Do I need Other Structure coverage on my home insurance?

This is a common question which I often hear from my clients. This question often comes up when we are reviewing a policy to save money. This question may also occur when someone is buying their first home. While you may feel you don’t need the coverage it can be invaluable at the time of a claim.

In order to understand to important of this coverage it is worth looking at how we define what is the Dwelling and what is Other Structures.

A typical definition for dwelling is, “The dwelling on the “residence premises shown in the Declarations, including structures attached to the dwelling.”

The typical definition for Other Structures is, “We cover other structures on the “residence premises” set apart from the dwelling by clear space. This includes structures connected to the dwelling by only a fence, utility line, or similar connection.”

Based on the above definitions, Other Structures could be a fence, garage, shed, pool, cabana, patio, etc.

You may feel you don’t have any structures on your property that meets the definition of Other Structures but here is the catch – Other Structures is automatic coverage on the policy and is already built into the price. It does not cost you additional money or added to the policy to bump up the cost.

The amount for Other Structures is based on a percentage of the Dwelling amount listed or primary structure value which may be 10%, 20% or 30% of the Dwelling amount listed based on the insurance company.

That being said you may want more coverage than is automatically provided. This is important to discuss if you have several Other Structures or Custom Structures on your property. This often is the case with farm properties which are no longer an active farm. Also, water front properties that have boat lifts, docks, boat houses, etc.

While you may feel you do not have anything that qualifies as Other Structures, you may in the future. You could build a pool, a garage, a fence that meets the definition of Other Structures. It is always best to have more coverage than you think you need than to not have enough coverage at the time of a claim. Other Structures is a valuable coverage which you should give careful consideration and be discussed with your insurance agent when reviewing your home insurance for adequate coverage.

9 home insurance coverages you should have and 2 you should discuss with your insurance agent

Homeowners insurance is kind of like cars. You have the base year, make, model and then you have add-ons. A car can come with a package or a group of features or you can add features a la carte. Homeowners insurance is similar, but more complex. A home insurance policy comes with the basics which I cover in this video. You should never purchase the basic policy without looking into the add-ons. If you are not sure what home insurance coverage you should have, here is a list of the top 9 coverages or endorsements you should have in your home insurance policy and 2 you should ask your insurance agent about.

Special Coverage for Dwelling –Insurance professionals may call this allrisks or open perils but it refers to the same coverage. A basic home insurance policy is typically written to include only 16 types of claims. However, if you add this coverage or endorsement it will open the policy to cover home claims, excluding 11 types of claims. Essentially you can have a policy that only covers claims that are listed or have a policy with 11 exclusions.

Special Coverage for Personal Property – Like the coverage for dwelling you can have either specific claims covered or specific claims excluded.

Replacement Cost for Dwelling – Without Replacement Cost coverage the policy would settle claims based on actual cash value. Most home owners want to be put back to their original home condition versus less. Furthermore when you have Replacement Cost coverage on your dwelling you should have an additional limit or cushion available should you need more than the dwelling amount for a total rebuild of your home. I recommend at least 150% to start.

Replacement Cost for Personal Property – Without this coverage claims would be settled on a depreciated value basis. Most people do not want to buy used personal items or shop at Good Will. If you want new for old then you will need this coverage.

Water Back-Up coverage – a homeowners policy does not include coverage for the back-up and overflow of drains inside your home without adding this coverage to the policy. Any drainage systems inside your home can back-up and overflow causing damage to not only the interior of your home but also to personal items. According to iPropertyManagement the average amount for a home water claim is $10,000.

Personal Injury – While many of us would not purposely attack another person you could be potentially accused or sued for it. This coverage may include slander, libel, defamation of character, invasion of privacy, mental anguish, assault, etc. Without this coverage you would be out of pocket for an attorney to defend you whether the accusations were true or not.

Identity Fraud – This type of event is so common place today that we are almost immune when it is announced that there was data breach. That being said such an event can be damaging to any one, with long term financial consequences. This coverage is minimal cost and worth having.

Service Line Coverage – Our homes are connected to an infrastructure of water lines. There are some areas of Baltimore and Maryland that are older and more susceptible to failure. A water line on your property that collapses causing water to back flow into your home can damage not only the inside of your home but personal items as well. The local community, city, and county will not fit the bill. Ultimately the home owner will if this coverage is not added to your home policy.

Equipment Breakdown – Homeowners insurance is not a warranty program. If an internal appliance, such as the HVAC system fails, the homeowners insurance will not pay to repair or replace the system. Insurance companies have gotten wise to the issues that come with home ownership and the cost of new appliances today. Without this valuable coverage you will be out of pocket to repair or replace your appliances should they fail.

Bonus Coverages:

Loss Assessment – It is very common for communities to have homeowners associations. If a severe weather event were to occur and damage portions of the community the by laws of the homeowners associations may allow them to charge back to home owners in the community an amount to cover damages. Without the appropriate amount of coverage you could be out of pocket thousands of dollars.

Ordinance & Law –  Following on Loss Assessments homeowners associations may also require that your home have a certain esthetic look; roof type, siding, etc. This is common in golf communities. Also for homes located in coastal areas, mountainous terrain, etc. you may need to build to a certain code dictated by the city, county or state.

While this is not an all-inclusive list these are the coverages or endorsements that are added and/or discussed with my clients when reviewing their home insurance policy or quoting alternative options. Some of these coverages are new and were created as a result of the changing times. Some of these coverages have always been available but not used by agents. Regardless, as a home owner you should be aware of the various options available and discuss with your insurance agent on the best ways to protect your home.

If you haven’t reviewed your home insurance policy recently its time to call your insurance agent. A good agent will not only review your current policy for coverage gaps but discuss ways to fill those gaps.

Googling homeowners insurance could spell disaster for you.

Have your ever Googled your symptoms even though you know you should’nt only to find out you are dying in the next five minutes?!?

I have done it. I was recently diagnosed with a difficult form of eczema but had convinced myself after Googling my symptoms that I had skin cancer. After hemming and hawing I decided to put on my big girl pants and talk to a professional – my dermatologist. She quickly settled my nerves and told me that greasy lotion was my new best friend and that feeling like a greased pig was a new way of life now.

That’s like Googling home insurance and going with the first website that promises you cheap home insurance. It may seem easier and less stressful to do it yourself but you don’t really know what you need or what’s available. Only an professional can do that.

According to a study completed by JD Power in 2016 74% of new insurance purchasers will begin the buying process online. Of those consumers 25% will purchase insurance online. The rest use other methods, such as insurance agents or insurance company call centers. Now consider that 60% of homes in the US are under insured as stated by Marshall & Swift/Boeckh, and per Insurance Information Institute 1 in 20 homes will have a home claim each year. Those are some scary statistics from my perspective.

I know asking for help is difficult sometimes. My husband easily comes to mind when it comes to asking for help, asking for directions, or visiting a doctor. Hearing, “Honey, you were right.” always feels good. There is a reason there are doctors and there is a reason why there are Insurance Agents. It’s because we need them.

You may think by Googling and searching through a couple options that you have the right insurance. You can’t tell from seeing a few websites what you are getting until you are knee deep in a claim and you are hearing the word “denial” from your claim adjustor when you realize you may need a professional.

You are not paying extra money by using an Insurance Agent. You are asking for some one to build a relationship and trust with you. You are asking for an Insurance Agent to help you insure your home and auto adequately and to educate you about what is available to you. So ask for help and don’t go it alone. You will be glad you have some one to call if and when something happens.

Why Do I Need Renters Insurance?

For many their first home is a rental unit or an apartment. I also did this for a few years. When you go to sign the leasing agreement the leasing office will require proof that you have renters insurance. This is the main reason you purchase renters insurance.

The second reason to purchase reason is to protect you, the renter. There are a few coverages that are important for a renter of a unit or an apartment to have.

  • Contents or Personal Property – This is all the stuff you put into the unit/apartment; furniture, clothing, pots/pans/dishes, electronics, etc. If you lose everything in a fire will you have the money to replace all of your personal belongings?
  • Loss of Use – If you have a covered claim and you are unable to live in your unit/apartment. This coverage will cover the cost of a hotel, apartment, etc. temporarily. You will still be responsible for the rent on your unit/apartment unless the leasing company decides to let you break lease.
  • Personal Liability – If someone slips in your unit/apartment and decides to sue you for medical costs and/or inability to work, etc. this is coverage to pay for the damages or to settle the suit. If found liable for a traumatic event your wages can be garnished by the courts if necessary.
  • Medical Payments – If the same person that slips in your unit/apartment needs medical attention this is good will dollars to get them necessary emergency care.

In addition to these standard coverages you should consider the following additional coverages.

  • Replacement Cost Coverage for Contents/Personal Property – After a covered claim you will want new furniture, clothing, etc. not used.
  • Personal Injury – If you are accused of libel, slander, defamation of character whether true or not you will want coverage which can be provided through this endorsement.
  • Identity Fraud – Now that you are taking on more responsibilities you have a higher exposure to an identity fraud event, which can have long term consequences if you are unable to undo the damage.
  • Water Back-Up – If a drainage system in your unit/apartment backs up into your home you will need coverage for the repairs and personal property damaged. You must add this endorsement to yours renters policy in order to have coverage for this type of loss. This is the #1 cause of home claims across the country.

Many renters assume the leasing company or property manager will cover the cost of a loss to your unit/apartment. The leasing office/property manage can still hold you responsible for the damages and they will not cover you for the loss of your personal belongings or your liability as the occupant of the unit/apartment.

Overall the cost of renters insurance is minimal at around $200 a year or $15 monthly. While renters insurance may feel unnecessary it is important in order to maintain your financial independence.

Why you need an insurance agent

At the end of July I had what I would call a traumatic insurance event. I was woken up one night by my husband saying the police were knocking on our door. It turns out an impaired driver had struck my SUV while parked outside our home. As I glanced out my window I could not see damage to my SUV but what I found shortly there after was my vehicle was a total loss.

My SUV immediately following the collision at 4am on July 24th.

I don’t know about other people but I loved my SUV. It took me a month to commit to buying her and I was diligent in maintaining her. I invested my time and money in maintaining the condition of my vehicle. I also enjoy the independence of having my own vehicle at my disposal at all times.

As an insurance professional I thought it would be smooth sailing but it was not. Between negotiating vehicle values to the rental car shuffle, nothing went as I thought it would. I was in four different rental vehicles while trying to get back to where I was before this claim began.

I am finally at the tail end of the claim and this is what I have learned.

  • Get towing coverage, whether through your auto insurance policy or a AAA membership. Get it! To drag my SUV onto a flat bed tow truck off of the curb the cost was over $400. Also, have the number of a tow company you trust for those 4am tow emergencies.
  • Get rental reimbursement coverage and buy it up to a minimum of $50 per day. For someone like me that drives a full size SUV with two small children in carseats and a 6’2″ tall husband you need more than the $30 per day limit. A full size SUV today is $90 per day if you are not the insurance company.
  • Know the value of your vehicle when you are reporting the claim and research similar vehicles as comparables so you are not surprised by the value the insurance company estimates.
  • In my case my gut told me my vehicle was totaled. If you have any inkling that your vehicle is totaled start finding a replacement vehicle as soon as possible. I did not want another vehicle. I delayed the process and had a hard time committing in the end.
The shock and suspension falling off the undercarriage of my vehicle.
My vehicles broken dashboard.

If you have a good insurance agent they will help guide you through the claim process and give you tips and tricks to help make it as smooth as possible. Some claims will go smoothly and others will not. When the big claim comes along you will want someone on your side to help you along the way, if not just to vent to. I don’t wish claims on any one but if a claim happens I want to be there for them.

What you need to know about selecting a home deductible.

When looking at insurance quotes our eyes automatically drift to the bottom line premium quoted. But what about all the stuff above it? Not all home quotes and/or policies are created equal. One of the key parts of a home quote and/or policy is the deductible. Below is a list of things to keep in mind as you consider a home quote and/or policy.

  • Some deductibles are flat and some deductibles are percentages. Percentages are typically used in coastal areas where there is a higher probability of wind, hurricane, etc. A percentage deductible is based on the dwelling value listed in the policy. If the dwelling value increases the deductible increases as well.
  • Some deductibles are specific to a type of coverage; Water Back-Up, Water Damage, Hurricane, Tropical Cyclone, Named Storm, Wind/Hail, etc. You may also see the term All Other Peril which means where a specific deductible is not identified the All Other Peril deductible applies.
  • A home policy can have multiple deductibles which can be a problem if a claim triggers more than one deductible. Understanding how each deductible applies at the time of a claim is important.
  • Some deductibles are dictated or required by the insurance company. This decision can be based on where the home is located, such as coastal. One insurance company may require a higher deductible than another insurance company.
  • Some home policies waive the deductible for large claims or a total loss claim. Knowing when a deductible waiver applies is important. This can be beneficial in deciding on a high deductible.
  • Some companies offer a reducing deductible if you remain claim free.

It is important when you are reviewing a home quote that you be aware of the deductibles. While a high deductible will reduce the policy premium, a high deductible can be detrimental if you can not afford the deductible at the time of a claim or the losses that occur are below the deductible. An insurance agent can help you review all the deductibles applicable to a quote and/or policy. An agent can also help you select a deductible that fits your financial situation while providing you the most advantageous premium.

National Insurance Awareness Day, June 28th

This Friday, June 28th is National Insurance Awareness. The day was created to encourage everyone across the nation to review their insurance policies.

Below are some tips to help you observe the day:

Home:

  • Review the home value. The value of the home should be based on current construction costs, not market value. You should review the home value every 3 to 5 years.
    • Review the home credits. If you have installed an alarm or have turned your alarm service off you should update the home policy accordingly.
    • Review the deductible. The higher the deductible the lower the premium. Also a higher deductible will discourage you from filing small claims which can impact your ability to obtain coverage in the future.
    • Review the endorsements included in the policy. If you have switched insurance companies recently a coverage may have been dropped during the process.

Auto:

  • Review drivers listed on the policy. All licensed drivers residing in your home should be listed on the auto policy. Failure to do so could result in a denied claim for unlisted drivers.
    • Review ownership of the vehicle. If the loan or lease agreement has been satisfied update the policy. This will prevent delays in payment at claim time. Any change in titled ownership should also be reflected on the policy or a new policy purchased for the vehicle.
    • Review deductibles. Insurance companies continually increase the price breaks for higher deductibles. As with the home insurance a higher deductible will save you premium and discourage you from filing small claims.
    • Review usage of each vehicle. Vehicles used for Uber or Lyft services do not have coverage while being used for this purpose. Vehicles used for business purposes may also not have coverage if used for business at the time of a claim.

Schedule:

  • Update items to be listed along with values. Appraisals should be completed every 3 to 5 years to keep up with market values. Use an inventory such as Collectify to manage your collection easily.

Umbrella:

  • Update properties, vehicles, drivers, recreational vehicles, boats, etc. at each renewal. Failure to update could result in no coverage under the umbrella.
  • Make sure the underlying insurance policies for each of the above meets the minimum liability requirements to avoid a coverage gap.
  • If you do not have coverage for the underlying insurance policy for each of the above obtain it at your earliest convenience.

With the help of a Trusted Insurance Advisors they can help you review your policies at any time, not just this Friday or at renewal. A Trusted Insurance Advisor is there to help you every step of the way. Call your agent today!

Why is my credit score used when buying insurance?

This is a common question with clients and it is never an easy conversation. Like many of my clients my gut goes sour when I need to discuss or request information regarding credit reporting. There are a few things to know.

  • State of Maryland has approved the use of credit as a rating factor for auto insurance. Credit is not used for home insurance in Maryland. Almost all insurance companies doing business in Maryland will want to obtain a credit report in order to provide an auto insurance quote. There is only 1 or 2 insurance companies in Maryland that do not.
  • Your insurance agent will never see a credit score or credit report when quoting your auto insurance. For this reason your insurance agent will also not be able to provide specifics about what was contained in the report, and will direct you back to the insurance company quoted to obtain more information.
  • Your insurance agent will not know specifically how your credit impacted your auto quote. Insurance companies have rating structures based on hundreds of rating factors. As information is entered into an insurance company’s quoting system the rate changes. Credit score is only one factor for rating.
  • The process of obtaining your credit report will not impact your credit score. Unlike when you are applying for a loan or line of credit, we are not looking to confirm if you are a good applicant. For this reason you can not be turned down for auto insurance based solely on your credit score.

While the thought of your credit score being run for an auto insurance quote has you sick to your stomach, your insurance agent is doing their best to meet your insurance needs. Your insurance agent will not pry into your financial situation but will guide you on the best auto quote for you. Maintain an open dialogue with your insurance agent and voice your concerns to help settle your nerves.

Call your independent insurance agent for more information on the auto insurance quote process.

LLCs, Trusts, and Estates

Recently, I had a client call me regarding the purchase of a new property.

I went through the typical questions I would ask…

What’s the address?

Do you have a settlement date?

Is it a business or personal property?

How do you plan to use the property?

Who will reside at the property?

Who will own it?

It is not uncommon to get all green lights until you get to the last question. Business entities are a tricky business in the personal insurance arena. They are not impossible just tricky.

Insurance companies get a little crazy when you start talking business entities owning personal properties. A business has a different kind of exposure or risk and therefore has different insurance needs. Personal insurance policies are not designed to meet those needs and ultimately a business entity could put an insurance company in quite a pickle if a claim happens.

An LLC can sometimes be done if the LLC is formed solely for the purpose of holding a single residential property. The LLC should not conduct any other business and should not employ anyone. There may be tax benefits to an LLC but you need to weigh the tax benefits against the issues that arise when it comes to insuring the property in the name of an LLC.

Trusts can also be done but every insurance company is different. Some will name the trust as Named Insured, some as Additional Insured, some require a special endorsement for naming the trust. Only your insurance company will be able to tell you how the trust can be named.

Estates are tricky in that typically the estate was developed to hold assets for a person that has passed away. An insurance company would shy away from this type of situation because it is unknown who will live in the home, who will take care of the home, will the home be vacant, is it for sale, how long will the estate exist? The answers to these questions have an additional amount of risk associated with it and the insurance company may not want to take on that risk.

Regardless of what your plans are, you should always consult with your insurance agent on what your plans are before committing to them. You may not be able to get the coverage you thought you could or need.

Pamela

Winter Is Coming

Yes, I am a fan of Game of Thrones. It is something my husband and I were able to binge watch in the evenings over the summer and are looking forward to watching when it airs next year.

With winter quickly approaching it is time to batten down the hatches for the looming cold temperatures and wintery precipitation.

Here is a quick list of things to check off as you prepare for winter…

  • Clean out gutters of any debris for proper drainage and to reduce the chance of an ice damn.
  • Disconnect and drain all outside hoses. If possible, shut off outside water valves.
  • Repair roof damage and remove tree branches that could become weighted down with ice or snow and fall on your house or your neighbor’s house.
  • Wrap water pipes in your basement or crawlspaces with insulation sleeves to reduce the chance of freezing.
  • Clean your furnace and replace the filter to reduce the chance of fire.
  • Have your chimney and/or flue inspected to make sure no animals are nesting there.
  • Test or install smoke and carbon monoxide detectors. Replace the batteries twice a year.
  • If your house will be unattended during cold periods, consider draining the water system.

Whether you live in a single family home, condo, or apartment be prepared for the freezing temperatures and the mounds of snow and ice to come.

By following the simple steps above you can reduce your chance of filing a home insurance claim and have a cozy winter season.

You can find more information about preparing for winter by visiting…

http://emergency.cdc.gov/disasters/winter/

http://www.ready.gov/winter-weather

http://www.weather.com/safety/winter

Pamela