Home Owner Insurance Deductibles on the Rise

Home owners beware: “Your homeowner’s insurance now probably covers less while costing more,” The Wall Street Journal reports.

Home owner deductibles have been rising the last few years, as home owners who may have once seen $250 to $500 a claim soar to $1,000 to $2,500 a claim in recent years.

There’s been a move by the industry to go to percentage-based deductibles, which have caused prices to rise. For example, home owners may have once had a $500 to $1,000 deductible but now have a form of a deductible of 2 percent of the insured value of a home for items like wind and hail damage. That could mean that insurance may only cover half the cost of a roof replacement.

What’s more, more insurance companies are issuing more limits on what all they will pay for in replacing a home.

Texas home owners pay the highest insurance premiums in the country, but a consumer group in the state found that newer policies are covering less, like limiting coverage on plumbing leaks or damage to foundations.

With insurance policies squeezing more home owners’ budgets, housing experts say home owners need to take an active role in reviewing their policy to find out what all is covered. Also, they say that home owners need to think twice before making several claims.

“One large claim will affect you less than multiple small ones,” The Wall Street Journal article notes. “Of course, you buy insurance to be covered, so you are always free to file a claim. But you should know that insurers keep close track of claims and will penalize you for making too many, even if you just happen to hit a string of bad luck.”

Source: “Insurance Deductibles Soar,” The Wall Street Journal (July 13, 2012)

Many homeowners confused on tree damage rules

While most consumers are aware that home insurance policies cover damage to their property resulting from fire or wind, a recent poll finds many are unclear regarding tree damage.

A recent survey conducted by PEMCO Insurance asked consumers what would happen if a tree planted in a neighbor's yard fell and caused damage to their home.

The company says 82 percent of respondents incorrectly answered that their neighbor's insurance company would pay for the claim. In reality, the company says that the incident would likely fall under a homeowner's own insurance coverage unless there was some kind of negligence on the part of their neighbor.

"With so few homeowners knowing the right answer, and wind storms so common in the Northwest, we have a great opportunity here to educate consumers," said PEMCO spokesperson Jon Osterberg.

Many Los Angeles-area homeowners have likely been asking similar questions over the past several weeks, after a powerful wind storm swept through the area earlier this month. The Pasadena Sun reports public sector damages from the storm are more than $30 million.

Source: http://homeinsurance.com/news/many-homeowners-confused-on-tree-damage-rules.php

Homeowners Insurance: Time for an Annual Check-Up

An annual check-up on your homeowners insurance can result in a healthier policy and a healthier pocketbook.


It’s time for your annual check-up. The good news is that for this one, you won’t have to don one of those revealing hospital gowns—and you may walk away with a healthier pocketbook. We’re talking about a homeowners insurance check-up, a task you should complete once a year, ideally around renewal time. This will ensure your policy still provides the right level of coverage for your family, and your premium isn’t costing you more than it should.

Remember, homeowners insurance is essential. The coverage is designed to protect your home and its contents, as well as shield you from liability for accidents and such on your property. Block out an hour of your time, call an insurance agent, and get answers to these three important questions.

What type of coverage do I have?

The most effective type of coverage is known as “replacement cost,” which covers, up to your policy limits, what it would take today to rebuild your house and restore your belongings, says Jerry Oshinsky, a partner at Jenner & Block in Los Angeles who has represented homeowners in litigation against insurers.

“Extended” replacement cost coverage provides protection to your policy limit, say $500,000, and then perhaps another 20% of the cost after that. Percentages vary, but in this example you could recoup up to $600,000 on a $500,000 policy, assuming your losses reach that high. Extended coverage can compensate for any unanticipated expenses like spikes in construction costs between policy renewals. Now harder to find due to the industry shift toward extended replacement coverage, “full” or “guaranteed” replacement coverage covers an entire claim regardless of policy limits.

A less attractive alternative is “actual cash value” coverage that usually takes into account depreciation, the decrease in value due to age and wear. With this type of policy, the $2,000 flat-screen TV you bought two years ago will be worth hundreds of dollars less today in the eyes of your claims adjuster. Kevin Foley, an independent insurance broker in Milltown, N.J., favors replacement cost coverage unless you can save at least 25% on the premium for going with actual cash value coverage instead.

Even if you have replacement cost protection for your dwelling and personal property, don’t assume everything is covered. Structures other than your home on your property—such as a detached garage or swimming pool—require separate coverage. So too do luxury items like jewelry, watches, and furs if you want full replacement cost because reimbursement for those items is typically capped.

How much coverage do I really need?

OK, now that you’re clear on what type of policy you have, you need to figure out how much policy you truly require in dollar terms. Let’s say you purchased your home five years ago and insured it for $200,000. Today, it’s worth $225,000. Simply increasing your coverage to $225,000 may nonetheless leave you underinsured. Here’s why.

The key to determining how much dwelling coverage you need isn’t the value of your home but the money you’d have to pay to rebuild it from scratch, says Carlos Aguirre, an agent for Liberty Mutual Insurance in Arlington, Texas. Call your local contractors’ or homebuilders’ association and inquire about the average per-square-foot construction cost in your area. If it’s $150 and your home is 2,000 square feet, then you should be insured for $300,000.

There’s no rule of thumb for how much your homeowners insurance should cost. Insurers use numerous factors—age, education level, creditworthiness—to determine pricing, so the same policy could run you more than your neighbor. In recent years the average annual premium was $804. Oshinsky advises against scrimping on insurance because big increases in coverage probably cost less than you’d think. He recently purchased a liability policy that cost $250 for the first $1 million in coverage. Adding another $1 million increased his premiums only $12.50 more.

How can I lower my premiums?

The higher your deductible, the amount you pay out of pocket before coverage kicks in, the lower your premium. Landing on the appropriate deductible level requires remembering that insurance should cover major calamities, not minor incidents, says Foley, the independent insurance broker. Most homeowners should be able to absorb modest losses like a broken window pane or a hole in the drywall without filing claims. If you can, then you’re wasting money with a $250 deductible.

Foley’s rule: If you’re a first-time homeowner and don’t have a lot of savings, moving up to a $500 deductible will probably stretch your budget. However, if you live in a ritzy home and drive an expensive car, then you should be able to afford a $1,000 deductible. In Milltown, N.J., for example, the premium for a $200,000 home with a $500 deductible would be $736, according to Foley; moving up to a $1,000 deductible drops the annual premium to $672. That’s $64 in savings.

Every major insurer offers discounts to various groups, such as university employees or firefighters. Figure about 5%. Ask which affiliations would entitle you to a discount and how much. If an AARP membership would result in a $50 savings, pay the $16 dues and pocket the $36 difference. Many insurers also offer discounts ranging from 1% to 10% or more for installing protective devices like alarms and deadbolt locks, for going claim-free for an extended period, or for insuring both your car and your home with the same carrier.

G.M. Filisko is an attorney and award-winning writer who has been involved in insurance litigation. A frequent contributor to many national publications including Consumers Digest, Bankrate.com, REALTOR(R) Magazine, and the American Bar Association Journal, she specializes in real estate, personal finance, and legal topics.


Read more: http://www.houselogic.com/articles/homeowners-insurance-time-for-annual-check-

Insurance Mistakes to Avoid: Don't Risk Being Underinsured

Too many Americans mistakenly believe that the coverage limits of their home owners insurance policy are linked to the market value of their home, according to the Insurance Information Institute.
In the I.I.I.’s 2011 Insurance Pulse Survey, conducted by the Opinion Research Corporation, nearly half (48%) of survey respondents came to that incorrect conclusion.

“The real estate value of a home, that is the price you can buy or sell it for, has absolutely nothing to with the amount of insurance needed to financially protect the home owner in the event of a fire or other disaster,” said Jeanne M. Salvatore, senior vice president and consumer spokesperson for the I.I.I. “Reducing insurance coverage because the market value of a home has decreased can result in being dangerously underinsured.”
One out of three respondents to the Pulse Survey reported that they purchased less home owners or auto insurance as a way to save money. A better strategy would be to take a higher deductible, which can substantially reduce insurance costs. Home and car owners can then put the savings into a purchasing the right amount and type of insurance for their specific needs, pointed out Salvatore.
Another way to save money is to comparison shop, something that seven out of 10 Pulse Survey respondents said they did to save on both their home and auto insurance needs.
I.I. I. says three biggest insurance mistakes home owners can make are:
1. Insuring a home for its real estate value rather than for the cost of rebuilding. When real estate prices go down, some home owners may think they can reduce the amount of insurance on their home. But insurance is designed to cover the cost of rebuilding, not the sales price of the home. You should make sure that you have enough coverage to completely rebuild your home and replace your belongings.

• A better way to save: Raise your deductible. An increase from $500 to $1,000 could save up to 25% on your premium payments.

2. Selecting an insurance company by price alone. It is important to choose a company with competitive prices, but also one that is financially sound and provides good customer service.

• A better way to save: Check the financial health of a company with independent rating agencies and ask friends and family for recommendations. You should select an insurance company that will respond to your needs and handle claims fairly and efficiently.

3. Dropping flood insurance. Damage from flooding is not covered under standard home owners and renters insurance policies. Coverage is available from the National Flood Insurance Program (NFIP), as well as from some private insurance companies. Many home owners are unaware they are at risk for flooding, but in fact 25% of all flood losses occur in low risk areas. Furthermore, with the significant snow fall this winter, spring related flooding may be particularly severe, thus increasing the importance of purchasing flood insurance.

• A better way to save: Before purchasing a home, check with the NFIP to determine whether the property is situated in a flood zone; if so, consider a less risky area. If you are already living in a designated flood zone, look at mitigation efforts that can reduce your risk of flood damage and consider purchasing flood insurance. Additional information on flood insurance can be found at www.FloodSmart.gov.

Source: Insurance Information Institute

Read more: http://www.houselogic.com/news/articles/insurance-mistakes-avoid-dont-risk-being-underinsured/#ixzz1GyKgD7Zt