Arizona Homeowner Advice & Tips

Before the real estate crash, we occasionally would receive phone calls from clients questioning whether their home was under-insured. The reason? They had purchased it for a much higher amount than what it was being insured for. They figured it should at least be insured for the purchase price.

Now, several years into the recession and amid a severe housing slump, clients are calling asking if we are insuring their home for too much. Are we over-insuring their home, they want to know. The reason? Home prices have fallen dramatically up to 40% or more in some areas and read about slumping home values.

When considering your home insurance, be sure to not confuse how much a home is bought or sold for versus what it takes to rebuild a home from scratch in an emergency situation (such as a total fire loss).

Typically our carriers provide very decent coverage on homes, often much more than what a client has paid for it and higher than many other carriers we encounter. While clients may wonder if we are providing too much coverage, the bigger issue is what happens if you are under-insured.

And no doubt we occasionally run into carriers who are willing to insure homes for substantially less than what we do. Can they really rebuild a home for much less coverage than our carriers? Or are they low-balling the coverage to obtain the business? Who is right?

According to a March 15, 2011 article in the Wall Street Journal (online), Marshall – Swift believes that upwards of 2/3 of all homes are UNDER-insured. Marshall -Swift is the company responsible for determining how much a home should be insured for. Their service is used by many insurance companies.

According to Xactware, a company that tracks trends in the property insurance and construction business, the cost of building materials rose sharply in 2008. Now with gas prices up to nearly $4 a gallon in many parts of the country, the cost to deliver building materials is rising as well.

If you believe your home is under-insured or over-insured feel free to speak with your agent. But the bigger issue is whether or not your home is under-insured. In the event of a claim a home that is insured for less than what it takes to rebuild will leave you very dissatistified.

Over-Insuring Homes?

I received an email from a client who was looking at buying a single family dwelling for a rental property. We ran the quote and emailed it. The client emailed back wondering whether we were over-insuring the home.

It is a question that probably every insurance agent has received.

Before the real estate crash there were clients who thought we were under-insuring homes. If they were paying $325,000 but we were insuring for $275,000 they believed we were not adequatly insuring the dwelling. Now that they are paying $150,000 and we are insuring for $275,000 they believe we are placing waaay too much coverage on the dwelling.

It is easy to confuse the two points, perhaps. However, whatever you buy or sell a home for has little to do with the cost of rebuilding that home.

PLUS, there are coverage on a home that have nothing to do with the dwelling itself. A home policy covers your personal property. The home policy pays to clean debris away. It protects you against claims made for liability or medical reasons. It provides money for you to live elsewhere if that home is unliveable. Or, reimburses you if a tenant moves out and you need reimbursed for lost rents.

While no one wants to overpay for their insurance, the fact is everyone wants their home put back like new if it is damaged or destroyed. To that end, you are welcome to ask questions and even question the coverage being placed on your home. However, the end result is that you AND your insurance company wants to see you made whole again if the worst happens with your home.

If you want a quote on Arizona Home Insurance, please contact us today!

Filing Homeowner Insurance Claims

When we buy insurance of any kind there is a premium/cost to us as consumers. All we really ask in return is that the company providing the coverage do their part when there is a claim. And for the most part insurance carriers do a pretty good job handling claims (in my opinion) overall.

But what is often not understood is the repercussion of filing multiple homeowner claims.

In Arizona, insurance carriers commonly non-renew Arizona home insurance policies that have two (2) or more claims within a 5 year period.

One simple piece of advice can save you alot of grief.

Carry a high deductible on your home insurance policy and avoid the temptation of filing a small claim. One person reportedly had a water claim a few years back. Then, a couple years later believed they had been the victim of a theft and called the insurance carrier only to discover the item missing was not missing afterall.

Even though this person tried to cancel their “theft” claim it was too late. The insurance carrier already had reported it to the claims loss underwriting exchange. Now for the world to see they had two claims on their record.

The result? The client was non-renewed for having two claims within a 5 year period. When they shop for new home insurance the rate will likely be substantially more due to their claims history.

Be careful filing small claims. And be especially careful filing two home insurance claims within a 5 year period.

A few things your homeowner insurance does NOT cover

As a homeowner you expect your insurance policy to rebuild your home if destroyed by fire or damaged in a claim. While you can always ask your agent periodically (every couple years) to do a rebuild cost estimator to help ensure your home is insured properly sometimes it is what we don’t know that could hurt us.

Are you aware that your homeowner policy does not coverage mold or earthquakes?

In one poll 40% of respondents believed their home insurance covers mold. It either does not or has limited coverage. That’s become a pretty normal standard for insurance today. The poll also found 51% believed their policy covers damages from a earthquake. Some policies offer endorsements that you can purchase and add coverage but earthquake coverage is usually not included in your homeowner policy.

What about renters insurance?

17% of renters believe renters insurance is not important.

If you rent your home or apartment, do you carry renters insurance? According to a survey 60% of renters do not bother carrying renters insurance. Younger people are even more inclined to not carry renters insurance, a whopping 72% of respondents acknowledged this fact.

Fifty one percent of seniors who rent their home carry renters insurance. Many simply believe it’s too expensive. Yet the costs to have renters insurance are actually very moderate to reasonable at a cost of $180-$250 or so per year. However, the fact is many seniors are battling having limited income and too many hands reaching into their pockets. The cost of food and utilities, health care and other items goes up over time. Invariably, something gives and giving up their renters insurance is an easy decision for many.

Then again, American’s make choices:

50% of American’s spend at least $80 per month on coffee.
66% of working American’s spend around $148 per month buying lunch, instead of packing it and saving the money.
Renters insurance works out to about the price of two at the movies, per month

Why buy renters insurance?

A house fire takes place every 90 seconds. In an apartment you not only have to be concerned about your property but the behaviors and habits of other tenants. What if they cause a fire that spreads to your building? A break-in occurs every 15 seconds.

You don’t want to wait until there is a claim to buy it. Then it’s too late.

Do you worry about being dropped by your insurance carrier?

A story ran in the Wichita Kansas area spoke about a couple of clients who were being dropped by their homeowner insurance carrier. The client was upset and confused.

The reasons why an insurance carrier would drop you from coverage probably variers from carrier to carrier. But typically, it seems most insurance carriers look at a five year track record for claims. If you have one claim in five years they accept that ratio – unless (perhaps) it is some type of major claim involving water or theft. Then the rules or guidelines may fly out the window.

Theft and water damage claims are looked upon by insurance carriers as different than mother nature, wind, hail and storm claims. While an insurance carrier may drop someone for two mother nature type claims I would not say it is an absolute with every carrier. However, anytime you mix in a theft and water claim they ratchet up their dislike.

One key is to carry a higher deductible, at least $1000. If your carrier offers a $1500 deductible consider increasing.

Plus, have a few thousand dollars in savings set aside if possible for unseen, emergency situations like claims. If you have a claim for $1800 are you going to pay $1800 to keep it off your claims history or file and have an $800 claim (after your deductible). I am not advocating one way or the other except to say I would likely pay this type of claims out of pocket to keep it off my record.

Insurance has gotten to be a catch-all for every claim situation. Ideally, it’s major claim protection. Though I understand not everyone has the ability to pay $1800 out of pocket and would need to utilize the insurance policy.

Health insurance has been a terrible trendsetter for many. We go to the doctor and pay $25 copay. The bill might be $5000 but we’re so happy to only pay a small co-pay. In some ways we’ve gotten used to using insurance and expecting to pay a small amount.

One of my client’s had a major water claim. The bill totalled about $100,000. I heard this same carrier had another client with a fire claim that cost at least this much or more. How many insurance policies does this carrier need to recoup their losses? When they charge $500-$800 per year per policy it takes alot, especially when many other people are filing claims too.

We have to keep in mind that the risk is great for the insurance carrier too. That’s why they get nervous with fire and water type claims. Particularly with these types of events we, as consumers, must do a good job of minimizing the risk in our homes.