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Home Insurance and a First-Time Home Buyer’s Mistake

Home Insurance and a First-Time Home Buyer’s Mistake

A friend of mine who’s in the water, fire, and smoke damage servicing business asked me to talk with one of his client’s last week. The client was a first-time home buyer and needed some advice on how to deal with a home insurance claim for 6 leaks beneath his slab foundation. His homeowner’s insurance policy was woefully inadequate to deal with the claim as it didn’t have the right coverage added to it. He shared his story with me. As a first-time home buyer, he reviewed the home insurance quote from the carrier he has his car insurance with and determined it was too expensive. He talked with another home insurance agent and stated he wanted the “cheapest policy” available. He got that, but as it turns out, he wished he’d paid more to purchase a couple of options which would have helped him. All home insurance policies have a variety of options available, but it’s up to the buyer to confirm they are included and avoid the fate of this home buyer. Here are 4 options I believe all homeowners should have. Water Damage: Most policies provide some level of coverage for damage caused by a water leak. The coverage is usually limited to “sudden and accidental” leaks such as a pipe bursting, an appliance leak, a ruptured water heater, etc. There may be a dollar limit, so I recommend at least $25,000 in coverage and more if it’s available. It takes more than most people realize to replace wood flooring, sheetrock, etc. that’s damaged by a significant water leak. Slow Leak: A few home insurance companies provide optional coverage for damage caused by a slow leak. This type of leak usually occurs under appliances or sinks, behind walls, or around pipe joints and often go undetected until hardwoods warp, tiles pop, or mold grows on sheetrock because they are hidden from sight. If the option is available, I highly recommend it. Sewage Backup: Having sewage back up into your home is a nightmare, and most home insurance policies don’t include coverage for it. Clean up requires a hazmat team which is why I recommend this coverage which is expressed in a dollar amount. Foundation Coverage: Texas soil has a high clay content which expands when we have rain and contracts when we don’t. While damage to the foundation due to soil movement isn’t covered by any home insurance policy, damage caused by leaks under a foundation from water supply lines is covered. This option provides coverage to access (cutting through the slab to get to the leak) and egress (filling it back in and tying it into the existing slab). Anyone with...

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Is a Car That’s Been Broken into a Car Insurance Claim?

Is a Car That’s Been Broken into a Car Insurance Claim?

A client texted me early Monday morning letting me know his car was broken into overnight. The good news was his car wasn’t stolen. What was stolen, though, was his wallet, watch, possibly his passport, a ring, and a few other items. His question was, did his car insurance policy cover this? He has “full” coverage policy on his car which results in a yes and no answer. Let’s look at the reasoning behind the two answers. Yes: If the car were damaged during the break-in, such as a window being broken or the door bent from the use of a crowbar, then yes, his car insurance policy would have covered repairs for the damage less the deductible. Comprehensive coverage, which he has, covers vandalism to a car, as well as a broken window or windshield. In his case, the driver’s window was left cracked open allowing the thief to easily unlock the car and enter it. Since no damage was done to his car, there is no need to file a car insurance claim. Filing one would result in a $0 paid claim which may make it difficult to move him to another carrier who may provide a better rate. No: The contents which were stolen from his car are not covered by his car insurance policy. They are covered under a home or renter’s insurance claim. Surprised? Most people are very surprised when I share that with them. The majority of insurance companies who write home, renter’s, and condo insurance, provide some coverage for personal property, or contents, off premises from the home. Usually it’s about 10% of the amount of contents coverage on the policy and it covers personal property in your car, while traveling, and even in a storage unit or facility. The items taken from my client’s car, are considered personal property or contents off premises. The issue is whether such a loss exceeds the home / renter’s insurance policy deductible? In most cases, it doesn’t. Further complicating the issue is my client doesn’t have renter’s or home insurance since he’s living with his fiancé. Her policy probably doesn’t cover it either as she does not have an insurable interest, or ownership, in the stolen property. What happened to my client is unfortunate. He appreciated our discussion even if he didn’t like the answers. It serves as a great reminder for all of us to not leave a purse or wallet with our driver’s license, credit and debit cards in it. Never leave your social security card or passport in your car as these two documents can lead to a stolen identity more quickly than just your driver’s license....

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Potential Changes in the Flood Insurance Program

Potential Changes in the Flood Insurance Program

The National Flood Insurance Program, or NFIP, was already in deep debt, to the tune of $24.6 billion, before Hurricanes Harvey, Irma, and Maria, and Tropical Storm Nate hit our shores. Further complicating matters, the Congressional Budget Office, or CBO, is projecting a budgetary shortfall of $1.4 billion. Let’s examine what’s causing the budgetary shortfall and what the future implications are for the flood insurance program. Budgetary Shortfall: The cause for the budgetary shortfall is due to the difference between how premiums are calculated for coastal counties versus inland counties affected by flooding from lakes, rivers, streams, and creeks. In short, the program doesn’t charge enough for flood insurance for properties in coastal counties to cover wave damage such as we experience in hurricane storm surge. Storm surge accounts for 37% of all flood insurance claims. When this is added to hurricane related flooding claims due to rain (16%), tropical storms (5%), and nor’easter coastal storms (2%) it far outweighs inland flooding claims which total 36% of all flood claims. Adding to the unbalanced rates, flood insurance policies in coastal counties account for 75% of all NFIP policies. Unless something changes, the NFIP’s coffers will run dry soon. Congress and the Trump administration are eyeing changes to the flood insurance program due to the budgetary challenges and outstanding debt the NFIP has. Here are a couple of ideas being considering. Deny Coverage: Mike Mulvaney, the director of White House Office of Management and Budget, believes flood insurance should be denied to homes built in flood plains after 2020. Coverage for existing homes in a 100-year flood plain would be continued, but no coverage would be available for new homes constructed in these areas. If this were to become law, homeowners will need to find private flood insurance which is usually more expensive than flood coverage from NFIP. President Trump has expressed similar statements where coverage would be denied for homes most at risk for flooding. As you can imagine, the National Association of Home Builders is opposed to this idea. Cut Off Coverage: Mulvaney’s plan also provides additional powers to cut off coverage from properties which flood repeatedly. No details have been provided as to how many times a property would have to flood before being cut off, however, when it occurs, the homeowner would be forced to find private flood insurance if it’s available. Raise Rates: None of the news reports have mentioned a rate increase. Most private carriers raise home insurance rates after major storms. Rates in north Texas for home insurance continues to climb due to the massive hail storms in 2016 and 2017. One easy way to slow the budgetary...

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What is Forced Place Insurance?

What is Forced Place Insurance?

In July of this year, news agencies announced Wells Fargo forced unwanted car insurance on 500,000 to over 800,000 of its car loan customers, most of whom had valid car insurance. The type of insurance used is referred to as forced place or lenders insurance. The results of this practice were devastating; 274,000 of Wells Fargo’s customers were forced into delinquency and 25,000 vehicles were wrongfully repossessed. Wells Fargo reaped millions in revenue and fees from this practice. Forced place insurance is written by the lender when a borrower has a lapse on their car, boat, RV, or home policy. It’s designed to protect the lender in the event of a loss and is usually written with enough coverage to pay off the loan. This policy isn’t a gift; the cost of a forced place insurance policy is rolled into the monthly payment the borrower makes. If the borrower refuses to pay the new amount, the asset is repossessed. Forced place insurance on a car means the policy provides much less in coverage than a standard car policy. It may or may not extend liability coverage to the car you hit if you’re at fault in the accident. There is no medical or personal injury protection coverage for you if you or a passenger are injured. There’s no rental car reimbursement or roadside assistance coverage. In the case of home, condo, flood and wind versions of force placed insurance: These policies protect the home up to the value of the loan. If there’s a total loss, the loan is paid off but the borrower is left holding the bag for everything else. There’s no coverage for contents or personal property. There’s no liability or medical coverage. There’s no coverage for loss of use. The purpose of lender placed insurance is to recoup the money they’ve loaned the borrower for the lost property.  The borrower may still be liable for medical charges, repairs to another person’s vehicle, demolition of a home, and debris removal. Forced place insurance is expensive too, costing anywhere from the same as a standard policy to twice as much. In a few instances, it may cost as much as 10 times the cost of a policy from a standard carrier. The good news is borrowers may replace forced place insurance with their own coverage simply by obtaining a policy from the company of their choice. I’ve replaced several forced placed insurance policies with real car and home insurance.  In all but one instance, the savings were huge.  In that case, the client wound up paying about $100 more a year, but they considered it a bargain once they understood how little...

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Dog Breeds Home Insurance Companies Don’t Like

Dog Breeds Home Insurance Companies Don’t Like

I was talking with a prospective client the other day and getting the information needed to quote home insurance for her new home. She laughed when I asked her if she had any dogs. She does – 4 Chihuahuas! We both had a good laugh although she also understood that while her Chihuahuas were not an issue for a home insurance company, there are breeds carriers won’t write even if they behave nicely. There are several dog breeds home insurance carriers will decline to write a home or renter’s policy for. These breeds may also result in the insurance company canceling or not renewing the policy if they are acquired after the policy goes into effect. The most common breeds include; Pit Bull Rottweiler Doberman Pinscher German Shepherd Akita Chow American Staffordshire Terrier Dingo Husky Italian Mastiff Malamute Wolf (or wolf mix) Great Dane The aggressive breeds are the most obvious due to their history or reputation of dog bites (Pit Bull, Rottweiler, Doberman, etc.).  Some home insurance companies have changed their perspective on German Shepherds and will write a home policy for someone who owning a Shepherd. The change in heart is the result of low claim activity on Shepherd’s to a level equal with the “good dogs” (Labrador and Golden Retriever, etc.). The big breeds (Great Dane, Italian Mastiff, etc.) are on some carriers’ do not write list due to their size. In these cases, underwriters are concerned they may knock someone over such as a child or elderly parent which could result in a claim. There are a few carriers who will write a home insurance policy for someone with an aggressive dog breed, however they exclude liability coverage for a dog bite. I’m not comfortable with that approach because if someone is hurt, the homeowner would be held personally liable to pay for any medical bills out of their own money. Consult with your agent if you own one of the dogs on this list to see what your options are.  If you are considering one of the obvious aggressive breeds, know you’ll have fewer choices for home or renter’s insurance and it will be more expensive.  If you own rental property, address what is and is not an acceptable pet in your lease contract.  I’ve seen owner’s rental property policies cancelled based on a tenant having a Pit Bull.   If you have a question, comment, or experience you’d like to share, post it on my Facebook, Google +, or LinkedIn pages. I’d love to hear from you! Thanks! Ed Wise Share...

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