Former Agent's view on Homeowners Ins.Mar 27 '06 (Updated Oct 02 '06) Write an essay on this topic.
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Too many people often do not review their insurance coverage on a yearly basis and often find themselves many times under-insured, especially with the real estate boom. If you have an agent, go and see him or her...They will be more than happy to review your policy, chances are, you will need to increase your coverage. I was licensed in California. Three Coverage you need to be aware of: The coverage of the house itself. Insurance companies over the years use a rating system to determine the COST of REBUILDING the dwelling/structure of your house. It is determine by the size your house, design, materials, roofing, etc. Unfortunately, with the real estate boom over the past five years, it has thrown the whole system off. For example, in California when I was doing business my rating system calculated that a 2,000 Sq. ft was to be insured at roughly $200,000. But the house was purchased for $400,000. Many times the lender requires $400,000 coverage based on market value, not on cost of rebuilding that house. Lately, many insurance agents have been insuring the house based on the purchase price and market value of the house to get pass escrow. So which one should you choose? It’s always better to over-insure than under-insure. Contents Coverage: The coverage on the contents in policy will cover items such as cloths, sofa, TV, stereo, etc. You will need to make sure if your insurance coverage is full replacement. There are other items that will not be covered or have limited coverage under the basic contents coverage. You will need to add it to your policy as an endorsement. Anything expensive should be added as an endorsement such as a diamond ring, paintings, collectables, etc. Each items that is endorsed will need a written appraisal to show proof of value incase there is ever a claim. If you lost a $15,000 diamond ring, it doesn’t mean the insurance company will pay out that amount. If they can replace it with an exact or similar one for cheaper, they will. Liability Coverage: This coverage is used to cover you and your family against lawsuits, ranging from dog bites to your guests slipping and injuring themselves in your back yard. (Lately, if you own a dog that is on the insurance company list, you might get an increase rating or no coverage at all. Pit bulls, Rots, and other guard dogs have pretty much been blacklisted as a high risk.) If you are financially well off, you should get as much liability coverage as you can on your homeowners and auto insurance. On top of that, get an UMBRELLA policy. An umbrella policy will kick in when your auto and homeowners coverage is no longer high enough to protect you financially. For example, you accidentally kill someone in an auto accident and his/her family sues you for $1 million dollars and if you lose, your umbrella insurance policy will kick in to cover that lawsuit. To obtain umbrella insurance, most companies require that you have both auto and homeowners insurance with them. Secondly, the insurance company requires that you max out your liability coverage on both your auto and homeowners. Umbrella Insurance are very affordable and worth every penny. Always keep records of expensive items and store these receipts, records, appraisals, in a safe location other than your home incase your house is a total lost from fire. If you do not have any receipts, get a camera and take pictures or camcorder and film all your items with brief description and value. It is up to you to prove what you own and what they are worth. If you are not sure if an item needs additional coverage, don’t hesitate to ask your agent. Do not assume it is covered. Homeowners Insurance DOES NOT cover FLOOD, EARTHQUAKE, and in California, MOLD. If you are required to carry either earthquake or flood, please do so. The problem with earthquake insurance is that the coverage is limited. If an earthquake destroyed your home, you will spend a lot of your own money along with the insurance company’s share to restore your home. You will need to check your coverage to know what is covered and not. Flood Insurance is insured through the government so no matter which insurance companies you buy it from, it should be the same price. (In California, many location are not “zoned” as flood risk but actually has the potential to a disaster if levees breaks and the levees in many of these cities needs repairs or upgrades. It is a Katrina 2 waiting to happen. So you Californians who pay attention to the news and knows the conditions of your levees in your town, you might just want to start thinking about that flood insurance even if your location is not consider a flood zone.) WARNING: Homeowners Insurance is a DOUBLE EDGE SWORD. It’s nothing like auto insurance. When you file an auto insurance claim, it could be the other driver’s fault and so they collect from the other driver’s insurance and so your rates won’t go up. In Homeowners any time you file a claim, it is and it will ALWAYS BE YOUR FAULT, even though they don’t say it but the new premium will say it or sometimes they will right out refuse to renew your policy. More than one claim and they will be keeping a close eye on you. Electrical fire, it’s your fault. Winds blow down your fence and knock down your tree and destroy half your house. It’s really not your fault, you didn’t do it but once you file that claim, it’s your fault. Even if you NEVER filed a claim before, your rates will be higher if the previous owner of your newly-purchased house has a previous claim on that property. That house is considering a risk, therefore, higher rates for you. You get punish for just owning that “at-risked” property. That’s like getting a higher car insurance rate because the previous owner of that car you just bought had previous claims. Why are we held accountable for somebody else’s claim? Because a Homeowners insurance claim is always your fault. You need to write to your State insurance commissioner to end this practice. Don’t even bother having that $500 deductible on homeowners insurance. I don’t even recommend it. $1,000 should be the minimum. $2,000 deductible is even better and it will save you money. Save that money for future repairs. Why such a high deductible? Remember, every time you file, it’s your fault that is why. You never, ever file a claim unless it’s too much of burden to you financially. $1,000 loss, don’t even bother; the insurance company will make you pay dearly for that claim. $10,000 lost is ok enough to file a claim in my opinion. Damn if you file a claim, damn if you don’t. A true example: a potential client called me up. I quoted him for $400/year on his 1500sq ft home, same amount on what he used to pay for with his previous insurance company. I ran a claim report and found out that he filed a claim, stolen item worth $150 and damages totaling nearly $500, totaling $650. He filed the claim; after the $500 deductible, the insurance company sent him a $150 check. At renewal, he found out that his insurance company raise his rates by almost double what he used to pay for. He got angry and canceled the policy. Due to his claim, Preferred Rating Insurance companies refused to insured him, including my company. My insurance company does not like to receive new business that have THEFT and FIRE claims no matter how small the claim was. He became a high-risk client and falls into the standard market and so a friend of mine insured him for close to $1,000 year. In the end, he got a $150 check from the insurance company but lost thousands of dollars later on due to rate increases by filing that claim. He will continue to pay double or triple his original premium until he is no longer consider a high risk. So only use it when you really have to or you could end up paying that much too. It is up to a customer to file a claim or pay for the repairs themselves, I always let them know the consequences if they do go ahead with the claim.  |
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