Thursday, December 29, 2011

What do I do if the house I rented catches fire?

Get renters insurance ahead of time!

The landlord really does not have an obligation under insurance purposes.

The tenant may not be able to occupy the property and would need to find someplace else to live. If it is a lease, the tenant could be allowed to move back in once the property is repaired, but that would depend upon how the lease is structured. They may still have to pay rent. In a month to month, it would be up to the landlord. Under a landlords policy, the landlord is covered for structure, loss of rents while being repaired, liability, medical payments to others,  and any personal property named in the policy. The tenant on the other hand would need to have renters insurance which would cover the tenants personal property, liability, loss of use (which would help them rent a hotel room or get them set up in a new place) and medical payments to others. If the tenant does not have renters insurance, they are out of luck. I have heard in some instances where a landlord had another vacant property nearby and offered it to the tenant, or where they put them up in  a motel for a short time, but that is up to the landlord.
Another issue is what was the cause of the damage. Was there a wiring problem? Did the tenant BBQ under the patio and it caught fire? This can have an impact on the decision process. For these reasons and others many landlords are now requiring their tenants to have renters insurance and name the landlord as a loss payee or additional insured.

If you are renting, getting renters insurance is a great way to protect yourself. Read your lease or rental agreement and if you have questions, contact your property manager, leasing agent, or legal counsel. The landlord has protection, you should too.

Friday, December 16, 2011

Refinancing? Check the lay of the land first.

If you are looking at refinancing, you may want to check with your insurance first.

The flood maps in my area and many areas of California took effect in August 2008 and are causing some people to think twice before diving in to todays low mortgage rates. The problem is that when you bought your home and got your current mortgage, you may not have been in a FEMA designated flood zone.

In August 2008 the new maps were finalized and put into use. In many areas the maps had not been updated in decades. Changes to the topography caused by construction, erosion, new roads and other changes in the landscape have changed the way water and debris will run if you get enough rain or a large pipe break water and who knows what could end up in your living room.

How does all this affect your loan? If you are in a FEMA designated flood zone A or V, the lender usually will require you to purchase flood insurance. Flood insurance can cost thousands of dollars a year in addition to your homeowners insurance and mortgage payment. For some people, the cost vs. the change in loan payment does not make sense.

If  you got your loan prior to August of 2008 and are now in a FEMA designated high risk flood zone, contact your insurance agent to see what a flood insurance policy may cost. You can also check here to see if your home is in a high risk flood zone. You could also contact your county flood control to challenge the determination or FEMA, but you could be tied up in that process for a long time. A survey by a public surveyor may be required.

Tuesday, November 15, 2011

How do you feel about online insurance quotes?

Online quoting is great. It give the consumer a chance to compare quotes with different carriers and companies all in one spot. The only down side is that quote depends on what you, the customer, put in. If you put in false data, you will get a poor quote. Also, sometimes an experienced agent knows of other ways you can save just by asking a few questions that an online rater may not ask.

If you are getting quotes online, consider them to be a good general starting off point. They will give you an idea of if that carrier or company has a good fit for you. If you have a unique situation, such as a property in a flood zone, high brush area, the property needs some TLC,  or recent claims or traffic tickets, use the online system as a jumping off point, but call the agent and give them more detail.

So what do you thing about online quotes? Please take our survey here.

Friday, November 4, 2011

Disaster Planning Part 5: Emergency Planning Around the Home

Be it Earthquakes, Floods, Fires Hurricanes or Zombies, you need to be ready. Preparing for one prepares you for the others in a big way. 

We have talked about first aide kits, food and medication and home inventory. Now let me ask you this: Do you know how to get out of the house?

In a disaster you may have gas and water pipes as well as electrical wiring that has been damaged. Getting out of the house fast is going to be interesting to say the least.

That's why you need to plan escape routes in advance. The front door may not be accessible depending on how your home is laid out, what has happened, or whats in the way. Plan on maybe needing to go out a window or another door. Do you need to have a small step ladder handy? Do you need a ladder outside to get you safely to the ground? What about grandpa and grandma? The kids?

Plan it out in advance and rehearse. Have a family disaster drill night and make it a game.

Do you know how to turn off your electricity, gas meter and water meter? Have a wrench handy and check out your utility providers webs site or call them to learn how. Most of them are simple breaker switches and valves, but depending on where you live there could be a certain way you need to turn off the breakers.

Thursday, October 27, 2011

Preparing for a Disaster, Part 4 - Home Inventory

October is Disaster Preparedness month. Be it Earthquakes, Floods, Fires Hurricanes or Zombies, you need to be ready. Preparing for one prepares you for the others in a big way. 

Preparing a home inventory and keeping a copy in you grab and go kit is very helpful when filing a claim. It can help the adjuster and you when completing claim forms and figuring out replacement cost.

Note the item, when you bought it, serial numbers if applicable, the cost, and where it was purchased. You can also video tape your belongings, but don't forget to keep a summary list with your grab and go kit. You may only have a few seconds to get out in the case of a fire or evacuation. Keeping a summary copy will help.  You could also include photos if you do not have access to a video camera.

For more helpful suggestions please visit:

Know Your Stuff Home Inventory (see free version link at the bottom)
More Home Inventory Programs

Also, check out your version of Microsoft Word or Excel, Open Office, etc. for templates on home inventories.

Friday, October 21, 2011

Preparing for a Disaster, Part 3 - Family Communication Plan

October is Disaster Preparedness month. Be it Earthquakes, Floods, Fires Hurricanes or Zombies, you need to be ready. Preparing for one prepares you for the others in a big way. 

Having a communication plan is crucial in the event of a disaster. Chances are good that your cell phone will not work, you won't have internet (no e-mail, and, gasp!, no blogs!) home phones will probably be out of order too. So unless you are adept at smoke signals, you should put a plan in place to communicate with your friends and loved ones.

Here are some ideas:

 1. Plan on leaving a message for family members with the local red cross as to where you will be in an emergency.

  2.  Plan a meeting location and a couple of back up locations in case your first choice is inaccessible or destroyed. Make sure the location is secure and in a public place, like a school, red cross shelter, shopping center, etc. Out of the way location could be difficult to get to and may be unsafe.

   3. Make a list of family members names, date of birth, social security number, phone numbers and any important medical information (medications, allergies, conditions, etc.). Include doctors names, pharmacy, medical and property insurance info.

 4. Give each member the name and number of an out of state contact and make sure they have the above info in a locked, safe place. Keep your copies locked up and give a copy to at least one other family member for safe keeping.

 5. Include address and phone numbers for work locations, schools, and other places.

For a form you can complete, click here to go to the FEMA Website.

Tuesday, October 11, 2011

Are you ready for a disaster? Part 2

October is Disaster Preparedness month. Be it Earthquakes, Floods, Fires Hurricanes or Zombies, you need to be ready. Preparing for one prepares you for the others in a big way. 

Last week we talked about food, water and medications. This week, lets talk about first aide.

Your first aide kit should include:

1.  Band aides in various sizes.

2.  5" x 9" sterile dressings.

3. Sterile gauze rolls. 2 or 3 should be fine. Gauze pads in assorted sizes.

4.  Antiseptic wipes. Rubbing alcohol, antibacterial ointment and peroxide are good to have too.

5. Cold pack. You can get them at camping supply stores and online or the red cross.

6. Small scissors, 2" medical adhesive tape.

This is just a quick list. Check out the red cross and click here for more sites to consider.

For more information, check out this link.

Tuesday, October 4, 2011

Are you ready for a disaster? Part I

October is Disaster Preparedness month. Be it Earthquakes, Floods, Fires Hurricanes or Zombies, you need to be ready. Preparing for one prepares you for the others in a big way. 

First thing is to have food, water, first aide kit and any medications you may need. Don't forget to provide for your pets too!

So how do I do all that? Take it in steps.

1. Food - You can get a kit for your family that includes dehydrated meals. Canned goods and foods that required no refrigeration and very little water to prep are best. I got a great kit at Cost Co or you can shop on the web for them. Camping supplies shops are a great resource too. Remember to write a date on any canned and dry goods and check them twice a year for expiration, bulging or damage. Use and replace any canned goods that are about to expire. Toss out any bulging or damaged items. They can be a breading ground for bacteria and can cause illness.

2. Water - Most recommendations are to allow for one gallon of water per person per day. Plan on being on your own for at least 2 to 3 weeks, longer if you live in a remote or mountain area. Bigger cities, highly populated areas and major disaster areas are where disaster responders are going to go first.

3. Medications - If you have medications that you need on a regular basis like insulin, ask your doctor for an extra supply for your emergency kit and talk with them about how to manage your health issues in the event of a disaster. Remember to rotate out your medications regularly.

For more information, check out this link.

Thursday, September 15, 2011

Gov. disaster aide? At some point. Maybe.

In a recent survey, most Americans were not ready for a disaster. (See article) Many that do have plans lack some or most of the items that experts recommend. Also, many families do not have a disaster plan. In the event of a disaster, you may not have cell phone service, that includes texting and internet. Regular phone service may be disrupted. 911 will be overwhelmed with calls by those who can call out. Local emergency services will be busy prioritizing and dealing with the largest issues first.

In short, you and your loved ones are on your own until they can get to you. You could wait a few hours, a few days or a few weeks. We have to get back to being able to function on our own without power, water, sewer, phones, etc. For some helpful information on disaster planning click here. You can also visit the website for help making a plan.

Thursday, September 8, 2011

Have an Insurance Claim? Watch who lines up!

Recently  I had a client that had a small electrical fire in their attic. Thankfully everyone is fine. We reported the claim to the carrier while the fire trucks were still there.

While I was there, I noticed 2 people parked in separate vehicles waiting for something. The fire trucks had barley left when in come the public adjustor's, one after the other, offering their services saying that the carrier would not do an adequate job of settling with them. And I thought only attorneys chased emergency vehicles!
Public adjuster's, contractors, cleaners and others are all great professionals. But there are those who swoop in, hoping to make a quick buck at your expense. Remember, your insurance carrier will send out their own adjuster free of charge. If you hire a public adjuster or other worker, it is at your expense. There have been cases where "public adjusters" have taken a large "deposit" and vanished. Other adjustor's work for you for a percentage of your settlement amount. In other words, you get $60,000 for damage to your home, and the public adjuster may get 10% of that or $6,000. Contractors, cleaners and others have used scare tactics like this too.

 If you disagree with your insurance carriers estimation for repairs, you can hire a public adjuster to help you dispute your carriers calculations. But keep in mind, you are paying them out of your pocket, so be clear what they are charging you. Public adjusters have to be licensed by the state, so check with the California Dept. of Insurance to see if they are licensed and have any complaints if you decide to hire one.

Here's a couple of tips to help you try to avoid fraud:

1.  Check with your insurance agent or claims representative to see if they did really send them out and to see if their work will be covered.

 2.    Don't sign anything from anyone that shows up at your door offering to do        work. Tell them that you need to talk to your agent or claims rep and ask them to give you the paperwork so you can send it to your claims rep.

3.  Check to see if they are licensed and insured or bonded. You can check on license status for most professions by going to your states website. If they are not licensed, you may want to report them to your police department.

4.   If in doubt, call your claims rep, insurance agent or carriers customer service dept. and ask. Don't sign anything!

Wednesday, August 24, 2011


Do you life near a hillside or in a high fire area? There are some steps you should take now to protect your family and your property. Among them are:

1. Keep trees and other vegetation away from the roof. If a burning branch breaks, it has no other place to go but your roof.

2. Keep a defensible clear space around your property. Clear brush and vegetation away from your home and any structures like sheds. At least 400 feet is recommended.

3. Have a grab and go kit ready. Put copies of your insurance forms, bank information, names of contacts you may need, a copy of your home inventory and emergency preparedness plan. Check out this post for more info.

Remember, you can't always anticipate when a fire or other disaster could threaten your family and your home, but you can do a little preparation ahead of time to be ready.

Check out this video from CAL FIRE for more great information.

Wednesday, August 10, 2011

Got High Water Jeans?

Recently I was contacted to provide a quote for flood insurance on a property. Well, needless to say, they were a shocked. The flood insurance alone was a little over a thousand a year. Plus they still had to get homeowners insurance.

I advised them that they should get in touch with a surveyor and have them do an elevation certificate and survey, which could lower their rate for flood insurance.

Right now, the flood program assumes that the structure is at the lowest point on the property and that it will be a lake if we have enough water. The elevation certificate explains how the structure sits on the property in relation to the low points or areas of potential flooding. The NFIP sets flood insurance rates and determines flood zones. The homeowner can challenge the flood map and zone, but they should enlist the help of a surveyor and / or their local county or state flood control agency.

Now if you are lucky enough to pay cash for your home, you can opt to not purchase flood insurance if you own the property free and clear. Just keep in mind that if the house should flood (water and / or debris coming in from outside the structure, filling up to a level and then receding), you would have no coverage under your homeowners policy. A flood could be caused by a burst pipe in the street, a hydrant getting hit by a car, or any other number of things.

If you are in a flood zone and trying to sell your home, make sure you have a copy of your elevation certificate available for the buyer. It could save your transaction. Better still; most cities will scan a copy of your elevation certificate for free so that it is available by going to the city in case you loose it.

Friday, July 29, 2011

Square Pegs in Round Holes.

Insurance is kinda odd at times. Trying to find the right carrier for a client and their property can be a challenge. Especially if the home was custom built.

Carriers are like people at your local salad bar. Some like olives in their salad, others want iceberg and mayo, and still others are allergic to beets.

Some carriers would not even consider a home built before 1950, others will, and some can't get enough of them. It is frustrating for clients purchasing insurance, frustrating for the agent too. All we want is a square hole to put the peg in, a policy that meets the clients and the properties needs.

When shopping for insurance, answer your agents questions honestly. If you don't understand something, ask them to explain the question. Remember, an inspector will come out to look at your home and report back to the underwriter first, then underwritting will make the report avalible to your agent. It's worth it to take your time, give an accurate picture of your home and any claims.

Friday, July 22, 2011

What if S & P and others Downgrade Insurance Carriers?

With the government seeming to want to wait for 11th hour politics to kick in on the debt negotiations, Standard and Poors rating services has threatened to lower their ratings for insurance carriers, securities brokers, mortgage bankers and other financial firms if Congress and the President don't agree on a plan in time.

So what if they do? Didn't they and other ratings services say AIG and other big wall street companies were solid until the day they crashed? Yes, they did. And yes there are still parts of the financial world that take into account the S&P's rating of a particular financial investment before they will buy it or grant credit.

My thought on this is that if the S&P, etal., lower the rating of these companies, including Fannie Mae and Freddie Mac, it will make it harder to get loans and credit. I don't think that it will have that much impact on world trade unless the the government does default, even if just for a few days. Many countries are in financial turmoil right now through out the world. There are other ratings methods and ratings companies as well as measures of how a company or a country is doing. We have to take the bad with the good and look at the whole picture.

As for property and casualty insurance carriers, California and many other states have fiscal solvency requirements for those carriers doing business in the state as admitted carriers. A company has to do more than be able to pay all its policies in the state. They have to have reserves over and above their operating costs. I don't look for your homeowners insurance carrier to be seriously affected by what the ratings services do.

Thursday, July 14, 2011

What do I need to know before I cancel my policy?

If you have an insurance policy of any kind and are thinking of canceling it for any reason, think about the following:

1. Am I replacing the policy? If you are just switching carriers, look at the new policy that you are switching to. Does it provide the same or better coverage limits? What is the cost difference? I've seen people cancel a policy, go to a new carrier, pay $30 less a year and loose $80,000 in coverage. Think about it before you act.

2.  If you are canceling the policy and not replacing it, think again! You are required to have minimum auto coverage for your state. Here in California and elsewhere, the carrier is required to notify the Dept. of Motor Vehicles of any changes in your policy. If you do not have coverage, you could have your vehicle registration suspended. If you have a loan on the property, the lender will usually require you to have insurance on it for the life of the loan. They can force place coverage to protect themselves (Tell Me More).

3. When will my new coverage take effect? If you cancel your insurance today and your new policy does not go into effect for 2 days, and something happens tomorrow, you could be stuck without any coverage. I hope you have one honey of a savings next egg built up.

4. Do I get a refund? In some cases you could be canceling your policy during the current coverage term (mid-term cancellation is what it's called). Your carrier will then owe you a refund for any paid but unused premium. Most carriers pro-rate your refund based on how many days you were covered under the policy, how many days are left in the policy term and any fees due to the carrier. If you are pretty close to your renewal date, you may want to wait.  Refund policies and calculation methods vary carrier to carrier, so you may want to check with your carrier.  

5. Have you been with the same carrier or agent for years? Call your agent and ask them if there are any other carriers that may have appropriate coverage. Some carriers will let your agent cancel the current policy and re-write it, which can also lower costs.

Keep in mind that insurance is a way to begin to rebuild your life after a loss. It's not there to make you rich, pay for simple repairs, or to make your life more difficult (although I do wonder on that last bit!) . It's a way to have access to money that you may not normally have in an emergency.

Wednesday, June 29, 2011

BBQ Safety

Each year there are approx. 7,000 calls to fire departments due to injury or property damage due to BBQ grills.

Here's a couple of tips to help you and your loved ones stay safe.

1. Establish a child and pet free zone - Keep children and pets at least 3 feet away from the cooking area.

2. Check the connections on gas grills to make sure they are hooked up correctly and are not leaking.

3. Check the grill, housing and bottom for cracks.

4. Work on a non-flammable surface (concrete patio, asphalt, etc.).

5. Keep the grill at least 5 feet from any structure, 10 is better. Many house fires start because of flame ups that reach the patio cover above, the roof overhang or fence.

6. Never leave the grill unattended.

7. Keep the grill clean and practice sanitary food handling.

Have a great summer!

Thursday, June 23, 2011

Does My Tenant Need Renters Insurance?

If you are a landlord you are only interested in covering your property inside the rental, structure, and liability.

But none of your coverages apply to the tenant. If the house gets broken into and the tenants stuff is stolen, they are out of luck. If there is a fire and all their things are destroyed, they are out of luck. The tenant must get a renters insurance policy to cover their things.

Typical coverage in a renters policy includes personal property coverage,  liability, loss of use and medical payments to others.

Next week I'll talk more about each of these coverages and why a tenant would need them.

Thursday, June 16, 2011

Medication coverage and Homeowners Insurance, know what is covered.

One of the things I love about insurance is the challenge of  addressing anything that can happen to a property or person. Insurance carriers get it all!

With some states legalizing marijuana shops and others banning them, many carriers have revisited this important issue. Homeowners policy typically offer some form of coverage for prescribed medications. If marijuana is legal in your state, will your carrier cover your stash?

They may, up to a limit. If you are prescribed medication by a licensed physician, no matter what that medication is, you may have some coverage if the medication is stolen or destroyed in a disaster like a house fire. Some carriers will reimburse you the cost of medication refills for the medicine you lost.If you have a condition that requires you to take medication on a regular basis, know what your homeowners, renters or condo policy will cover.  Others will assign a flat amount. Check your policy or call your agent.

Monday, June 13, 2011

Look out for Brush Fires!

Brush fires in California are a unfortunately a common occurrence. The best thing you can do to save your home is to keep a defensible area around your home clear, 30 feet or more, trim tree limbs away from the roof, keep bushes and plants maintained, clean up an leaves and needles from trees and store any flammable items (gasoline, rags, paper etc) in approved safety containers.

If you are buying a home, one of the frustrations (as if there are not enough in real estate!) is when you can't get insurance because of a brush fire moratorium. When insurers get news of a bush fire in an area, they go into action and suspend the writing of any new policies in and around a burn area. Some insurers are more extreme than others and depending on where your home future home is located you might find a carrier that can still bind a policy in that area. If you are down to the close of escrow or near it when a brush fire starts up, make sure to ask your agent if they can bind the policy, and not just quote it.

Insurers put in moratoriums and stop binding polices in areas where there is a brush fire in order to protect themselves from losses and to prevent panic buying. Sometimes all you can do is wait.

Thursday, June 2, 2011

The Myth That You Must Have Insurance

Many people think you must have insurance on your home. The fact is, you don't.

If you do not have a loan (lucky!) then you can choose not to have insurance and to pay for all the repairs yourself or get a loan should the house get some serious damage or be destroyed.

If you have a lender, as do most of us, you will be required to get insurance or the lender will force place insurance to protect their interest in the property. I have yet to see a forced placed policy that is less than what a local agent can provide.

Keep your insurance up to date on your home. Open everything you get from your insurance company and call your agent or carrier if you don't understand it. Look at your renewal quote and check around. You may be able to save by switching carriers, changing your deductible, or adjusting coverages.

You can request a quote for homes in Southern California by clicking here.

Monday, May 23, 2011

A word on Insurance Inspections

When you purchase insurance for your home, rental, commercial property etc. the insurance carrier will send out an inspection firm to look over the property. These a third party company that is given a list of what to look for by each carrier they are hired by.

These inspectors mostly look at the outside of a home, but some companies will want an interior inspection as well. Check with your agent to see what type of inspection is being preformed.

If you deny a carrier access, refuse to speak to them or ask them to leave once they have identified themselves, you will be canceled by the carrier. Would you buy something worth  hundreds of thousands of dollars site unseen? Your carrier wants to make sure the property is in good shape. They are covering you for major losses. All you pay is your deductible and the yearly premium, usually less than $2,000, and the carrier can end up paying hundreds of thousands in the event of a covered loss. You would want to take a look too!

What are the inspectors looking for? Here's a short list:

1. Overhanging trees, overgrown brush. (Increased fire risk)

2. Dogs - breeds such as pit bulls, rottweilers, chows, german shepards, etc. (Liability risk due to breed bite / attack history. The list does vary some from carrier to carrier. Check with your agent)

3. Roof in bad shape. (Risk of injury, flooding, fire, etc.)

4. Trash / Debris / non-working vehicles. (Increased fire, theft and injury risks)

5. Distance to brush / vegetation / hillsides. (Increase fire risk)

6. Property occupied (Some carriers will insure vacant properties, but most want them occupied within 30 days or sooner if they are not written as a vacant property to start)

7. Other hazards such as construction, (increased risk of injury / damage, theft) distance to lakes & streams (flooding) and peeling paint / damaged overhangs (mold, damage due to infestation, rotting) are also noted.

This is only a short list and each carrier has their own standards. An inspector is not there to pick on you or your home. They are trying to make sure that the home will have a reduced risk of claims and that you and your loved ones are safe.

Thursday, May 5, 2011

Looking at Insurance Part 4: Additional Living Expenses

Additional Living Expenses or ADL coverage pays you money in the event your home or the home you rent is damaged or destroyed and you cannot live there until it is fixed up. The money is there to help with everyday expenses like groceries, rent, mortgage payments, etc. Your house or the house you rent does not have to be destroyed to get this coverage. You may be evacuated due to a fire  in the area and you have to go to a motel for a few days or weeks. ADL will help you pay the cost of the hotel and other expenses while you are not able to return home.

While having an emergency account is always a good idea, ADL is there to help out. Talk to your carrier or insurance agent and read your policy to find out what ADL coverage you have.

Thursday, April 28, 2011

Looking at Insurance Part 3: Personal Property

Personal property is everything you own that is not attached or a part of the structure. When I talk about personal property with a client, the first thing they think of is computers, flat screen, jewelery, and stereo. Then they tell me they don't have that much stuff.

There is a lot more to it than that! Personal property is EVERYTHING you own that is not attached or a part of the structure. Computers, flat screen, jewelery and stereo just scratch the surface. Your clothing, dishes, pots and pans, sofa, chairs, breakfast table, night stand, medications, cd's, dvd's, dog bed, your bed, those fridge magnets you got on your vacation, etc. When you really look at replacing everything you own, this coverage is usually not too far off. Carriers usually calculate personal property as 55% of the dwelling value, but you can increase this to 75% or more depending on the carrier and your needs.

While you may have to meet your lenders requirements for property coverage, it's ultimately up to you to determine the right amount of coverage.

Monday, April 25, 2011

Looking at Insurance Part II: Other Structures Coverage

One question I get often is "Can we get rid of other structures coverage?" What the client is really asking is can we save some money and get rid of this since we don't have a detached garage or shed.

Other structures covers more than detached sheds and garages. It also covers fences, walls around the property, walkways, concrete patios,  pools, spas, outdoor BBQ's, etc. For most policies the coverage is set at ten percent of the dwelling value, (ie, dwelling value is $200,000, other structures would be $20,000) but you can increase this limit if you feel more coverage is needed, like for a large concrete patio.

But to get back to the question, "Can we get rid of other structures coverage?, some carriers allow you to eliminate this coverage. But would you want to? If a large fire took out your neighborhood, you would not only have to rebuild your home and replace your personal possessions, but also the fence around your home, the large patio and the spa.

Thursday, April 14, 2011

Changes are coming to how your carrier determines your replacement cost.

In June the new replacement cost regulations put in place by the California Department of Insurance will take effect. Many carriers are gearing up for it and all property and casualty insurance agents must take a course on replacement cost calculations by June or they can no longer discuss replacement costs with a client.

What this means for the customer is that they will see a more detailed analysis of how the insurance carrier arrived at the replacement cost for their home.The customer will also need to provide more details about the property and themselves to obtain a quote. Type of flooring, roofing, counter tops, bathroom fixtures and more will all need to be put into the analysis. Most insurance carriers do this analysis already based on rebuild cost data for your area by companies like Marshall, Swift, Beck, and certain assumptions about the property. For example, some carriers will add 20% to the value if the home is over a certain square footage, or 25% if it is a 2 story home, etc.

Some carriers use the current real estate value, which is constantly changing, and add or subtract a certain percentage from that. This second approach leads to a lot of problems and personally I think this is what led to the regulation. It would be very easy to under insure a home based on it's current market value. Ultimately it is up to the property owner to determine their replacement cost for the property. If  you have a loan on the property, you will have to satisfy your lenders requirements for property insurance.

Lets say you buy a home for $245,000. You might think that in the current economy that it would cost about that or a little less to rebuild it. Your insurance carrier covers the home for $320,000.  Why the huge difference?

Well, the size of the home, the area it is in and the year it was built all play an important part. In this example the home is over 2,000 sq.ft. and in a good neighborhood. Cost of building materials and labor are another factor. But the one that most people miss is the costs of debris removal, permits, governmental fees, and changes to the building codes since the home was built. Costs of permits and government fees have gone up because of the down economy. Local and state governments are trying to grab any nickle they can. If the house was built in the 1960's and burns down in 2011, the home must be rebuilt to 2011 building standards.

Talk to your agent. Ask them for a copy of the rebuild cost analysis after June 27th when the new law is in force and all carriers must provide a copy and explanation of how the rebuild cost of your home was determined.

Thursday, April 7, 2011

Looking at Insurance, Part I: Dwelling Coverage

The dwelling coverage on your insurance policy is for the main structure you occupy or rent out. Your house, the apartment complex you own, the house you got a great deal on and have just rented to a nice couple with 2 kids.

This figure may seem high to you. The real estate market is down, demand for construction is also down, so the cost should be down, right? Well, not really. While the real estate market is constantly changing, insurance companies are not concerned with value, they are concerned with replacement. Replacement includes things like debris removal, county, city and state fees, permits, building code upgrades and more. Next, they have to look at costs of building materials for the term of the policy. If a large disaster occurs, like a wildfire, demand for labor and materials will go up and so will cost.

When you look at the dwelling coverage on your policy, think about building a home from the ground up and all the costs associated with it. That is what your carrier is doing.

Friday, March 18, 2011

Buying a home? Do you have coverage? Are you sure?

I got a question today from one of the real estate professionals I work with. The question they asked was, " With lenders wanting insurance coverage before they will prepare loan documents, does the client have coverage even though they do not own the property yet?".

The policy is in force the day it is bound. But the buyer does not own the house yet and the policy will not be paid for until escrow closes.  The first thing an insurance adjuster will ask for is proof that the client owns the home at the time of a claim, especially if they just moved in. Usually this is in the form of closing statements from escrow or a copy of the grant deed. If they don't own it, they don't have an insurable interest. You would not pay for something you don't own, would you? We'll neither will your insurance. The buyer would not have any coverage until they own it.

If you are buying a home, don't plan on "just putting a few things in the garage" until after you close escrow and you own the home. The sellers insurance will not cover your stuff, the policy you are buying will not cover you yet since you do not have title to the property. Don't start painting or do anything to the house. You don't own it yet! If anything happens and you file a claim, the policy could be canceled by the carrier and they may not provide coverage.

 Keep your insurance agent in the loop so they know if you are closing escrow early or later. They can often move policy dates forward or re-write the policy to reflect the correct dates.

Thursday, February 17, 2011

Go shopping, have an accident, pay for your rescue?

We all know that having a car accident can raise your insurance quicker than congress can vote to raise their benefit package. While the economy showing signs of recovering is debatable, one thing that is certain is that local governments are strapped for cash. Governor Brown in his budget proposal for California plans on raiding city and county redevelopment funds to help close the states budget gap and the race is on to prevent that.

A few weeks ago the Sacramento City Council passed an ordinance that charges out of town drivers who are involved in traffic accidents for the cost of emergency response fees. Cities have to pay for fire, police and other services. This is done through the cities share of local taxes paid by property owners, businesses, and other local sources. When someone lives out side the community and uses emergency services, the city does not get that money back. The Sacramento City Council did allow a waiver for business owners who live outside the city and commute to work, but their employees did not seem to get that waiver.

The fee, called the "fire recovery charge",  would be billed through the drivers insurance company and would only be imposed on non-resident drivers if insurers found them at fault.

So basically I could go to a nearby town to do some shopping or coming or going to work and get involved in an accident. Because I don't live in the city, I could be fined a "fire recover charge" if my or the other parties insurance carrier decided I'm at fault.

This could get ugly. And because this is a city ordinance, the only way to stop it is to get out to your local city council meetings and get heard. Many cities in fact already have such a charge against out of town motorists.

You can read about the Sacramento fire recovery charge HERE.

Thursday, February 10, 2011

What Most Homeowner's Insurance Doesn't Cover

Your homeowner's insurance protects you from what are known as perils-the things that might cause damage or loss. A good homeowner's policy is set up to provide coverage for the most likely perils that affect homeowners, such as fire, theft, and vandalism. However, there are some perils that are specifically excluded from the average homeowner's policy, and depending on where you live, these exclusions could be serious.

Earthquake Coverage

Most homeowner's policies do not provide coverage for damage caused by an earthquake. If you live in an area where earthquakes are common and a serious earthquake is a real risk, you should consider taking out a separate earthquake insurance policy. Your homeowner's insurance agent can point you in the right direction.

Flood And Water Damage

Water damage is a tricky area when it comes to homeowner's insurance. Some types are covered, while others are not. The most commonly excluded type of water damage is from a flood. This usually means a natural flood, from rain or rising water. For anyone who lives near a river or other body of water where flooding is a possibility, flood insurance is a good idea. Flood is typically defined as water and or debris coming in from outside the home.

Water damage that is caused by negligence is also usually excluded. If you knew your pipes were leaking and did nothing to repair them, the resulting water damage will likely be excluded and not covered. On the other hand, if a pipe suddenly bursts with no forewarning, your homeowner's insurance should kick in and take care of the damage.

Mold Exclusions

Many insurance companies do not provide coverage for mold, because it is considered to be the result of negligence. This is another grey area where some types of mold may be covered and others may not. Many carriers will cover mold, but will limit the dollar amount they will cover. Again, this is a good one to discuss with your insurance company.

Special Types of Personal Property

Usually your personal property is covered up to the policy limit. However some items, like computers and electronics have sub limits placed on them. Other items like musical instruments, art work and jewelry may require a personal property rider added to the policy. This is an area you should discuss with your insurance agent and make sure that the policy and endorsements will meet your needs.

Maintenance Issues

Homeowner's insurance is there to get you back to normal after a loss or damage. It doesn't provide you with free maintenance on your home! Any damage to your home caused by your failure to properly maintain it will not be covered by homeowner's. Thus, roof repair for wind damage is covered, but a roof that has simply gotten old will not be. If that were the case, homeowner's insurance would be very expensive indeed, with everyone getting repairs done to their home every time something wore out!

It's important to know what your policy covers and doesn't cover, so that you are not stuck paying big bills for a catastrophic event. Ask your agent or read your policy, and obtain extra coverage when you can.

Thursday, January 20, 2011

Flood Insurance - It's Expensive, But There Are Ways to Save.

Flood insurance is for some property owners a necessary evil. The property is in an area prone to flooding and flooding is excluded from homeowners policies, so an added expense. Most policies run into the thousands of dollars per year.

One way you can save money is to have a survey of the property done. The surveyor will, for a fee, come out and do a full survey of the property including an elevation certificate. The elevation certificate is specific to your property and shows how the structure is positioned on the land, where the low points are, if any of the structure is below ground level ( like a basement), etc. Once the survey and elevation certificate are completed, send a copy to your flood insurance carrier. It may take them some time to review it, in this case a little over a month, but the savings can really make a difference in your mortgage payment. A client of mine recently saved a few thousand dollars by having a survey and elevation certificate done.

Sometimes the elevation certificate is recorded with the title to the property. A trip to the county recorders office may be well worth your time.

 It may take several calls to find a surveyor that will do elevation certificates and surveys for flood insurance. I made about 12 calls to surveyors for my client and only 3 of them returned my call. What a surveyor will charge is up to them and the cost can vary from area to area and from surveyor to surveyor. The client did find a great surveyor at a price they could afford after making several calls themselves. A little persistence and patience can pay off.

Thursday, January 6, 2011

Force-Placed Homeowner's Insurance And How To Avoid It

Unless you are very lucky, you probably have a mortgage on your home. Your mortgage company, also known as a lienholder, has a vested interest in the protection of your home. If you fail to carry acceptable homeowner's insurance and a loss occurs, their monetary loss will be much greater than yours. For this reason, lienholders require that you carry homeowner's insurance. You typically won't be able to close on a purchase without it, and if it lapses, your lienholder will step in.

What Is Force-Placed Insurance?

Force-Placed insurance is a policy that your lienholder takes out on your home when your policy has lapsed or you have not provided them with proof of a policy that is acceptable to them. In order to protect their interest in the property, your mortgage company will obtain a policy and attach the payments on this policy to your mortgage. This insurance will remain in place until you provide proof of an alternate insurance policy.

Why You Don't Want It

It doesn't sound like such a bad deal to let the mortgage company handle placing insurance on your home. The problem is that this type of policy exists only to protect the mortgage company's interests-not yours. There is often little to no coverage for your personal property, and in the case of a claim you will get nothing-only the mortgage company will receive payment. In return for this limited coverage, force-placed insurance is very expensive-much more so than traditional homeowner's insurance. The lienholder usually only uses one source for this type of insurance and they do not shop for the best rate. After all, they are not paying for it, you are.

How Can I Avoid It?

First of all, make sure your homeowner's insurance coverage doesn't lapse! Make your payments on time if you do not have an impound account with your lender. If you do have trouble remembering, consider rolling the insurance in with your mortgage payment, or having it automatically withdrawn. Another important consideration is to make sure that the insurance company has accurate information regarding your lienholder, including their address. This will ensure the insurance company provides proof of insurance to the correct lienholder and there is no question that you already have insurance in place.

Force-placed insurance isn't what the mortgage company wants, nor is it the best choice for your interests. Be sure your homeowner's insurance stays in force and proof is provided so that your interests, as well as those of the mortgage company, are protected.