It’s What’s NOT Covered That Will Hurt You

Imagine your home is damaged.  You call your insurance agent to report the claim.  And then you hear the worst news possible, “I’m sorry.  That’s not covered by your policy.”  Now, you have a real problem.

The unfortunate truth is no insurance policy covers you for everything that could possibly happen to you or your property.  However, with a little bit of understanding you can make sure you have the protection you want … and make sure your claims get paid by the insurance company.

Beware: It’s Not Always Covered

Just because you have an insurance policy that doesn’t mean your home is covered for everything.  Your home policy doesn’t cover you against every “cause of loss”.  What’s that?  Fire is a cause of loss.  High wind is a cause of loss.  These are also known as “perils” in insurance terminology.

A standard home policy excludes many causes of loss.  That is, it does NOT protect you from certain perils – like earthquake, flood and surface water, termite damage and many more.  That means if your home is damaged by one of these excluded perils your policy will not respond.  You have no insurance against them.

If you want insurance against some of these perils, you can buy it … like earthquake or flood insurance.  However, some excluded perils are not insurable … like insect damage.  Be sure to discuss your policy exclusions with an agent in our office and buy the protection you really need.  Don’t be caught by surprise after the damage is done.  It’s too late to buy insurance then.

Special Limits On Personal Property

As if your home policy wasn’t complicated enough already it includes “special limits” of protection for some of your personal property.  A “special limit” reduces the protection specifically available for certain types of property.

Property subject to a special limit typically includes … property used for business … cash & coin collections … jewelry & furs … guns … silverware … and more.

Additionally, some of these special limits apply only if the property is lost or stolen – making things just a little more confusing.

For example, the standard home policy typically includes only $1,000 of protection for stolen jewelry.  If your $2,500 diamond engagement ring is stolen you’ll get only $1,000 from the insurance company.  Ouch! And, if the stone falls out of the ring and is lost, there may be NO coverage at all!

The bottom line is it’s very important you fully discuss these conditions and special limits with your agent and buy the protection you need.  Otherwise, you could find yourself with a very nasty surprise … an unpaid claim!

Conducting Business At Home

WARNING!  Your home policy has very strict limits and rules about business conducted at home.  The protection offered by your policy is severely limited if your claim arises from business activities.  Your business property has very little coverage.  And in some cases you may have no liability protection at all.

This is not something to take lightly and just assume everything will be fine.  Be sure to discuss your home business activities with a licensed agent in our office to make sure you’re still protected.

Other Exclusions and Options

The standard home policy excludes protection for many things.  But then the insurance company gives you an opportunity to buy some of them back.

Additionally, you have the option of increasing protection where you personally need it.

There are literally dozens of optional coverages available in your home policy.  Here are some of the more common options available to you.

Identity Theft – many home insurers now offer protection for Identity Theft in their home policies.  This will help pay the expenses you incur to restore your identity if it’s stolen.

Water & Sewage Backup – the standard home policy excludes damage caused by a water or sewage system backup.  You can buy this protection if you want it.

Ordinance & Law — pays the increased costs of repairing or rebuilding your home that are a result of changes in local building codes. For example, your home has single paned windows. After a loss, the local building department requires double-paned windows. This endorsement pays for the increased cost required by the new building code.

Packaged Endorsements – often times an insurance company will package the optional coverages people most commonly buy into a single endorsement.  That means for a lower price you can get several optional coverages added to your policy.

There are many more optional coverage and exclusion buy-backs your agent can explain to you.  Take a few moments to understand them and make good decisions about your protection.

Ask the Agent

I love checking out the keywords that people use to find our blog.  This weekend, someone asked, “Will insurance pay off my house if I set it on fire?”  The short answer – no.  The long answer – that’s arson, which is a felony.  And if you try to file a claim on it, it’s also insurance fraud, which is a crime in 48 states.  So while you wouldn’t have a house anymore, you’d still have a roof over your head in the state pennitentary.

Thanksgiving Safety

If you’ve ever been to the State Fair of Texas, I’m sure you’ve realized one very important thing about Texas cuisine: fried food is good. Just this year, I tried deep-fried cookie dough and a fried grilled cheese sandwich. I wanted to try deep-fried bacon, but the line was waaaaay too long. Texans like their fried stuff, including turkey.

Not that there’s anything wrong with fried turkey. It’s pretty tasty. The problem is that there’s also a lot of “Hey, y’all! Watch this!” moments around Thanksgiving. In the interest of not exploding your turkey and setting your roof on fire (as my cousin managed to do a couple of years ago) please watch the following videos, courtesy of Alton Brown.

Part 1:

Part 2:

Part 3:

Also, make sure your homeowners insurance premiums are paid up. That always helps.

Have a safe and fun Thanksgiving holiday, because we like turkey too. Our office will be closed November 26-29, 2009. We’ll reopen on November 30.

Actual Cash Value vs. Replacement Cost: What’s the Difference?

RVOS Insurance offers two types of payments when a covered loss occurs. These are often referred to as settlement options. The settlement will either be an Actual Cash Value (ACV) settlement or Replacement Cost Value (RCV) settlement. The RVOS Star policy provides actual cash value payments for covered losses unless replacement cost is added to the coverage by an endorsement. An endorsement is simply a document verifying that the replacement cost option has been added to a line of coverage. The Centennial policy provides replacement cost for the dwelling and actual cash value payments for personal property unless replacement cost is added to the policy by an endorsement.

When you add the replacement cost endorsement to a policy, it refers to the dollar amount needed to replace

 

damaged covered property without deducting for depreciation (the decrease in value of an item due to age and condition). Replacement cost value is limited by the maximum dollar amount shown on the front page of the policy. This page is often called the declarations page.

Then there is the actual cash value settlement, which is the cost of replacing damaged or destroyed property minus depreciation. For example, a 10-year-old sofa will not be replaced at the current cost of purchasing a new one because it was in use for 10 years. Or, in rare cases there are items that no longer have a true material value such as an old printer that won’t work with newer computers.

Of course each and every situation can be different and each RVOS policy is different based on the individual needs of the policyholder, but if you want to discuss adding replacement cost to your policy or just want to know more about RCV and ACV, call your agent.

 

Myth Busters: Home Burglary

According to the FBI, a burglary occurs somewhere in the United States every 15.4 seconds. No one likes to think about being a victim of home burglary. Both the material loss and the sense of personal invasion can be devastating. Here are some of the most common burglary myths busted to help you keep your home safer from break-ins.

Myth 1: Leaving lights on makes burglars think someone is at home.

 

Leaving the same light on each time you leave the house is actually an invitation to burglary. Burglars get to know your neighborhood and your schedule. A light that stays on too long in one place is a signal that you’ll be gone for a while. It’s better to have lights go on and off in different parts of the house on a random schedule. Electronic timers are helpful and are available at most hardware stores.

 

Myth 2: Having an alarm sign or stickers will deter burglars from entering.

 

Having an alarm sign in your yard may help you feel secure, but it can also tell a burglar what alarm company you’re using. Burglars can figure out how to circumvent your system by easily purchasing plans to different branded systems. It’s better to use a generic sign, because a burglar cannot be sure exactly what system you’re using.

 

Myth 3: I don’t need my alarm on all the time.

 

Most people won’t activate their systems when they are in their house. Believe it or not most burglaries occur when the victims are at home. The most effective type of security system is a zone alarm system that enables you to cover different areas at different times. A zone alarm system ensures your house is covered – no matter where you are, in or out of your home. Also, many homeowners will fail to turn their alarm on if they’re running out for a quick errand. But all a professional thief needs is a few minutes and he’s in and out of your house with your valuables. You should always turn the alarm on – even if you just leave your house for ten minutes.

 

Myth 4: Cutting off mail and newspaper delivery while on vacation is smart.

 

It turns out that bit of contemporary wisdom is not true. Stopping newspaper and mail delivery is a signal that you are away. Burglars have been tipped off by people intercepting this information making you an easy target. It’s better to have friends and neighbors checking on your house, picking up the mail and newspapers for you and dropping by at different times throughout the day.

 

Myth 5: A big dog will keep out unwanted intruders.

 

Not always true. A dog’s bark is the real deterrent. Small dogs, such as such as a Chihuahua or a Schipperke, do a good job of barking when someone enters your property. Large dogs, unless they are trained, usually don’t bark much — which is great if you want to get some sleep, but it’s not so good for scaring off burglars.

 

Myth 6: A burglar will never think to look in my sock drawer.

 

It’s best if you put valuable jewelry and documents off premises in a safe deposit box or a secure safe. Most people tend to hide valuables in their bedroom in standard hiding places such as the underwear drawer, under the mattress and closet shelves but these are the first places burglars look. It’s better to scatter your valuables in more than one place, and to hide them in unusual places, such as the freezer, or in a cereal box in the cupboard.

 

Myth 7: Sticker bushes in front of my windows will deter burglars from entering.

 

Many homeowners think thorny bushes in front of windows work to keep burglars out. Not so. A reformed burglar who stole over $70 million worth of valuables says bushes that hide windows are a mistake – even if they do have thorns. Professional burglars usually wear gloves, and often wear two layers of clothing and many times they will also carry cutters. If they’re determined, a few thorns aren’t about to stop them from entering a home. In fact, it has the opposite effect, bushes can give burglars the cover they need to screen them from the street. If you do have bushes under your windows, be sure you keep them trimmed below the sills so they can’t easily conceal a burglar.

 

Source: Bottom Line Personal, Winter 2009

 

Homeowners Insurance Tips

Shop for hazard insurance early
80% of insurance companies credit score. That means the price you pay for your insurance with them is based on your credit, as well as the house you are insuring.  (Note: RVOS does not use credit scoring to determine rates!)  Texas insurance costs are some of the highest in the US! If you don’t shop, you may not get the best coverage at the best price. You cannot get a loan without insurance on the dwelling you are buying or refinancing.

Compare coverage for the cost
Do not go on price alone – look for value in coverage. The most expensive mistake you can make is the not getting coverage you need included in your policy. When it is time to file a claim, that is the wrong time to find out.

Avoid small claims
Two non-weather related claims and you may not be renewed by some carriers or may not be written by others.

Budget for insurance increases as property replacement cost goes up
The amount of the coverage on your policy is what you would be paid if your dwelling and personal property were totally destroyed by the hazards covered in your policy. With increased building costs, review your coverage periodically to be sure you have enough.

Don’t insure your dirt
When you shop for your insurance coverage, be sure you are not including the value of the land in your coverage. Insure just the dwelling, other structures and your personal property. If you lose your home to a tornado or fire, you would still have land to sell.

Good Housekeeping/maintentance counts
Insurance companies require good housekeeping/maintenance. Keep tree limbs trimmed back so they are off of roof. Run a soaker hose around your house to keep the foundation watered to help avoid foundation problems. Keep clutter picked up in yard. Insurance does not pay for problems caused by poor maintenance, only for damage caused by “perils” that are listed in your policy.

Remember to Schedule!

Christmas and Valentine’s Day are the two big jewelry-giving holidays, so let’s take a look at how that needs to be insured.  You can usually purchase a warranty from your jeweler for the workmanship, but the jeweler probably isn’t going to be able to help you out if your wife’s new ring melts in a house fire.

Jewelry can be covered under your homeowner’s policy.  You’d need to check your particular policy for the details, but let’s look the Centennial policy at one from one of our major carriers, RVOS.  Jewelry falls under the personal property portion of your coverage, which is normally a percentage of the dwelling coverage.  So if you have your house covered for $100,000, you might have your personal property at 60%, or $60,000. 

If you choose to leave your jewelry unscheduled, then there’s a piece of that personal property pie that’s set aside just for jewelry.  The default limit for that is $700.  So if you lost every piece of jewelry you own in a fire, you’d only get paid $700.  If all you wear is costume jewelry, then that probably won’t concern you too much.  If you have a few nice pieces though, you’d want to get an endorsement to increase that unscheduled jewelry limit.  You’d still have $60K in coverage on your personal stuff, but you’ve allocated a bigger piece of pie just for your jewelry.

If you have a large jewelry collection, or a few very valuable pieces, then you’d want to schedule your jewelry.  To do this, you’d have to provide a list of the special pieces you want covered, along with their values.  Items worth more than $1,000 require an appraisal, and you’d need to provide photos on items worth $5,000 or more.  The coverage on these items would not be part of the $60K personal property pie because they’re listed separately.

Of course, all policies are NOT created equally.  Some policies may have higher limits for unscheduled jewelry, and some may require you to schedule all jewelry.  You’d need to actually read your policy in order to know for sure.  If you’ve purchased a new diamond bangle bracelet for your wife, check with your insurance agent to make sure it’s approriately covered.  The same goes for antiques, collectibles, art, and furs.

Homeowners Insurance and Your Car

Some of the top search phrases for this site have been about paying off the remaining balance on your vehicle, and whether homeowners insurance covers that.  Long story short, no, your homeowners insurance will not cover your vehicle itself.  You have to have an auto policy that has comp & collision coverage to repair your vehicle.  If your vehicle is a total loss, the check the company writes you may be for less than what you owe on your vehicle, depending on how you’ve financed it.  Gap insurance, which is usually available from the financer or your auto insurance company, pays the difference between what the insurance company pays for the vehicle and what you owe on it.  Homeowners insurance never comes into play in this scenario.

What your homeowners policy WILL cover is the stuff in your car that isn’t installed.  It won’t cover your stereo system or your built-in DVD player, or to repair your broken in windows.  It will cover your purse if it’s stolen after the windows are broken in.  Check your homeowners policy for the amount of coverage provided.  There will most likely be a limit to the cash covered in your purse – how easy would it be to claim that you had $10,000 in that stolen purse?  Also, there may be a limit on the amount that’s covered when it’s “off premesis.”

In summary, your auto policy covers your auto, as long as you have comp & collision coverage.  Your homeowners policy covers your home and your “stuff.”

The Rains Came Down and the Floods Came Up

If you’ve spent much time at all in Texas, I’m sure you’ve heard the saying, “If you don’t like the weather, just wait five minutes.”  Our weather has been known to do some pretty unpredictable things in this area.  It’s not uncommon to go without any rain at all from June to September.  And when it does rain in the summer, it’s usually only a brief shower.  Normally severe weather passes through in about a hour, maybe two. 

That’s why it was so surprising to have floods in Sherman last summer.  The same storm kept circling back again and again and again.  I was awakened by thunder at two in the morning.  When I woke up at six, the same storm was still going strong.  It finally started to let up around eight.  That’s six straight hours of very heavy rain.  Roads were impassable, the high school football stadium was under water, and sadly a couple of people died in rapidly rising water.  Our county and the next one over were featured on CNN. 

There’s a very large creek that runs parallel to Highway 75 on the south side of town, which happens to be a relatively low-lying area.  Guess where all that water went?  First into the creek, and then into the nearby houses after the creek overflowed its banks.  People who live in that area reported floodwaters four feet high in their homes.  You would be amazed at how many of your belongings are lower than four feet from the floor.

A lot of people were reminded in the days to come that homeowners insurance doesn’t cover damage from rising waters.  And as you can imagine, those who had purchased flood insurance were very grateful they had.  And those who hadn’t take out coverage . . . well, they weren’t very pleased at all.  They learned a very important lesson: Just because insurance isn’t required doesn’t mean you don’t need it!

You can use freeflood.net to determine whether your home lies in a flood zone.  But remember, homes that weren’t necessarily considered at high risk for floods had high water marks last summer.  Don’t let yourself be one of those left saying, “If only I’d had flood insurance!”  Contact us today to discuss your needs.

Homeowners Insurance

It’s a wonderful day when you finally pay off your mortgage. After thirty years, you finally get to free up about a quarter of your income! But in the aftermath of your mortgage-burning ceremony, don’t forget about your homeowners insurance.

Mortgage companies will require a homeowner to purchase insurance on the property that’s been financed. While they don’t necessarily do this for the borrower’s benefit, it’s certainly in the homeowner’s best interest to maintain coverage on their home. In the event of a total loss, homeowners insurance would pay off your remaining balance on your mortgage. This means you wouldn’t be stuck paying off a mortgage for a house that doesn’t even exist anymore.

If you don’t owe anything on your home, it’s still a good idea to maintain homeowners insurance. If you were to lose your house to fire, tornado, or any of the other things that could destroy your home, the insurance money would provide you the funds to not only rebuild your home, but also to find other accomodations during the rebuilding process. Otherwise, you’d have to depend on your cash reserves and investments. Replacing a $100,000 house out of pocket could put a serious dent in your retirement savings!

It’s also important to know the replacement cost of your home. You may have purchased that house for $20,000 thirty years ago, but it’s probably worth considerably more on the market now, and the cost to build a similar new home could be even more. If you do have a mortgage, the lender probably only requires you to have coverage equal to the purchase price. If your coverage is less than 80% of the replacement value, you may get hit with a larger deductible than expected if you have a claim.

Contact us today for an estimate on homeowners insurance, or for a free evaluation of your current policy.