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Home Insurance Option: Equipment Breakdown Coverage

Home Insurance Option: Equipment Breakdown Coverage

I am occasionally asked by a new or existing client whether their home insurance policy covers an air conditioning compressor or water heater that’s going bad. In most cases, the answer is no, unless it’s caused by an event justifying a claim such as a lightning strike, a tree limb that fell on it, etc. Two home insurance carriers offer a coverage option worth considering for their policy holders called Equipment Breakdown coverage and it may provide an attractive option worth adding to your policy. Equipment breakdown coverage from both home insurance companies offers some very attractive coverage including: Repair or replace a major home system such as the central heating and cooling system, swimming pool systems, ventilation, emergency generators, well pumps, air and water filtration, chair lifts and elevators, home entertainment systems and computer equipment. One of the companies extends this coverage to include appliances. One even includes coverage for additional living expenses if the home becomes uninhabitable due to the equipment breakdown. Both offer to replace the failed equipment with greener replacement by paying to replace a non-Energy Star device with Energy Star rated equipment. One won’t surcharge the renewal rate if such a claim is filed and paid. Where these two home insurance companies differ is in the cause of the equipment failure that may trigger a claim. One company excludes equipment breakdown coverage due to normal wear and tear. It requires a triggering event that is sudden, direct, and accidental such as a broken part or electrical arcing. The other covers a sudden, direct, and accidental failure and goes on to cover failure due to human error such as an improper installation of the unit and improper operation and maintenance of the equipment by the homeowner. The cost to add this option to either equipment is very affordable depending on the amount of coverage and deductible selected. It can range from $24 to $100 a year which is much less than most home warranties. The biggest difference is the home warranty is designed to cover normal wear and tear. Equipment breakdown coverage is a fairly new option. Given the competitive nature of home insurance, I expect most companies will provide it within the next couple of years. If offered, would you choose to add it to your policy? Share your “decision” along with your thoughts, questions, and experiences with me on my Facebook, Google +, and LinkedIn pages. I’d love to hear from you! Thanks! Ed Wise Share...

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Car Insurance Topics for College Students

Car Insurance Topics for College Students

There are a couple of car insurance related topics every parent of a college student should discuss with their son or daughter before they head off to school. Both have a financial impact on the family’s car insurance rate. The biggest one is allowing a friend or roommate to drive their car or truck if they take one to school. The other one relates to grades. Let’s review this issue and ways to lower your car insurance rate. Friends Driving Their Vehicle: Most students don’t think twice about letting a friend or roommate borrow their car. They’re not using it at that moment, so why not? The reason they shouldn’t is what happens if the friend is involved in an accident, regardless of who’s at fault. Any time your son or daughter allows one of their friends to drive their car, they put the family’s car insurance in jeopardy. It will be your car insurance which will pay for damages if their friend is involved in an accident, not theirs. If someone is hurt or injured, you may be found liable for medical expenses or worse. I recommend all parents advise their student to not loan their car to a friend. The moment a car is loaned to someone else, that driver becomes a permissive driver. Insurance follows the car, not the driver. If the friend is involved in an accident, it will be your policy that’s liable not the friend’s. A permissive driver can also put you at financial risk if someone is hurt or killed because of the accident. Accidents and injury claims will impact your rate with most car insurance companies for 3 to 5 years. Grades Still Matter: Why pay more for car insurance than you have too? Remind your son or daughter good grades keep the cost of car insurance lower! Students with an A/B average (they can still have one or two C’s on their transcript) earn a discount while attending college. A copy of the most recent transcript will need to be presented to underwriters to receive this discount. Students With No Car: Many car insurance companies offer a discount if the student attends a school 100 or more miles away from home and doesn’t take a vehicle with them. The reason for the discount is the student doesn’t have a car with them which reduces their exposure for being involved in an accident. Geographical Rating: Those students who attend a school in a smaller community than the one they live in may help reduce the premium by rating that vehicle with the new garaging address. For example, if the family residence is in Houston, Austin, or...

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Insurance Considerations for College Students

Insurance Considerations for College Students

Does your college student need property or liability insurance? I’m asked this question by clients who have a son or daughter headed off to college each August, and it is that time again. The answer is it depends more on where they’ll live; whether it’s in a dorm room on campus or off campus in an apartment, condo, or home. Let’s review both scenarios. Dorm Room: If your son or daughter will live on-campus in a dormitory they don’t need renter’s insurance. Most home insurance policies provide coverage for personal property off premises, or items stored in a dorm room, storage unit, etc. The amount your home insurance policy covers depends on the carrier, but it’s usually 10% to 20% of your personal property or contents. For example, a home insured for $200,000 will have contents coverage ranging from 60% to 75% of the home’s value or $120,000 to $150,000. The amount of off-premises contents coverage will range from $12,000 to $30,000, which should be more than enough coverage for the typical dorm room. The only caveat is anything lost or stolen is subject to the home insurance policy deductible. Texas home insurance policies normally have a deductible ranging from $1,000 to 1% of the home’s dwelling value which means the home policy deductible will be $2,000 if there’s a 1% deductible for a home with an insured value of $200,000. Items such as smart phones, laptops, tablets, and musical instruments can be scheduled on most home policies. Scheduling an item on a home policy simply means listing that item or items for their stated value under the scheduled items portion of the policy. This is optional coverage on the home policy and will have a nominal cost to add it. It also usually means there’s either no or a small deductible such as $100. Apartments & Rent Homes: Many students move into an apartment or rent a home after the first or second year at school. I recommend a renter’s policy when that happens because the student usually has more personal property than their dorm room accommodates. You’ll need enough coverage to cover more electronics, decorative accessories, furniture and any appliances you own such as a washer and dryer. Renter’s insurance policy rates are determined by the amount of the contents coverage, what type of home the student is living in, where the home is located and protective devices such as fire and burglar alarms. The cost of a renter’s policy will range from $150 to $300 a year. Common deductibles are stated in dollar amounts such as $250, $500, and $1,000 depending on the carrier. If they have roommates living with them,...

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Converted School Buses and Car Insurance

Converted School Buses and Car Insurance

I received a call a couple of weeks ago from someone who’d been referred to me. The caller needed car insurance for a Blue Bird bus he and his wife were buying. Their plan is to convert it into an RV and live in it as they drive to different parts of the country where they’ll live and work for varying timeframes. The question is what kind of car insurance would they need and who’d write it? I initially thought this would be an easy policy to write, after all, I have several carriers who write RVs. None would. I then called the underwriters with the broker firms I work with thinking they could write a car insurance policy for it but they couldn’t either. I struck out with all my carriers but had several interesting discussions which helped me understand the difficulty in writing such a policy. Below are the three issues which resulted in the “no” answers I received. Commercial vs Personal: Blue Bird buses are recognized as commercial vehicles. Anyone who drives a school bus must carry a commercial driver’s license. A RV, on the other hand, is designed as a personal vehicle to be driven be anyone with a standard driver’s license. Converting a school bus to a traveling home means changing the vehicle classification from commercial to personal thereby requiring an initial commercial policy until it’s converted to a RV. Once the conversion is complete it needs a personal, or RV insurance policy. No carrier or broker was able or willing to write the vehicle one way and then shift it the other way when the project was completed. Intended Use: This line of reasoning from a couple of underwriters, is similar to whether this is a commercial or personal vehicle. It’s based on what the Blue Bird bus was originally intended to do, carry people. Converting from a commercial vehicle to a personal vehicle changes its original intended use and caused a couple of underwriters to say no. I run into this with a few underwriters when someone converts a commercial building, barn, etc., into a home. These companies won’t write a home which wasn’t originally built to be a home. DIY vs Skilled Work: The other problem resulting in underwriters declining to write a RV or car insurance policy is who is doing the conversion work. The couple buying the bus are intending to do most of the work themselves. They will have a skilled electrician and plumber assist them with wiring and adding the kitchen and bathroom, but intend to do the finish out themselves. DIY projects of this kind, as well as on kit cars,...

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Why Home Insurance Rates Change Every Year

Why Home Insurance Rates Change Every Year

Many people are surprised to learn their home insurance rate will change from year to year. Many times, there will be an increase as we’ve seen in the past few years, and sometimes there will be a decrease. Rates fluctuate, so let’s examine why! Inflation: Most home insurance policies include an “inflation protection” component within the policy. This is designed to increase the home’s insured value, what it cost to replace the home in the event of a total loss, each year based on the rate of inflation. The average rate of long term inflation in the United States since World War 2 is 3.76%. If the rate of premium increase for a home insurance policy at renewal is between 3% and 5%, that signals to me the rates are stable and not increasing beyond the rate of inflation. If rates are rising at a rate faster than inflation, as they have been for the past five years, then it becomes increasingly important to review our client’s options each year. Insurance companies didn’t always include an inflation protection component within their home policies. They depended on the agent and their team to review each client’s insurance policies every year to two and adjust them accordingly. The only problem is it didn’t always happen and resulted in many people having a home which was underinsured for a total loss. Inflation protection protects the client from having too little home insurance coverage to replace their home. Weather: Texas, especially the Dallas / Fort Worth area, has experienced three continuous years of severe hail storms. Insurance companies have paid billions in claims over this timeframe which has resulted in significant rate increases in the zip codes which have been most impacted by hail. As severe weather frequency increases, rates go up, even if you didn’t file a weather-related claim. When the severe weather abates, rates will drop. Claims: Home insurance is designed to protect the homeowner from financial disaster by moving the risk for a major claim from the homeowner to the insurance company. When claims for water damage, a fire, theft, vandalism, and other non-weather-related events are filed, rates will increase for the homeowner. Being claim free, helps keep rates lower and enhances your ability to move to a carrier with lower rates. Competitive Pressure: Rates don’t always increase. Sometimes, they do go down. Texas is the second largest home insurance market in the country which means it’s a very competitive marketplace. Some home insurance companies lower rates to increase their market-share and grow their business. When this happens, consumers benefit, if they are willing to evaluate options! Complacency: Most people I know really don’t enjoy...

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