How Much Renters Insurance Do You Need?

Posted by on Nov 13, 2017 in Blog | Comments Off on How Much Renters Insurance Do You Need?

How Much Renters Insurance Do You Need?

One of my clients recently sold her home in McKinney and moved into an apartment. The decision for her was easy, she’d rather pay rent than deal with the cost of a home’s upkeep. The big question we needed to work through was how much renters insurance does she need? She is, after all, downsizing and won’t have as much stuff, or personal property, as she has in her home. Here’s how we approached.

I began the discussion with contrasting the difference between a homeowner’s and a renter’s policy. All homeowner’s policies will contain some level of personal property or contents coverage. This is usually a percentage of the amount of coverage on the home. For example, a home insured for $200,000 may have anywhere from $80,000 to $140,000 in contents coverage based on the percentage the insurance company uses.

When it comes to renter’s insurance, there’s no such percentage of coverage since there is no coverage for the home, duplex, condo, or apartment. The main thing the renter’s policy is concerned with is the amount of coverage required to replace their personal property. That’s when the prospective client asked how she should go about determining the value of what she has. It’s an excellent question and one many renters ask depending on their life situation.

I suggested she stand in the middle of each room and make a list of all the furniture, electronics (TVs, computers, smart phones, tablets, etc.), throw rugs, and decorative items. Include clothing, linens, seasonal decorations, dinner and cookware, glasses, and even items in the cabinets, pantry, and refrigerator. Also include any lawn and garden equipment if that’s applicable.

Think about what you paid for the larger items such as a sofa, side chair, bed, dresser, or TV. Assign a value to each item either based on what you paid for it, or if a gift, what it may have cost the giver. Check stores and websites where you shopped to replace items you purchased new, and garage sales, thrift stores, and Craigslist for items you may have purchased used to help determine a value. The goal is to determine what it would take to replace everything if it were lost in one event such as a fire or tornado. While you’re at it, take pictures of each room and its contents to create a home inventory (see http://wiseinsurancegroup.com/do-you-have-a-home-inventory/ on how to create one and why).

Once you have everything totaled, or have created a rough estimate, use that as the amount of coverage needed for your renter’s policy. If you’re just starting out, you may only have a $5,000 to $10,000 worth of personal property. Some insurance companies have minimum amounts of coverage such as $15,000 or $20,000. Start with the minimum because most people begin to add things over time.

Keep in mind if you are fairly established and have items such as original artwork, fine jewelry, silverware, etc. you should probably schedule those items to protect them to their full value. Most renters, and homeowners, policies have limits on the amount of coverage they’ll provide for these items. It’s pretty common to see limits capped at $2,500 total or less for items in a particular category.

Other coverage limits to address are medical coverage and personal liability. While many policies will provide minimal limits such as $500 on medical and $50,000 on personal liability, you can have better coverage for a couple of dollars a month that will protect you financially if something happens to a guest or worker in your home.

My new client did an initial assessment of what she had, but was unsure of a total value. To help her decide what would be appropriate, I provided her with three quotes showing her three different amounts of coverage consisting of an entry level she specified and two higher limits to give her choices. She picked the high limit option to give her the peace of mind she desired and because it was only a few dollars more per month.

How much renters insurance do you need? Share how you approached this along with any questions or comments you have with me on my Google +, Facebook, and LinkedIn pages. I’d love to hear from you!

Thanks!

Ed Wise

#GetWiseInsurance

Wise Insurance Group

Car Insurance and Delivering Pizzas

Posted by on Nov 8, 2017 in Blog | Comments Off on Car Insurance and Delivering Pizzas

Car Insurance and Delivering Pizzas

I wrote a car insurance policy for a friend’s son last year. It’s an interesting story that’s worth retelling because most people aren’t aware that many car insurance companies won’t write a policy if you or one of your kids does this. You may surprised by this too!

A friend of mine called me last week to ask me about his son and their policy. They have their car insurance with a company headquartered in Texas and he’d just been told they would not cover his son’s car because of the job he has. The son deliver’s pizzas for a franchise owner of a national chain. My friend wanted to know whether any of the carriers I represent would cover his son as a pizza delivery driver.

I called underwriters at all my companies and found out something most parents, and many agents, aren’t aware of. Most car insurance companies will not extend coverage on a personal policy to someone who’s a delivery driver regardless of whether they are delivering pizzas, sandwiches (think Jimmy John’s), or anything else (UberEATS, Grubhub, trycaviar, DoorDash, etc.).

The lone exception is Travelers. They will extend coverage if the driver is in high school or college and delivers pizzas a couple of times per week during the summer vacation between the spring and fall semesters. They will not, however, extend coverage if this is a full-time summer job.

Progressive will not extend coverage on a personal car insurance policy though they will write a commercial policy for a delivery driver. In this case, the delivery driver needs to be on their own policy apart from anyone in the household who’d not a delivery driver. I quoted a commercial policy for my friend’s son, but the rate was more than $3,000 a year. That’s expensive coverage for someone making minimum wage and tips.

Aside from the expense of having appropriate insurance coverage for what many view as a part time job, there’s a very interesting question we should ask. What would happen if someone’s high school or college student were involved in an accident while delivering pizza to one of the shop’s customers? Would your car insurance policy cover the accident?

There’s no clear answer here. Some companies may cover it and then inform the client they will not cover a delivery driver in the future. They may cover the accident and then cancel the policy, or they could deny the claim leaving the driver and possibly the family to pay for damages on their own. None of these potential scenarios are great options and should serve as a red flag to any parent whose son or daughter wants to do this. The pizza shop owner suggested my friend’s son simply remove the sign from his vehicle if involved in an accident. This is insurance fraud and puts the young driver in a compromising position of being solely liable for whatever their insurance company decides.

My advice to any parent is to find out if your car insurance policy will cover your student before accepting the position instead of after an accident. What do you think? Share your thoughts, questions, and experiences with me on my Facebook, Google +, and LinkedIn pages. I’d love to hear from you!

Thanks!

Ed Wise

Wise Insurance Group

Home Insurance and Historic Homes

Posted by on Nov 6, 2017 in Blog | Comments Off on Home Insurance and Historic Homes

Home Insurance and Historic Homes

While Dallas is renowned for tearing down old homes and replacing them with new ones that are “bigger and better,” there are some areas in east Dallas, Lakewood, the Park Cities and parts of Fort Worth near TCU that have some beautiful, stately homes built at the turn of the past century. Some of the homes appear on National and Texas historic home registries and more reside in historic districts. How does writing a home insurance policy for a home in a historic district or on a registry differ appear from writing one built in the 1950’s or that was just finished?

Historic homes, as well as historic districts are governed by complicated and bureaucratic preservation process. This process mandates obtaining approval for any exterior modifications whether a fresh coat of paint is needed, door placement, window changes, roofing materials, and more. In some cases, the Landmark Commission and various city departments can specify what materials can be used on the exterior of the home.

Such was the case when a number of homes in the area, including several on Swiss Avenue, were struck by baseball size hail in 2012. Many of the affected homeowners had tile roofs which are manufactured by a single US company. Each of the affected homeowners had to order replacement roof tiles from this one manufacturer to be compliant with the preservation codes. This lead to a delay of several months before the company could produce enough tiles to replace the damaged roofs.

Many home insurance companies will write an insurance policy on a home located within a historic district. I’ve written several policies on homes in historic districts in Dallas, Fort Worth, and McKinney. In each case, I confirm with underwriters who will, exclude those that won’t, and then determine what items they’ll need to know in order to write the policy.

In most cases, the biggest concerns center on updates for the electrical, plumbing, and HVAC systems. In addition, they want to know when the roof was last replaced. If the roof is current and there have been updates to the main systems, most underwriters are happy to write a home insurance policy. Once that’s determined, I review the items which will impact the home’s replacement cost including:

  • Are the walls made of plaster or sheetrock?
  • What kind of molding is used for baseboards and around the ceilings?
  • If there are chandeliers, are they crystal and how many are installed?
  • Does it have decorative plaster work around doorways, stairs, etc.?
  • Are the interior doors solid wood?
  • Are there leaded or stained-glass windows installed?

These items and more are input into the replacement cost systems of each carrier who will write a policy. It is these items which make such a home different from many of the homes built today and each one impacts the home’s replacement cost.

If the home is an historic home, one that appears on a local, state, or national registry, then the number of carriers who’ll write home insurance drops dramatically. While there are a few carriers who will write a policy, they will want to know the home’s historical significance and whether the home will be lived in as a primary residence, be used as a museum, or both.

The types of materials that can be used in a historic home, are even more stringent than what many people face when rehabbing their home. In some cases, even the methods to repair the home are dictated which is why most home insurance companies are reluctant to write a policy.

Before embarking on such a project, do your research and know what’s involved, who needs to approve the work and materials used, and who will write a home insurance or builder’s risk policy on it. Otherwise, your dream home, can turn into a bureaucratic nightmare. Share your comments, questions, and experiences with me on my Facebook, Google +, and LinkedIn pages. I’d love to hear from you!

Thanks!

Ed Wise

Wise Insurance Group

Home Insurance and How to Confirm You Have Enough

Posted by on Oct 30, 2017 in Blog | Comments Off on Home Insurance and How to Confirm You Have Enough

Home Insurance and How to Confirm You Have Enough

Sheri and I had dinner Saturday night with a friend. It was a delightful evening as we caught up with what has happened in each other’s lives. Our friend had a couple of questions about her home and car insurance and was concerned her home may not have enough coverage to cover a total loss. After all, prices for homes in her part of the metroplex have risen sharply in the past few years.

I asked her for a copy of her home insurance declaration pages and determined she is under insured, probably about $75,000 to $85,000. To determine this, I simply divided the amount her home is insured for by the square footage of her home which told me she is insured for roughly $100 a square foot. Based on the level of finish out in her home, I believe she should increase the amount of her home insurance to somewhere between $125 and $130 a square foot or $75,000 to $85,000 more.

To truly know if my estimate is accurate or not, I’d need to perform a replacement cost analysis with several home insurance companies. Most home insurance companies require a replacement cost estimate to determine the amount of home insurance coverage for a home. I did not perform one, but provided her with an estimate based on quotes I’ve done for other homes in her neighborhood and the improvements she’s made (replaced carpet with hardwoods throughout, upgraded kitchen countertops, etc.).

She was concerned my estimate may not be high enough since most homes in her neighborhood are selling for $200 a square foot. This would entail almost doubling the amount of coverage on her home insurance, which I suggested may result in her being over insured. The reason is that even if homes are selling for that much in her neighborhood, part of that sales price is the value of the lot her home is built on. Home insurance doesn’t cover the lot as nothing is going to happen to the lot if the home burns down or is hit by a tornado. Home insurance is only concerned about the amount of coverage needed to replace her home.

If you want to take a deep dive into figuring out the replacement cost for your new or current home, there are a couple of tools homeowners can use.

  • HMFacts by Decision Ready Data Solutions, (see http://www.hmfacts.com/homeowners/) where you can run your own for a discounted price of $7.00 if you use the discount code of INTROIVT.
  • Marshall Swift Boeckh has an estimator many home insurance companies use. Consumers may be able to access the system, however, the cost and link were not working.

If you prefer, have a home insurance advisor provide you with one. It takes a five minute conversation for me to ask the questions needed to work up an estimate and you can compare this to your current level of coverage.

For Sheri’s and my friend, not having enough home insurance would cost her a significant amount of money if she were to experience a total loss. Being over insured would keep her from having to pay extra to rebuild her home, but she’d end up spending more for coverage she’d be unable to use. Getting it just right is what a professional insurance advisor should do. Is your home properly insured? Share your thoughts, questions, and experiences with me on my Facebook, Google +, and LinkedIn pages. I’d love to hear from you!

Thanks!

Ed Wise

Wise Insurance Group

Negotiating Your Car Insurance Claim

Posted by on Oct 25, 2017 in Blog | Comments Off on Negotiating Your Car Insurance Claim

Negotiating Your Car Insurance Claim

The value of a totaled vehicle is one of the most contested car insurance claims. Is it too low, is it fair, or is it more than you expected? It doesn’t have to be, based on a recent article in the Dallas Morning News by Jerry Reynolds. His article, “How to Negotiate with Insurers,” suggests, if you’re willing to do a little homework, you’ll know whether the offer you receive for your totaled or stolen vehicle is fair or not.

The value of a totaled vehicle is one of the most contested car insurance claims. Is it too low, is it fair, or is it more than you expected? You don’t have to accept the initial offer made by the insurance adjuster, especially if it’s the other party’s insurance company. I recommend my clients evaluate the value of their vehicle using three different websites, www.autotrader.com, www.edmunds.com, and www.kb.com.

Edmunds and Kelly Blue book provide you with a range based on your vehicle’s age, mileage, make and model, equipment level, extras you may have added, and condition. The condition usually ranges from poor to mint and does a nice job of defining what they mean. In addition, you can review the value of your vehicle based on trade in and retail value.

Auto Trader provides a great source of what vehicles, like the one you just wrecked, are selling for from dealers and individuals within a defined radius of where you live. Reynolds suggests setting the range to vehicles within a 300-mile radius of your zip code, although, if you’re in a major metropolitan area such as D/FW, Houston, Austin, San Antonio, etc., you can probably obtain an accurate estimate within a 25 or 50 mile radius.

If the offer is lower than the numbers you find on the three websites, don’t argue or berate the adjuster. Provide them with documentation to back up your position and confirm they are aware of all special equipment such as a diesel engine, DVD player, custom wheels, etc.

I also suggest my clients review their records for all repairs made to the vehicle in the past 12 months. Do not include oil changes or other maintenance items, however, do provide copies of receipts for new tires and all other repairs. The insurance adjuster should assign a depreciated dollar value to all repairs and add it to the overall value of the vehicle.

If the adjuster still doesn’t “get it,” or has an attitude, ask for their supervisor. Adjusters are people too with good and bad days and sometimes they make mistakes. They do want to settle your claim and won’t take offense at introducing you to their supervisor. Keep in mind this is a business discussion and should avoid sounding like an episode of the Jerry Springer show.

I have one last suggestion. If you’re reviewing an offer from the other party’s insurance adjuster that’s unacceptable, consider changing the claim to your insurance company. You may end up with a more favorable offer. You will be out of pocket for the deductible, however, you’ll get that back once your company has subrogated, or requested payment, from the other company.

Have a question, comment, or experience you’d like to share? Please share them with me on my Facebook, Google +, and LinkedIn pages. I’d love to hear from you!

Thanks!

Ed Wise

Wise Insurance Group

An Update on the Equifax Breach

Posted by on Oct 23, 2017 in Blog | Comments Off on An Update on the Equifax Breach

An Update on the Equifax Breach

In early October, Equifax announced another 2.5 million consumers’ data was stolen bringing the total to 145.5 million people. The data stolen includes names, addresses, dates of birth, social security numbers, credit card numbers, and in some cases driver’s license numbers. Chances are, most adult Americans were victimized by this data theft. Let’s look at what’s changed, what to do, and how this relates to your home and car insurance.

What’s Changed: Aside from the increase in the number of people whose data was stolen Equifax has extended two dates important to each of us.

  • The date to sign up for the free monitoring service has been extended to January 31, 2018. If you went to the website to determine if you’d been hacked, www.equifaxsecurity2017.com, and were told you were not affected, go back and check again. You may be in the most recently announced group of people identified by Equifax.
  • You also have until January 31st to sign up for the free credit freeze from Equifax. I suggest you have your credit frozen with the other credit bureaus too. It may cost a little to have that done, but you’ll certainly worry less if you do.
  • In addition, Equifax will offer a free credit lock for life service which can be accessed with your smartphone or computer. You’ll be able to lock and unlock your Equifax credit file. Consider doing this with the other credit bureaus.

To Do: Here are five actions to take whether your file was or wasn’t compromised in the Equifax breach.

  • Pull a free credit report every four months from one of the three credit bureaus by visiting www.annualcreditreport.com. This gives you a rolling snapshot of your credit and enables you to spot suspicious activity.
  • Consider a security freeze so no information can be released from your files without your permission.
  • Have a security alert placed on your accounts. This puts a flag on your accounts and shows extra steps are needed to protect your security.
  • Get a fraud alert through each of the credit bureaus which provides real-time alerts if someone tries to open an account in your name.
  • Use your bank’s mobile app and set it up to text alerts to you for any activity and monitor all transactions.

Insurance Relationship: Most states allow insurance companies to use credit as a rating factor for your home and car insurance policies. If your identity has been stolen, the thief can not only trash your credit by opening fake accounts and obtaining loans in your name, they can also file false claims using your identity. This can impact not only what you pay for home and car insurance, but also your ability to get it.

There are two types of home and renter’s insurance options worth considering, credit card fraud and identity theft coverage. Neither of these options cost a lot, usually $25 a year or less depending on the carrier, and can provide financial help in rectifying losses and cleaning up the theft of your identity. Add the identity theft coverage once the free offer from Equifax expires.

The Equifax hack, as well as, the hacks of the IRS, Target, Home Depot, Neiman Marcus, etc. reveal this problem is only beginning and will continue. Taking the right steps now can free you from a time consuming and costly headache later. What are you doing to protect yourself? Share those actions, along with your questions, comments, and suggestions on my Facebook, Google +, and LinkedIn pages. I’d love to hear from you!

Thanks!

Ed Wise

Wise Insurance Group

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

Posted by on Oct 16, 2017 in Blog | Comments Off on 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 a slab foundation should have this option.

What was missing from the homeowner’s policy was foundation coverage. If he had it, most likely his policy would have covered the damage to the home caused by the leaks beneath the slab. He succeeded in saving a few hundred dollars in premium by buying the cheaper policy, but he’ll be out at least $15,000 to make the repairs his home now needs. What do you think? Share your comments, questions, and experiences with me on my Facebook, Google +, and LinkedIn pages. I’d love to hear from you!

Thanks!

Ed Wise

Wise Insurance Group

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

Posted by on Oct 11, 2017 in Blog | Comments Off on 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. Always lock your car and put anything of value into the trunk.

The good news for my client is the thief didn’t discover the expensive set of golf clubs in the trunk! What’s in your car you need to take out today? Share that with me, along with your comments, questions, and experiences on my Facebook, Google +, and LinkedIn pages. I’d love to hear from you!

Thanks!

Ed Wise

Wise Insurance Group

Potential Changes in the Flood Insurance Program

Posted by on Oct 9, 2017 in Blog | Comments Off on 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 shortfall is to raise rates in areas in coastal areas. This is not an appealing solution for those who live in our coastal communities, but may help forestall the more drastic action of denying and cutting off coverage.

Rebuilding Changes: One group has proposed a plan allowing flood coverage to remain in effect for homes currently in flood zones if they were raised at least two feet above the flood plain. This is an expensive proposition for homeowners but may provide the best long-term alternative to owning a home that can’t obtain flood insurance.

What happens is anybody’s guess. What do you think should be done? Share your thoughts, experiences, and questions with me on my Facebook, Google +, and LinkedIn pages. I’d love to hear from you.

Thanks!

Ed Wise

Wise Insurance Group

What is Forced Place Insurance?

Posted by on Oct 4, 2017 in Blog | Comments Off on 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 the lender’s insurance policy covered.

I understand the need lenders have in writing these policies, but individuals don’t have to be stuck with it. Do you have a question, comment or experience you’d like to share?  Share them with me my Facebook, Google +, and LinkedIn pages.  I’d love to hear from you!

Thanks!

Ed Wise

Wise Insurance Group