schedule. Windows open on set dates and close once the funding is spoken for, sometimes within hours, so you would want the current county list and the next opening date from the program's own page rather than from an article. Fortified Home's Alabama incentives page is a useful second look at what else is available in the state.

There is a real limit for somebody mid purchase. The grant goes to the owner of the home, and while you are under contract you are not the owner yet. So the realistic paths are a seller who already did the work and can hand you the certificate, or you applying after you close. Either way the program is worth knowing about before you assume a roof replacement is entirely your problem.

The order this happens in on a real purchase

1. While you are still choosing which homes to look at, the roof and the certificate belong in the cost of the home, the same way the property taxes already do.
2. Once a home interests you, the listing agent is the one to ask for a copy of the FORTIFIED certificate showing the date and the ID.
3. With that certificate in hand an insurance agent can quote the property properly, and you want the quote before you write the offer, or at the latest inside the inspection window.
4. Whoever is doing your loan should see the quote. A premium that came in under the estimate in your pre-approval is a number worth updating.
5. If there is no certificate and the roof is aging, that belongs in what you offer, and it is a fair thing to raise with the seller, either as the work or as a credit toward it.

What I see go wrong

The premium gets budgeted off the seller's current bill. Their policy reflects their carrier, their claims history and the year they bought, so yours will not match it. The quote you can act on is the one written for you.

The certificate turns up after the appraisal. Nothing breaks when it does. You have just spent three weeks looking at a payment built on an estimated premium, when the quote the certificate would have produced was available the whole time.

The designation quietly expires. A certificate runs out on its own date, whatever condition the roof is in, and the discount follows the current certificate rather than the original work. If the one on your new home has a year left, the redesignation is worth putting on the calendar the week you move in.

The home gets written in the surplus lines market and nobody mentions it. You are not doing anything wrong by buying that policy, and you should know that you bought one. It is worth comparing at least one admitted carrier before you settle.

An illustration, so the shape is clear

Numbers below are invented to show the mechanism. None of them is a quote.

A buyer is looking at a home near the coast and the pre-approval carries an insurance estimate of $3,600 a year, which is $300 a month inside the payment.

The home turns out to have a FORTIFIED certificate from a re-roof two years ago. The insurance agent applies it and the annual premium comes back at $2,880, which is $240 a month.

Estimated premium, monthly      $300
Quoted premium, monthly         $240
______________________________________
Difference inside the payment    $60

That is $720 a year the buyer keeps, and it is also $60 less of housing payment inside the qualifying ratio, which came from asking about the certificate early enough for the insurance agent to use it.

Where to start

When you are ready, you can see rates for your own scenario with an Alabama tax and insurance estimate built into the payment. There is no credit pull, no account, and nobody calls you afterwards. You will see several options on one sheet, and you can choose the option that works best for you.

When you want something a listing agent will take seriously, an Alabama pre-approval means your income, debts and credit have actually been reviewed rather than estimated, and what a documented pre-approval involves covers how. Two other Alabama costs people meet late: the two recordation taxes at closing and claiming the homestead exemption after you buy.

Nothing here is a loan approval, a denial, a commitment to lend, or insurance advice. A licensed insurance agent owns the policy questions, carrier filings and program terms change, and what a carrier will do with a certificate on a specific address is worth confirming rather than assuming. No letter from anyone is a loan commitment; final approval depends on the property, the appraisal and full underwriting.

Common questions

Does Alabama require insurers to give a discount for a FORTIFIED roof?

Yes, for insurers that file rates in Alabama. Act 2009-500 is codified at Ala. Code §§ 27-31D-1 through 27-31D-5. Since May 14, 2009 it has required property insurers to include a premium discount or rate reduction in their rates and rating plans for a home built or retrofitted to qualifying hurricane mitigation standards. The adjustment applies to policies providing wind coverage, and each company works out the size of its own adjustment when it files its rates and has to show the actuarial work behind the number. So the amount differs between companies, and it changes when they refile, while the requirement to give one stays the same.

Does a FORTIFIED certificate transfer when the home is sold?

Yes. The designation is issued to the property rather than to the homeowner, so it transfers with the sale and the new owner receives it with whatever time is left on it. You would want a copy of the certificate showing the FORTIFIED ID and the date during your purchase, because the insurance agent writing your policy needs to see it to apply anything to your quote.

How long is a FORTIFIED designation good for?

Five years from the date on the certificate. Renewal is a separate redesignation step handled through the FORTIFIED program rather than something that happens by itself. If you buy a home whose certificate is partway through its term, you inherit the remaining time, so the renewal date is worth writing down at closing rather than discovering at a policy renewal.

Will every Alabama insurance company apply the discount?

No. The statute reaches insurers that file rates and rating plans with the Alabama Department of Insurance, which means admitted carriers. A surplus lines carrier is not licensed in the state and does not file rates there, so a FORTIFIED certificate does not compel an adjustment on that policy. Coastal properties end up in the surplus lines market more often than inland ones, so it is worth asking your agent directly whether the quote in front of you is admitted or surplus lines, and whether the certificate was applied.

Can a buyer use the Strengthen Alabama Homes grant before closing?

Not while you are under contract, because the grant goes to the owner of the home and you do not own it yet. The two realistic paths are a seller who already did the work and can hand you the certificate, or you applying after closing as the owner. The Alabama Department of Insurance runs the program county by county on a published schedule, closing each window once the funding is committed. Because that schedule moves, you would want the current counties and dates from the program's own page rather than from an article.

Does homeowners insurance affect how much house I can qualify for in Alabama?

It affects the payment, and the payment is what underwriting measures. Your premium is collected monthly through the escrow account and goes into the housing payment alongside principal, interest and property taxes, so a lower premium lowers the housing number in the ratio and a higher one raises it. That is why a quote written for you, on the actual address, is more useful early than an estimate carried to the end.