Wednesday, December 9, 2009

I don't have that much stuff, do I?

Homeowners insurance not only covers your home, but also covers your belongings. Some people feel that they don't have a lot of personal property and therefore don't need this coverage.


Think of it this way. It's not how much stuff you have at this point, but how much will it cost to replace. If you add up the cost of everything you have right now, clothes, appliances, furniture, electronics, Cd's, DVDs, books, TVs, tool's, etc., you will find in pretty short order that the cost to replace that stuff really add's up. You may have only paid $50.00 five years ago for that table, but if you had to buy the same table today would it still cost only $50.00? It will probably cost a little more for the same table.


Also, keep in mind that most carrier's have sub limits for certain types of personal property. A carrier may have a $5,000 limit on electronics for example. This is to keep a few items from taking all of your coverage. For example, let say you have $170,000 for your personal property limit. You have a flat screen TV, 2 computers, 2 digital cameras, and a printer. Your carrier has a sub limit of $5,000 on your personal property for electronics. If you had to buy the TV, the printer, the cameras and the computers, let say you would spend about $11,000. We'll, your carrier will only pay $5,000 for your electronics. The remaining, $165,000 would go to replace clothing, your fridge, your oven, jewelry, the couch, the bed, the blankets, etc.


Let's look at how the insurance carrier calculates this coverage since they can't know what you already have and even if they could get this info, it would be a real pain to list everything you own. (check out http://www.knowyourstuff.org/iii/login.html for a free home inventory program online). What they do is take a percentage of your dwelling coverage and use that as your personal property coverage. For example, say your home is insured for $200,000, your personal property coverage would be about $100,000. Most carriers figure 50% of the dwelling coverage as a base although some will go up to 75%. If you have a special, high cost item like jewelry, a piano, wine collection, or a valuable painting, you can add a rider to cover just that item.


Also consider that the carrier is trying to also cover what you may buy in the future. Most homeowners policies renew once a year. So everything you buy for that year would also need to be covered. You also have 2 primary settlement options when it comes to personal property. Actual Cash Value and Replacement Cost. ACV usually cost's less because the carrier is going to look at each of your items and depreciate them according to their depreciation schedule. In short, you will get less for the TV you bought last year. Replacement Cost means that the carrier will pay to replace the TV with like kind and quality up to the policies limits or applicable sub limit.


You can also choose to self insure. Just make sure that you will always have the money in an accessible form. Put $170,000 or whatever you think your stuff is worth in a savings account and don't touch it. One day, you may need it. The rest of us will just get insurance and keep a $1,000 in the account to cover the deductable.

Wednesday, November 18, 2009

Do You Gamble?

Las Vegas. Monte Carlo, Casino Morongo. All great places to spend your hard earned money in the hopes of winning big. Let say that I am in no danger of becoming wealthy but what if you could get a $200,000 jackpot for a $1,600 bet? Would you do it? You probably would.



Now lets look at insurance. You pay your insurance carrier $600.00 for the year. Your house is insured at $250,000 for total rebuild including debris removal. Your house burns down. You pay your insurance carrier a $1,000 for your deductible. They rebuild the house and spend $200,000 doing it.



You just paid $1,600 for a $200,000 pay off. You won!



Want a bonus spin? Your insurance carrier helped pay your living expenses like rent where you lived while they put the house back up plus paid for your personal property that was destroyed or damaged in the fire as well. Lets say that rebuilding your home, replacing your personal property like clothes, TV, computer, etc. and the rent for 6 months while all this was getting done is $300,000. You only spent $1,600.



You might say you've paid for insurance for years and never had a claim so it must be a waste? I agree, it is a roll of the dice as to if you will have a fire, your home could get broken into or any number of other things could happen. But one day you might win.

Another thing to consider: If you had a fire or if someone drove into the house at 2 am, would you have the money to pay for the repairs yourself? How long would it take to put enough money in a savings account? You would have to pay taxes on the interest, have the will power not to touch it even for that new TV or for school clothes, and you would have to be able to get at it in the event of a major disaster. The insurance company set that money aside in the event you needed it. You where lucky when you did not need it. Someone else probably did. Now it's your turn.

$600 a year does not sound like to bad of an investment in your own security and peace of mind, does it?

Thursday, November 12, 2009

Windows 7 and other rants.

Microsoft's new operating system, Windows 7, is touted as being better than Windows Vista. For the most part that may be true. However Windows XP is still more reliable by most accounts. My rule of thumb with any new Microsoft product has been to wait 6 months to a year for them to give all the early adopters’ time to beta test and work out the bugs. Once it is stable, I'll climb reluctantly on board. Why do the bother with minimum operating specs? Anyone I know that has tried to get by with the minimum specs is always frustrated and not happy.


Another problem is that software makers really don't care how much memory they use or how much hard drive space they take up. They don't have to pay for it, they figure you can just upgrade since it does not cost them anything and after all, hard drives and memory are very affordable.

Something else that gets me. So many people are looking for jobs right now. Why not get rid of the infinite voicemail system that is supposed to be so efficient at getting you to the "right person" and just get me to them? You could hire more people to screen the calls, more people to provide help in the "right" department and cut down on the wear and tear on your 18 menu phone system. With that in mind check out the great web site http://www.gethuman.com. This site rocks. I was able to get an actual live person at Verizon in less than 4 min.

What a modern age we live in!

Friday, November 6, 2009

The "M" Word and What It Can Mean To Your Insurance Company

With the great values in the housing market today, first time buyers and investors are finding some great deals.



One potential client asked for a quote this week on a home that happens to be a manufactured home. For those of you who are not familiar with this type of construction, the walls of the home and other parts are built at a factory, brought to the construction site and assembled. Instead of putting up one board at a time, you put up whole walls. Think of it like a puzzle being put together.



In many cases the homes are attached to a foundation such as a concrete slab, and placed on the county tax rolls like a traditional site built home. For most preferred insurance companies, if you have to use the "M" word (Manufactured) to describe the home; you have to insure it the same was a you would a mobile home in a trailer park. Most preferred companies won't insure manufactured or mobile homes. Companies that provide manufactured and mobile home insurance will sometimes insure them on the same policy type as a traditional home but allow for the differences in the homes construction method.



Why does it make a difference?



Well, let’s say you have a claim. There is a fire, a tree falls on the roof, some jolly drunk runs into the house at 2 am, take your pick. You insured the home on a traditional homeowner’s policy; your insurance carrier would probably discover in the course of repairing the damage to your home that it is a manufactured home. They don't insure manufactured homes. Your claim could be denied.



Now let’s say the tree, the drunk, or the fire happens and you are insured with a manufactured home policy. You are covered. You pay your deductible, the insurance carrier picks up the rest and after some hammer time your home is back up to having Aunt Gladys over for the holiday.



I understand that it's a pain to get insurance on a home. I listen to clients every day and explain to them why the insurance coverage on their home is more than what they are paying for it at today's real estate prices. My insurance on my own home has gone up this year to and I have never had a claim. I talk about rebuild cost, debris removal and all the things that could trigger a claim. I know that people are only looking at the price, not the benefit. I also know that when something happens, you are going to be wondering if you have coverage. It's better to insure you correctly in the long run. You pay your yearly premium and your deductible, in most cases about $1,600 on average for both ($600 for the yearly premium, $1,000 deductible), and the insurance company pays out tens of thousands or more depending on the claim. Not a bad trade if you ask me.


Think about people at a salad bar. Most will take lettuce, tomatoes, maybe a carrot or two or some bell pepper. Others will skip the carrots and go for baby corn, olives or radishes. Some may skip the salad altogether and go for the pasta, potato or macaroni salad instead. Insurance carriers are the same way. Some like traditional site built homes, good drivers, renters and landlords. Others like properties that may need a little work, have unique construction and drivers with 5 speeding tickets in the last year. Insurance is about matching your needs and potential liabilities with a carrier that will cover that risk.

Friday, October 30, 2009

Ready Campaign - Be Prepared

Fire Safety Campaign Kicks Off

The U.S. Fire Administration kicked off it's public safety campaign today by urging everyone to install and maintain smoke alarms.



Smoke alarms installed outside sleeping areas dramatically save lives. Sadly, one local family discovered this first hand. The Newsmirror (http://newsmirror.net/) reported that a family lost their mobile home to a fire that was started by faulty heater. The father was awakened by the smoke alarm and was able to get his family which includes 4 small children to safety.



This illustrates how a simple smoke alarm in working order can be a lifesaver. Most smoke alarms can be purchased for twenty dollars or less. If you test the alarm once a month and replace the batteries once or twice a year, you can go to sleep with peace of mind. Check out http://www.usfa.dhs.gov/smokealarms for more info about the USFA campaign.

Having your heating and AC units checked every one or two years and cleaning and changing the filter twice a year will help them run more efficiently, could help lower your utility bills and help prevent a malfunction.



For any disaster it is always a good idea to have a plan. You should have an emergency kit for your family and a kit in each vehicle you own. In addition to first aid and medications, you should also have plenty of water, spare clothing and good fitting, comfortable tennis shoes or boots. You can go to http://www.ready.gov/america/index.html to get some great information for disaster planning, info about the flu and more. Also, check the Ready Campaign box on this blog for more preparedness info.

Wednesday, October 21, 2009

Pay As You Drive Insurance Regulations Approved!

The Department of Insurance announced earlier this week that the final regulations allowing insurers to offer pay as you drive auto insurance programs have been approved.

What this means to consumers is that in the hopefully not to distant future, you will pay for auto insurance based on how many miles you drive. The less you drive, the less you pay for auto insurance. With more people working closer to where they live or if they telecommute to work via website or modem, this could mean a big savings.

Right now the program seems to only be intended for "good drivers" which meet the California Good Driver provisions. The provisions are:

1. Has been licensed continuously for 3 years.

2. No more than 1 DMV point in the last 3 years.

3. No drug or alcohol related felony convictions in the last 7 years.

4. No at fault accidents involving death or bodily injury in the last 3 years or that resulted in more than $500 in property damage.

Mileage verification can be done one of two ways. First, the estimated mileage is provided by the insured with a current odometer reading and that is used as a base for the first year. When the policy renews a new odometer reading would be done by either the insured, a third party hired by the insurance carrier or your insurance agent. Your policy would then be adjusted based on this reading.

The second method uses verified actual mileage. You allow the insurance carrier to install a device in your vehicle which periodically reports your mileage to the carrier and your policy is adjusted according to these readings.

The insurer can also use odometer readings form smog certifications,DMV or any other government agency that records odometer readings.

A few companies have these programs in place in other states, however they would have to adjust them to comply with California's regulations. It will be interesting to see who the first carrier is to offer this program and what kind of savings it will yield to the consumer. Only time will tell.

Tuesday, October 13, 2009

Do I need Flood Insurance? Wont' my homeowners policy cover it?

With the recent fires and a storm moving in, you might want to take a second look at your homeowners insurance policy.

While all homeowners policies some form of natural disaster, such as earthquakes here in California, you should know that flood coverage is also excluded in all policies, including commercial.

For example, lets say you live in a community where a recent fire happened. You and your neighbors where evacuated during the fire, but you are back home now looking at the charred hillside and counting your blessings. Are you out of danger? There may be nothing left to burn on the hill, so it won't catch fire for a while.

What about rain? The vegetation that held the topsoil and underlying earth may no longer be enough to hold the ground together. Down comes not only the water runoff but mud and rocks.

Your home owners policy will not provide coverage if your home floods. Most commercial policies don't provide flood coverage either. Sure, you could try to explain that it was the fire that caused the problem, but a flood is a flood. The definition of a flood is water, mud and/or debris entering the structure from the outside, filling up inside the structure and then running back out. This definition could also include a water main breaking and the water running into your home or business.

Flood insurance is the best bet to protect your home. You may not be in a flood zone, but you could still have a flood. This is different that a pipe breaking inside your home because the water is coming in from the outside. You can learn more about flood zones and check on how much risk you are in by visiting the national flood program website at http://www.floodsmart.gov/floodsmart/pages/flooding_flood_risks/defining_flood_risks.jsp .

If you live near a burn area you might want to consider getting flood insurance to protect your home. If your home floods, the cost of being insured and paying a deductible will be well worth it.

Friday, August 14, 2009

Fire season is well under way. Are you ready?

In California and many other parts of the country, fire is a real threat. We have the terrain, the fuel and sometimes the wind that takes a small brush fire and turns it into a full blown disaster.

There are a few things you can do to prepare for a brush fire.

First, keep your property clear of any leaves, evergreen needles, trash and other flammable materials.

Second, make and maintain a defensible area around your property. This area should be as wide as you can get it far enough from your home and other structures to give your fire department or forestry service room to get in and put the fire out before it can get too close to your property. Many cities and counties have requirements for brush clearance, so check with your city and don't be afraid to do a little more than they require.

Third, if you are remodeling or building a home in a brush area, talk to your builder about fire resistant building materials and techniques. There are coatings that can be applied to walls, roofs, etc. that can help with fire resistance.

Fourth, know your insurance coverage. Many people are trying to save money on insurance by lowering their coverage limits. This can be a pretty bad idea, especially if you live in an area where fire is a big concern. Check your policy dwelling limits and talk to your agent or insurance carrier about them. If you have remodeled, let your agent know about any upgrades. One of my friends put in a pool this summer and renovated his kitchen putting in some really nice flooring and high end appliances. He should get out the receipts and talk to his carrier about his coverage.

Fifth, if a fire has started in your area, listen to the news for any evacuation orders. You may want to keep an emergency kit and a suitcase or duffel bag with a change of clothes, heavy duty gloves, water and a radio packed and ready to go. Also, plan for your pets. Where can you take them in the event of a fire? Call local shelters and talk to your city, county and other emergency personnel in advance. Plan on what you will take with you and have some empty containers stored in the garage or extra closet so you can grab and go if the order to evacuate is given.

Last, try to stay calm and comply with all authorities during any emergency. I hear on the news where someone, desperate to save their home, belonging's, etc. ignored the evacuation order and went back and did not get out or had to be rescued. Pulling emergency resources away from the blaze to rescue you is not right. firefighters, police, medics, forestry crews and others are trying to protect your community and your home. Pulling them away from that duty lets the fire gain ground.

Your things can be replaced. Your life can't.

Check your policy and look at your loss of use coverage. This coverage can help you pay for a hotel and also can help you rent a home or apartment for a time while your claim is settled or your home is being repaired.

Thursday, July 30, 2009

Building Cost's, Fire Areas and You

A question I get alot is "How did you get that number? I'm paying less for the house!" or from a current client " My homes value has dropped a $100,000 since last year. Why did the carrier raise the coverage?!"


Insurance carriers get numbers from national sources that calculate rebuild costs for all parts of the country. The carrier then looks at the zip code, square footage, age and other factors and applies their own formula's to the replacement cost and arrives at what your dwelling coverage should be.



For example:



Cost to rebuild home based on Sq.ft, age and zip code: $180,000

Example of a carriers formula:

Rebuild Cost: $180,000

Home is 2 stories, add 20% = $36,000

Total insured value = $216,000

This is only a simple illustration, but a homes condition, risks near the home and the contents of the home can add to the coverage.

In addition, the carrier must also account for debris removal, after all we can't just leave the burned out rubble of your home laying around and then build over it. It's got to go. Then your local city and county governments must have their permit and inspection fees, utility company fees, new plans must be drawn up and approved by local authorities. Now, finally, we get to turn the contractor and their team loose nail up the first piece of your house.

Check out the building cost estimator at http://www.building-cost.net/ and click on start calculator. It is free and will give you a good idea about what your insurance carrier has to plan for. They do leave out debris removal which can vary based on governmental costs.

If your property is determined to be in a high fire area, there is more risk than normal and the carrier will charge you more to make up for the fact that there is a higher than normal chance of you having a claim. Many carriers use a scale from 1 ( no fire danger at all) to 10 ( this place could go up in flames any second!) to rate fire risk. This number is called your fire protection class. It looks at how close you are to a fuel source (i.e. brush or hills), the distance to the fire hydrant and how far you are from a fire department and then assigns a number from 1 to 10.

Remember that insurance is about risk and the potential for risk. You are paying a relatively small amount of money, your yearly premium and your deductible, to get hundreds of thousands of dollars in coverage which would otherwise take you years to put aside in a savings account. I have discussed ways you can save money on insurance elseware in this blog, so I won't go into them here. Don't be afraid to talk to your agent about saving money where you can, but don't sacrafice coverage either. Everyone want's to talk about price when you are buying insurance, then when there is a claim, they want to talk about coverage.

Friday, July 3, 2009

Have you thought about those who you will leave behind?

With the recent deaths or Michael Jackson, Farrah Fawcett, Ed McMahon, Billy Mayes and David Carradine, some people’s thoughts naturally turn to their loved ones and what will happen to them when they pass on.

So what about the rest of us? We don’t have huge estates to pass on to our heirs. We don’t have millions to spend on lawyers. How will I provide for my children? What about my surviving spouse or partner? How can I make sure they will be able to support themselves?

The answer to these questions is to plan now. That’s right. We all know that one day we will die. We don’t have the luxury of choosing a date; we can’t schedule this last appointment right after the vacation of a lifetime. So we need to plan now, while we are still alive.

To start, look into life insurance. There are affordable options out there. Usually term life insurance is more affordable to start with than whole life. Term insurance only covers you for a certain number of years. If you are still alive at the end of the term, the policy can be converted to whole life if you have selected that option. You could also renew the policy at the end of the term.

Whole life insurance has the advantage of covering you for your whole life without having to renew. The payments remain the same and you can pay monthly, quarterly, or yearly. Also, a portion of your payment can be used to create cash value, which can be used to pay the policy off sooner.

So how much life insurance do you need? Everyone’s life insurance needs are different. Your agent should have a detailed list of information they will need to help you calculate your specific needs. This list usually includes your monthly expenses by category, your mortgage or rent, car payments, your current income, and any savings or other income or expenses you may have. You can find a great calculator at Smart Money’s website at http://www.smartmoney.com/personal-finance/insurance/how-much-life-insurance-do-you-need-12949/ .

Now some people get pretty nervous or even scared when you start talking about your expenses. Let me just say that all your agent is trying to do is find a life insurance policy at an amount and payment you can afford. They are not here to judge you; they are here to help you decide how much money your survivors will need to make mortgage or rent payments, buy groceries, make car payments, keep the utilities on and live their life after your passing. If you have children or people who depend on you, this calculation is even more important.

The next thing you should do is create a will. Deciding who get’s your mom’s plates or your Giant’s baseball card collection should be done ahead of time to avoid (or maybe start) an argument. More important than that is deciding who will take care of your children in the event both you and your spouse pass away. You may want to name a back up person just in case Aunt Ethel does not make it back from that Mexican cruise next month. Make sure that both of those people are named as alternate beneficiaries on any life insurance policies, so that the money will be there for them to raise your children. You will also want to leave instructions about how your estate is to pay off debts, like your mortgage or credit cards. This will save your heirs some potential legal trouble and could help them keep a roof over their head.

There are many things to consider when making a will. In most cases a lawyer or paralegal may charge only a small fee to set up a will for you. There are also a number of websites and programs that will let you create a will for very little cost. You must then sign the will in front of two witnesses and then have them sign the will also for it to be valid in California. You can check out Nolo.com for will information in your state. Many counties have their own legal aid services that can also help at minimal cost. Keep in mind that you will want to periodically update your will. In one case I know of, all but two of the heirs were deceased and several of the grand children where left out completely. You will want to up date your will and insurance policies immediately due to major changes, like marriage, divorce, births, the sale of property, etc. Otherwise updating your will and insurance policies every 2 or 3 years should be fine.

Once you get your insurance, will and other legal documents together, keep them in a secure place where you can get at them. A fire proof safe at home is a good idea, so is a bank safety deposit box. If you have a lawyer, they may also keep copies of these documents on deposit with them. You can also get fireproof locking boxes at many stores like Target, Wal-Mart and Home Depot. The only draw back to them is that since they are portable, they can be stolen so hide them well.

These are just some suggestions of the types of planning you could do. Depending on your situation, you may need to consult a lawyer that specializes in estate planning or a certified estate planner.

And keep your will and beneficiaries a secret. There is no need in telling your daughter that grandma’s dishes are going to Aunt Betty instead. She can find out later.

Friday, June 12, 2009

Don't reduce your homeowner's coverage! There are other ways to save money!

With trying economic times upon us, we are all looking to save money any way we can. Many have lost their jobs and are trying to figure out how to stay in their homes.


You may be looking at your homeowners policy right now or have just gotten a renewal quote and you are thinking " My home is not worth this much! I need less coverage since homes in my area are selling for half as much as they were when I bought."


While the housing market has dropped considerably, your insurance company is looking at what it would cost to rebuild your home. That rebuild cost includes removing the rubble of your damaged home, getting new permits, plans, state and local building fees, labor, materials and more.

Keep in mind that the other coverages under your policy such as personal property, additional living expenses, etc. are all percentages based on the dwelling coverage. Reducing the dwelling coverage reduces the other coverages also. You can reduce or eliminate some of the optional coverages. Maybe you no longer have a dog so you don't need animal liability coverage. Or you don't need $10,000 in water back up coverage, $5,000 would be enough. Id Theft coverage may be better or included through your credit card. Have you put in an alarm system? Most carriers give you a discount for having a monitored alarm system. Some also discount for your profession and marital status.

You can remove or modify these coverage with a written request or e-mail to your agent or insurance company. Talk to your agent. You may be able to switch to another carrier and save.

Check out this article from the La Times for more information. http://http//www.latimes.com/classified/realestate/news/la-fi-lew7-2009jun07,0,3514957.story

Friday, May 1, 2009

Thinking of doing a walk a way from your vehicle? Think again!

It's real tough out there. Unemployment has not been this high since the depression. Costs for household essentials are going up, income is dropping. Everyone is trying to keep every penny they can just to keep the house payment made and food on the table. You or a family member may have a job loss or injury to deal with.

Many are asking " How can I get out from under my car payment?" . You may have a second vehicle you don't need any longer and possibly can't afford to keep around. It cost's too much to fill up, it doesn't get good mileage, the payment's for 2 cars is too much. Some people are abandoning or "Walking away" from their burdensome vehicles.

For example, take the case of a New York woman who reported her car stolen to police. Her car was latter found in Lake Erie. The keys where still in the ignition, and a rock was tied to the gas pedal. She later admitted to police that she wanted to buy a car with better gas mileage. Her hope was to collect the insurance money, buy a new car and get out of her current payments. She now has a criminal record for the rest of her life.


Or how about the lady in Mississippi who parked her car next to the storm gulf coast waters of Hurricane Gustave and then hopped into a waiting SUV.

There are many others. In Nevada, the police have started patrolling the desert areas by helicopter looking for burned out vehicles.

Such actions may seem pretty tempting in these trying times. But there are consequences. In addition to driving up insurance rates for everyone, you may be commiting fraud and you will have a criminal record for the rest of you life. You could end up on probation or in prision and have to pay several thousand dollars in court fees, fines, and restitution.

Not worth it.

There are alternatives to doing something illegal. Some auto dealers are now taking vehicles back if you can't make your payment. Better still, some dealers are not putting anything on your credit record for returning a vehicle. Also, the financing company may be able to work with you to get an affordable payment. Don't be afraid to ask them.

If you are having a hard time affording auto insurance, check with your agent to see if there is another carrier you can go with or if you can adjust your coverage. Shop around. You may also qualify for the California Low Cost Auto Program. This program provides low cost auto insurance to meet the legal requirement in California. There are income and driving record guidelines you must meet in order to qualify. Click here for more details.

In many cases, you can increase your deductible in order to save money, but be careful. This should be a last resort. Remember that your deductible MUST be paid in the event you have a claim BEFORE your policy coverage protects you. Never raise your deductible to an amount you will not have in an emergency.

If you are a professional or member of an organization, like AARP, check to see if they offer insurance to the membership. Sometimes you can get a discounted rate because of where you work or what organization's you belong to. Your bank or credit union may also have insurance plans available, but be careful. Some lenders are only out to protect their interest ( i.e. the loan) and not you. Be very clear on what coverage any policy from a lending institution provides. I had a client call in because they got an offer from their bank for life insurance. After listening to her read me the advertisement, it was clear that the policy would only pay off her mortgage in the event of her death. Her husband children would get nothing for funeral and other living expenses.

Remember, there usually are alternatives if you search for them. Don't think that you will not get caught. Insurance departments across the country are actively investigating and prosecuting insurance fraud. Insurance companies internal fraud units are geared up in this tough economy to look for suspicious claims. With the different options available, you don't need to risk ruining your good name and reputation just to save money.

Saturday, April 4, 2009

HEY, I'M NOT PAYING THAT MUCH FOR THE HOUSE! WHY IS THE DWELLING COVERAGE SO HIGH?

With today's real estate market in delcine, many buyers are getting great deals on homes. Houses that were selling last year in the $200,000 price range are now selling for quite a bit less depending on your area.

Here is an example. I had a potential client call for an insurance quote. I got the property information form her, went through the nosy underwriting questions, and produced a quote. The property replacement cost was $130,000. She then asked if we could make the dwelling coverage the same as what she was paying for the house, $50,000. Keep in mind that the property is less than a 1,000 square feet and is an older home ( built in the 1940's).

Now what the home is worth on the market today, is not my area of expertise. I'm not an appraiser or real estate agent, but I do know that comparable sales play a role. If the house down the street has close to the same square footage as yours and is of similar construction, it is used as a comparable property and it's sales data is reviewed to determine it's impact on your property value. The real estate market value of a home fluctuates based on these comparisons, sales of homes in your area, homes in escrow and homes that are off the market might also play a role. When I looked it up on Cyberhomes (http://www.cyberhomes.com/), the property had last sold in 2006 for $275,000!

I explained that the replacement cost is determined by the underwriter and that they use a valuation service to provide them data from all over the country about what it would cost to rebuild a home in a specific area. I expressed my doubts that if the house burned to the ground with all of her belongings inside that she could rebuild her home, even as small as it is, for $50,000 from the ground up. Permit fees, debris removal, architectural plans, posts, beams, plywood, drywall, bath tub, sinks, plumbing, electrical work, fixtures, construction workers, and probably at at least a hundred other things I can't think of would all come into play. In addition, many insurance companies build in extended replacement cost which is a percentage of cost that they will pay for over and above the dwelling coverage. They want to be sure that the coverage is adequate to rebuild the house and any given point in time. Your neighborhood could be ravaged by fire. Costs for labor and materials could go up based on increased demand.

I know that especially in these hard economic times that all of us are trying to cut cost's and pay less for everything. Everyone I talk to, clients and colleagues alike, are trying to keep costs down. It does the insurance industry no good if clients can't afford their policies, and insurance carriers have to have money to pay out claims. You might save some money by going to a less expensive policy, but read it carefully and make sure you understand what is covered. I have heard from my colleagues the tales of woe that customers who went with a less expensive policy had no coverage for a claim that occurred. Everyone wants to talk about costs when they are shopping for insurance, but then they want to talk about coverage when something happens and they need coverage.

She thanked me for my time, gave me her e-mail address and I e-mailed her a copy of the quote. I hope she will choose my quote because I know she has a solid insurance company backing her up, but if she finds coverage elsewhere for less, I hope her agent takes good care of her and gets her appropriate coverage.

Friday, March 6, 2009

Beware of the Out-Of-Towner Accident Tax!

The Association of California Insurance Companies is warning Californians of a new tax that local governments are adopting. Local governments are imposing an additional tax on people who live out of town who are involved in auto accidents. This tax is to help fund emergency services such as fire, paramedics, ambulance service, etc. Since someone involved in an accident may not live in that community, they are provided those services at the time of the accident without paying taxes to support those services in the city that the accident occurred.


So far Fresno county and the City of Modesto are the first to consider such a tax in California.

Here is one way in which this could affect you. Let say you go on vacation. You decide to drive up north from your home town of Yucaipa. You are in Modesto and you are hit by a driver that ran a red light. Paramdeics, Fire trucks, ambulances all show up. Everything gets taken care of and you get back home safe and sound. One day you are going through your mail and you get a letter from your insurance carrier. It seems that the City of Modesto is charging you $1,500 for an emergency fee. Your carrier informs you that this fee is not covered by your insurance policy and you will have to pay the City of Modesto directly.

Not what you want to hear from your insurance company after you have already paid your deductible for an accident that was not your fault is it? Sadly, with the current economic climate affecting cities, households and companies alike, I think we will see cities and counties finding new and creative ways to get funding for essential services. Since these charges are called fees and not taxes, local governments don't have to go through such a strenuous process to pass and enforce them. There are also no checks and balances and fees can vary from city to city. One town may charge $100 and the town right next to them charges $2,000. And these fees may be directed to pay for things other than emergency service since there are no checks and balances; the local government decides how to spend the money. Insurance companies may start covering these fees if this practice becomes more wide spread, but this will also raise insurance rates to cover it. Insurance companies are trying to keep cost's down, especially in these economic times. They need to keep customers happy and offer affordable insurance coverage, so they are not covering these fees right now.

One way you can help is to attend city council meetings and county public meetings and let them know you do not approve of these fees. If your community does it, then what's to stop the next town over? Do you shop in that town? Could you be in an accident there? Would you have to pay an accident fee to them because you had an accident while shopping or seeing a movie there?

Have you been hit with this fee? I'd like to hear about it since it is just now coming to California. I do know that other places in the country have had it up and running for a while now.

Check out http://www.accidenttax.com/ for more info and to see how you can get involved.

Monday, February 9, 2009

Condo / Townhome Insurance - Watch Out!!

I recently worked with a client who had an interesting dilemma. It made me think, how many Town home owners are under insured? Since Condos and Town homes are written on the same policy form, how would this apply to my client?

In the typical Condo / Town home insurance policy, the dwelling rebuild cost is figured based on the square feet between the INTERIOR WALLS. The homeowners association takes care of the exterior as you share at least one common wall with the neighbor(s) next door. You should check with your homeowners association as to what their fire insurance policy covers and at what value, then talk to your agent about how much insurance you need.

In this case, the client was purchasing a Townhouse that had no common walls with the other units. Quoting it as a Condo / Town home, the dwelling coverage was much lower than was appropriate. After some thought, I e-mailed underwriting and asked if they would accept the property on a dwelling fire policy. Dwelling fire is the most basic of insurance policies. It is typically used by landlords for insuring the property they rent out to others, but can be used for owner occupied homes, commercial buildings, etc. Underwriting agreed that it should be written as a dwelling fire policy, but that theft is not covered on their policy form. What, no theft coverage?!! What if their Townhouse was burglarized! They would have no coverage! Not acceptable. Since my philosophy is that if I do not have a policy that will work for that client, refer it to someone that can help them, I referred the client to a colleague of mine who had a good source for the client and everything worked out.

I know you are thinking: "In the current real estate market my insurance company has me insured for way more than I paid for my home! How can I be under insured?!"

Well, your insurance carrier along with mine and everybody else's is concerned with the replacement cost of your home, be it a Condo, Townhouse, Mobile Home, or a Site Built Home. They have to look at rebuild costs including materials, labor, permit fees, inspection fees, etc. In a large disaster, demand for materials and labor will probably go up and so could the cost. The real estate market determines prices based on what homes that are similar to yours and in your area are selling for. Big difference.
Remember when you are shopping for insurance, asking a question is a good thing. If your agent is pressuring you to sign anything before they answer your questions, find another agent