The Todd D. Tucker Agency

How Homeowner’s Insurance Values Your Property

The first time you see the value your homeowner’s insurance has placed on your home, it might shock you a little.  That’s because the number is probably nowhere near what you paid for your home, or what it is worth on the market.  There is a very good reason for this, and it can be a little confusing at first.  Before you panic, take a look at how an insurance company values your home.

Reconstruction Cost Only

Your homeowner’s insurance covers the actual physical building that is your home, along with everything that is in it.  The purpose of homeowner’s insurance is to make sure that if the worst were to happen, your home would be restored to the same level as before the incident.  So, if your home were to burn to the ground, homeowner’s insurance would pay to completely rebuild the structure and replace everything inside of it.

The value that is placed on your home is based on a complicated system of calculations used to determine what it would cost to rebuild your home from the ground up.  Things like the price of building materials and cost of labor are all taken into consideration.  Building costs have been standardized across the insurance industry.  As they change, those costs are given to the insurance company.  Those costs cannot be manipulated by the insurance company.  What isn’t included in this amount is the value of your land.

Why Isn’t Land Included?

Even if your house were to burn completely to the ground, you would still have your land.  You don’t lose that, nor do you lose the value of the land.  In many cases, the land on which the home sits is more valuable than the structure itself, especially in high in-demand areas.  When calculating the value of your home, your insurance company does not add in the cost of purchasing the land, because you don’t need to pay for that again.

What About Market Value?

Homeowner’s insurance isn’t really concerned with market value, because so much of it is wrapped up in things like the land, the location, and the state of the real estate market.  All your insurance company is worried about is what it would cost to recreate your home exactly as it was in that same spot.  So, market value and reconstruction costs really have very little bearing on each other, except for the connection between pricey areas and the cost of building materials which can be correlated.

The bottom line is, as long as your insurance company has the most accurate information about your home-square footage, building materials used, and all the important features-they can calculate an accurate amount of insurance coverage for you.  This reconstruction cost usually also has an extra allowance of about 25%, just in case the calculations are off.  In almost all cases, this is more than enough.

Estimating Reconstruction Cost

It is always a good idea for you to know what the approximate reconstruction cost would be for your home for yourself.  Insurance agents do a great job with coming up with the insured amount for the dwelling, but I am a firm believer in the client knowing the answer to the questions before they ask them.  There is a free website that calculates reconstruction cost.  Before you have your annual review with your agent, go to this site and it will provide you with a sound number to work with during your review process conversations.

Home-Based Businesses: Including Your Business In Your Home Insurance

If you have a home-based business or you frequently work from home, having both your office space and the business itself insured is an essential part of your overhead as an entrepreneur or business person.  One option that you may be considering is including your business as part of your home insurance.  While it may save you money in keeping your business investments and capital protected, it may not be enough in some cases.  So is home insurance the right choice for your home-based business?  Here are a few things to consider before shopping around for a separate business insurance policy.

What Does Homeowner’s Insurance Cover?

The coverage you receive from your homeowner’s insurance will depend on your policy, but in general it protects your home in case of damage or loss from a number of causes, and will usually include both the property itself and the contents.  Before deciding whether you need separate business insurance for your home-based business you will want to take a close look at your existing homeowner’s insurance policy.  If your contents are not covered, or the contents of your home office are not included in the policy, you will need to either extend your existing coverage or get a separate policy to include items such as your computer and office furniture.  Depending on the type of home business you run, however, this may not be enough to keep your business fully covered.

What Type of Insurance Does a Home Business Need?

One of the biggest considerations in deciding if you will need separate business insurance for your home-based business is whether the issue of liability will ever come up.  If clients enter your home for any reason or you have frequent business-related deliveries to your home, your homeowner’s insurance will not cover any injuries these people may receive on your property.  Also, if you have any employees, even if they work only a few hours here or there, you will need insurance to cover them.

If you run a home-based business your best choice in keeping both your home and your business covered is to talk with a licensed professional and discuss your particular situation.  Your business is your livelihood and your property is your home; ensuring that they are both covered should anything happen is important to both you and your family.

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Force-Placed Homeowner’s Insurance And How To Avoid It

Unless you have already paid for your home, you probably have a mortgage on your home.  Your mortgage company, also known as a lienholder, has a vested interest in the protection of your home.  If you fail to carry acceptable homeowner’s insurance and a loss occurs, their monetary loss will be much greater than yours.  For this reason, lienholders require that you carry homeowner’s insurance.  You won’t be able to close on a purchase without it, and if it lapses, your lienholder will step in.

What Is Force-Placed Insurance?

Force-Placed insurance is a policy that your lienholder takes out on your home when your policy has lapsed or you have not provided them with proof of a policy that is acceptable to them.  In order to protect their interest in the property, your mortgage company will obtain a policy and attach the payments on this policy to your mortgage.  This insurance will remain in place until you provide proof of an alternate insurance policy.

Why You Don’t Want It

It doesn’t sound like such a bad deal to let the mortgage company handle placing insurance on your home.  The problem is that this type of policy exists only to protect the mortgage company’s interests-not yours.  There is no coverage for your personal property, and in the case of a claim you will get nothing-only the mortgage company will receive payment.  In return for this limited coverage, force-placed insurance is very expensive-much more so than traditional homeowner’s insurance.

How Can I Avoid It?

First of all, make sure your homeowner’s insurance coverage doesn’t lapse!  Make your payments on time.  If you have trouble remembering, consider rolling the insurance in with your mortgage payment, or having it automatically withdrawn.  Another important consideration is to make sure that the insurance company has accurate information regarding your lienholder, including their address.  This will ensure the insurance company provides proof of insurance to the correct lienholder and there is no question that you already have insurance in place.

Force-placed insurance isn’t what the mortgage company wants, nor is it the best choice for your interests.  Be sure your homeowner’s insurance stays in force and proof is provided so that your interests, as well as those of the mortgage company, are protected.

If Your Loan Is Sold.

Mortgage companies sell their loans from time to time.  If that happens to you, call the new mortgage company and make sure that they have the correct insurance information.  Additionally, call the insurance company and ensure that they have the correct address to send the mortgage companies an updated insurance policy showing the new mortgage company as the mortgagee.  If your insurance payment is escrowed as part of the loan, the address that the insurance company has is doubly important because they send the bill to the mortgage company once per year at renewal.  Some insurance companies notify you that they have not received the payment and some do not do a good job at that.

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Ensuring Your Homeowner’s Policy Is Up To Date

When your insurance company calculated the cost to replace your home in the event of a claim, they based it on the available knowledge they were given regarding your home.  Things like the square footage, the type of construction, the materials used inside and out, as well as any special features of the home were all included in the calculation.  What many homeowners forget is that updates to your home needs to be reflected in the replacement cost.  Here are some key times when you should give your insurance company a call to provide updated information.

A Major Renovation

Whether you give your kitchen an overhaul or redo the master bath, these are high value areas of your home, and your insurance company needs to know you have improved them.  Give them a call and let them know what type of materials you used and what features you may have added, such as a jetted tub or granite countertops.  This will ensure that if insurance ever has to pay to replace your house, you will get those updates back.

An Addition To Your Home

If you add square footage to your home via an addition, it’s important to let your insurance company know right away, as this has a large impact on your replacement cost.  Remember that insurance will only cover permitted additions to your home, so be sure you have all the right permits on file and everything is up to code.  Some additions, such as certain types of sunrooms, do not actually count toward the total square footage, so discuss the coverage for that type of addition with your licensed professional.

New Floors, New Windows

Anything you replace or upgrade should be reported to your insurance company.  Whether you replace your carpet with hardwood floors, or install new windows, doors, or other features, all of these things are important to the reconstruction cost of your home.

If you aren’t sure if a certain upgrade or change has any bearing on your insurance, it’s always best to put in a call to the licensed professional of your choice just to be on the safe side.  You don’t want to make a claim down the road only to find out that the policy was outdated and you weren’t covered for the improvements you have made to your home.  Although most policies do have some protection built in for this, the safest bet is to be sure you keep your policy up to date.  It’s always worth a call to you’re the licensed profession of your choice or the insurance company to let them know things have changed at your home.

Do You Need Disaster Insurance For Your Home?

Your home is your greatest investment, and your family your greatest priority; making sure they are both protected should a natural disaster hit your home is important in keeping your loved ones and your home safe.  While some home insurance policies may cover natural disaster, ensuring that you are fully covered for all possible occurrences is essential to your peace of mind.  Here are a few things to consider when determining if your home and family are protected, and how to determine what type of disaster insurance you need.

What Does Your Current Policy Cover?

Many homeowners are surprised to discover that their current home insurance policies do not cover natural disasters.  There are three considerations to take into account when deciding whether disaster insurance is right for you-location, financial situation, and comfort level with the risk.

Location-Depending on where you live, there may be a large or a small chance of encountering any particular type of natural disaster.  If you live in the Midwest you may not need to worry about earthquakes, but you may want to consider covering your home for tornado damage.  Most areas of the country are at risk for some type of natural disaster, and covering your home for that particular type of disaster is a good idea.

Financial Situation-In most cases there are larger deductibles for disaster insurance, but considering the potential damage that a natural disaster can cause, what may seem like a high deductible can quickly be put into perspective when your entire home is destroyed.

Comfort With Risk-The actual chance that your home may be affected by any particular natural disaster may be rather low, but assessing the actual risk and whether you would be able to handle the worst, should it happen, is an important issue for your peace of mind.  The point of insurance is really to create a more stress-free life, and if the risk associated with damage due to a natural disaster is high then insurance may definitely be worth the price.

Overall, determining whether you need disaster insurance will depend on a number of variables, and seeking the advice of a licensed professional can help make the decision easier and stress free.

Covering Your Personal Property

Most people love their home, but what makes it far more valuable than the walls and roof are the things that fill it.  Your personal property is special to you, things that you have gathered over many years and selected to suit your personal taste.  Making certain you have enough coverage for these things should be a top priority when it comes to homeowner‘s insurance.  Here’s how to be sure your personal property is protected.

How Personal Property Coverage Is Determined

Most insurance companies use a percentage of the value of the home to determine the amount of personal property coverage.  For example, in the state of Ohio, the minimum amount is 50 percent of the dwelling amount.  Because of competition among insurance companies, most of the standard companies offer a higher percentage of coverage in order to remain competitive.  When you see that number, be sure to question it if you believe it’s too low.  In some cases you may need to provide some evidence for the extra coverage, but it’s worth the hassle.  If you were to lose everything in a fire, that is the maximum amount you would receive to replace everything.  And that really is everything, from your toothbrush to your dining room table.  So be sure to discuss that number thoroughly with your agent!

Special Items Of Value

Whenever there is something of particular value in a home, such as artwork, jewelry, or rugs, you may need to take out a special additional coverage known as a floater.  A floater adds a specific coverage to the policy that is intended only for that particular item.  It usually requires an appraisal of the item as proof of value and comes with an extra premium amount.  However, if your diamond engagement ring is stolen from your home you will certainly be glad you covered it properly, because most personal property coverage has a per item limit on jewelry that probably won’t cover it.  One other thing that most of these policies cover is something called mysterious disappearance.  That is when you have a ring and somehow you loose the setting that is in it, it mysteriously disappears.  This is covered under this floater as well.

When You Aren’t At Home

Many people don’t know this, but your homeowner’s insurance will actually cover your personal property anywhere you go.  That means that if your things are stolen from your car, or even from your hotel room in Hawaii, you can make a claim against your policy to recover the damage.  You will, of course, have to pay the deductible, so the amount of the stolen goods will need to be enough to make the claim worthwhile.

Your homeowner’s insurance covers more than your house-it covers the things that make it your home.  Be sure you help your licensed professional and insurance company cover your things properly by keeping good records, taking out floaters when they are no longer needed, and ensuring you have the right amount of coverage on your policy.

When should you amend your personal property coverage

The direct answer is immediately.  If you are a collector of items (i.e. musical instruments), make sure that you keep your list up to date.  Additionally, get proof of every change that you make to your list with the insurance company.  If something is not on the list that you expected to be there at the time of a loss, it is up to you to prove it.  And the insurance company can and in most cases will deny your claim.

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Combining Insurances To Save Money

The number of insurance policies that you need, and the premiums that you pay for them, can seem to take a huge part of your monthly budget.  So how can you keep you and your family protected while saving some money?  Often you can save by combining other insurance policies with your home insurance without sacrificing coverage.

Insurance companies are more than happy to insure policyholders with multiple policies, so they are eager to offer you great discounts.  This will help you to save more on your premiums.

When you combine your home and auto insurance, for example, you will not only save money, but you will have the added convenience of one insurance package.  Some companies have their billing setup so that you can make one payment each month, other companies require a separate payment for each policy.  If that makes a difference to you, make sure that you ask them how they bill up front to save yourself some time.

As with any type of insurance, it is important to do your research.  You should find out how a company ranks in terms of how well they pay their claims and how strong they are financially.  You should also read the insurance policy carefully so that you know exactly what you are covered for and how much the provider will pay for a claim.  It is important to remember that having the right amount of coverage outweighs the cost of having inadequate coverage.

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Buying Home Insurance For Your Condo

As a homeowner, obtaining a good home insurance policy that protects your home and family is one of the essential costs related to purchasing a home.  But if you own a condo there may be some additional considerations in selecting a home insurance policy that is right for you.  Here is a breakdown of the kind of coverage you need as a condo owner, and some tips on finding the right policy.

Ownership Issues

Since the actual property ownership of condos includes both private and shared property, condo insurance must cover both.  In the case of shared property, the major concern is liability insurance that will cover any damage that may be caused by your negligence or an accident that would damage shared property or the property of another condo owner.

Condo Association Coverage

Another issue to consider is whether your Condo Association has blanket coverage that will protect you from damages that may be caused by other condo owners who do not have liability insurance, or have limited coverage.  Since condo owners pay fees that include a number of shared costs, such as property maintenance and some utilities, insurance should be offered by your Condo Association to protect you in these cases.  If yours does not, you may want to check out ways to include it.  In most cases this type of shared coverage will cost each owner less than individual liability insurance and will keep all condo owners protected.

Content Coverage

Living in a gated community or secured building, as most condo complexes are, may give you a false sense of security.  If your condo insurance does not cover your unit’s contents from theft and other damage you could be leaving a huge gap in your coverage.  Also, if you own valuable items such as jewelry or antiques your content coverage may not protect the full value of these items and a rider may be necessary.

A qualified licensed professional can give you all the information you’ll need to keep your condo protected, and keep you protected from liability.

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