Sunday, May 21, 2017

Is Your Home Under-Insured?

Recent research shows that 60% of the respondents never shopped around or checked on the adequacy of their homeowner’s insurance when the policy was up for renewal. 75% of them said that cost was a major influence on the amount and type of coverage they had. While the cost of insurance cannot be ignored, it should not be the deciding factor in the amount of coverage that is taken. The coverage should be based on what it will cost to rebuild a home that has been destroyed by natural calamity.

Market Value vs. Replacement Cost

The real estate market is yet to recover from the mortgage crisis of a few years ago. Many homeowner’s look at the current market value of their home and, on finding that the value has dropped over the last few years, reduce their insurance accordingly. However, that is a major mistake. A home’s value may have come down by 30% but if it is destroyed, the cost of rebuilding it may be 30% higher. That is the kind of gap that could ruin a family financially. What you need to do is base your coverage on what it will cost you to rebuild a home that has been lost. There are 2 types of insurance options to consider.


  • Actual Cost Value (ACV):This is the less expensive of the options. It covers the “as is” or depreciated cost of the house. Coverage is limited to what is known as “like kind and like quality.” In other words, if a roof of a 12 year old house has to be replaced, the insurance payout will be for the cost of a 12 year old roof. The difference(the current market cost of a new roof) will have to be paid by the homeowner. Since depreciation happens quickly, it is easy to miscalculate the coverage that is available and find that a major part of the repair or replacement cost is not covered by the policy.
  • Replacement Cost: These policies cover the actual repair or replacement cost at the time the work is to be done. In other words, if the 12 year old roof is to be replaced, the policy will cover the cost that is prevalent today. Obviously, this is more expensive than the ACV coverage, but it offers complete protection.

Finding the Right Coverage

Thinking about worst case scenarios can be depressing. Finding your way through the complexities of insurance can be dull and boring. The cost of insurance can lead to efforts to reduce the premiums.  All these factors conspire to create a situation where it is easy to use ballpark estimates to decide on a policy without considering what you really need. You cannot afford to make mistakes or take risks when it comes to protecting your biggest investment. Balancing the cost of insurance and the coverage that is required requires professional expertise. An insurance broker will be able to guide you to the right choices – those that will not waste money on excessive premiums but at the same time give your family and your home the protection it needs. Procrastinate no longer and contact the insurance broker, today.

Monday, May 15, 2017

Why Don’t Californians Have Enough Earthquake Insurance?

One of the reasons why disaster movies are so popular is that watching something terrible happen while sitting safe and comfortable in a movie theater is that it allows people to see what could happen while they remain secure. The movie San Andreas showed how a massive series of earthquakes wiped out most of California. Yes, there was a lot of exaggeration in the storyline and some questionable science. But it was not complete fiction. The 800 mile long San Andreas Fault runs through the state and is one of the most dangerous fault lines in the world.

The Next Major Earthquake Could Happen Soon

Scientists say that the general rule of plate tectonic movement is that 16 feet of accumulated plate movement is relieved by a quake every 100 years. There has been no stress relief on the San Andreas Fault for over a century. The director of the Southern California Earthquake Center says that the fault is “locked, loaded and ready to roll.”

The science of earthquake is improving but it is still in its infancy. Even if a quake could be predicted, the benefit would be in terms of getting people out of the danger zone, not in saving property. A house cannot be moved overnight. The Bay area has 3 major fault lines – the San Andreas, the Hayward and the Calaveras. The U.S. Geological Survey predicts that a major quake will hit the Bay Area in the next 30 years along any of these faults.

A major quake in the Bay Area sometime in the not too distant future appears to be inevitable. The right insurance coverage is the only way to secure a family’s financial future when (not if) it happens.

Earthquake Insurance Is Not Cheap

A 2016 survey found that less than 15% of Bay Area homes have earthquake coverage. It’s not that people are unaware of the danger – everyone knows that this is an earthquake hot zone. The problem is the high premiums and deductibles that can make the cost of insurance appear to be excessively high. Premiums are determined by a home’s replacement value and how high the risk of quakes are in a specific area. Both of these conspire to push up Bay Area insurance costs. According to the California Earthquake Authority(CEA), the average premium for earthquake insurance in San Francisco County was $2,156 in 2014. That is a major reason why less than only 1 million of the almost 7 million single-family homes in the state have earthquake insurance. The issue that homeowners seem to miss is that the premiums are high because the risk is high. If a home is seriously damaged or destroyed in a quake, the cost of restoring it, could wipe out a family financially. Federal and state emergency assistance is only for survival, not for rebuilding lives. Earthquake insurance is the only way to protect a home and a family’s future.

Contacting an insurance broker to find the right coverage, as that is also essential. An insurance professional can help you to work out the coverage you need within the budget you have. It may not, afterall be as expensive as you think it is.

Friday, April 28, 2017

Floods - California’s Uncertain Future

According to a state report, California is at increasing danger of severe flooding in the future. What happened in San Jose recently could be just a taste of things to come. A report from the nonpartisan Legislative Analyst’s Office (LAO) says that 1 in 5 Californians live in a flood plain. The structures at risk of flood damage are estimated to be $575 billion. The current expenditure on flood reduction is far less than the tens of billions of dollars that will be required to increase the level of protection. In San Jose, 14,000 people had to be evacuated and the damage is estimated to be about $100 million.

Inadequate Funding – A Huge Challenge

According to the LAO, the funding for flood control is both limited and inconsistent. The Public Policy Institute of California estimates that between 2008 and 20011 the state spent $2.2 billion a year on flood control measures. Most of the dams and weirs in the state are a minimum of 60 years old and many of the levees were built 100 or more years ago. These are not to modern design and structural standards. The Department of Water Resources and the U.S. Army Corps of Engineers, in a study released in 2013, says that there are 836 flood management projects in the state that will require $52 billion and an additional $100 billion is required to address the problem of future flood risk.

Climate Change and New Developments Add To the Problem

The effects of climate change are well known and even if the trend is reversed in the foreseeable future, undoing the damage already caused will take decades. Expecting the scope of the problem to increase is not scaremongering – it is scientific fact. Added to this is the population growth that is pushing development into new and often unsafe areas and compounding the problem. One example is the approval given for the construction of apartments in Nordale Avenue in San Jose. This is an area that was inundated by the recent flood.

Flood Insurance Is No Longer Optional
 
The dangers to homes and property are obvious and there is no immediate solution in sight. Flood insurance is no longer an issue that Californians can afford to just think about. It is essential and needed now. Many homeowners think that their homeowner's insurance will cover such calamities and that state and federal flood assistance programs will offer them the additional protection they need. Standard homeowner’s insurance policies do not cover damage and loss caused by floods. State and federal programs are intended to offer immediate relief from the havoc that floods cause, not to help in recovery and rebuilding lives. If you do not have flood insurance, you should contact an insurance broker without delay to get the coverage you need to protect your family’s future. If you do have coverage, are you sure it is enough? Why not talk to an insurance professional to see what kind of protection you really have and if you should increase it?

Sunday, April 16, 2017

Life Insurance - Do Your Children Have The Right Coverage?

According to some estimates, about 30 million Generation X and Y people in the country do not have adequate life insurance coverage. In their younger years the thoughts of family, responsibilities and death are not serious concerns. However, time passes quickly and responsibilities grow faster than they think are possible. With so many competing financial obligations and life insurance options available, finding the right coverage is not easy.If you are the parent of a young person starting an independent life, talking to them about life insurance is not interference, it is parental guidance. Here are the 3 basics of life insurance that you should discuss with them.

Do You Need Life Insurance?

If you are single and have no dependents, you may not need life insurance. If you are working, you may qualify for a small policy through your employer which will cover the basic funeral expenses if you die. However, if you are married, or have taken on guardianship of siblings or have people who are dependent on you, then life insurance is no longer an option. You need to ensure that those who depend on you are taken care of if you should die. The younger the age at which a policy is taken out, the less expensive it is. Beneficiaries can always be changed as circumstances alter.

How Much Do You Need?

This is difficult to decide. Millennials will not be able to appreciate the financial liabilities that are placed on them as they progress through life. As a parent, you can use your own example of where you were 20 years ago and where you are now. That will provide a framework for what they have to plan for. They need to look at where they will be 10, 20, 30 and 40 years from now and what their responsibilities will be. In general, the coverage should be enough so that their dependents can live off the interest. This will include paying off any debts and paying for children’s education. These may be difficult to determine so much in advance, but by planning for the future in 5 or 10 year blocks, getting the right coverage will be easier.

What Type Of Life Insurance Is Right For You?

Term life insurance, as the name implies, is a coverage that is taken for a fixed period of time. If the policyholder dies during the validity of the policy, the beneficiaries will be paid the policy value. A whole life policy provides for lifelong coverage and contains a tax deferred investment component called the “cash value.” Money can be borrowed against the policy or it can be surrendered for cash. Both options have their pros and cons.

Professional Guidance Is the Best Option

Once the need for life insurance has been understood and accepted, an insurance broker should be consulted. An insurance professional will be able to explain the intricacies of life insurance, the various options and how the coverage can be changed to meet the demands of different stages of life. Insurance is a constantly evolving business and the coverage you, as a parent have had over the years, may not be the best for your children.

Wednesday, March 29, 2017

Earthquakes - The Increasing Risk in California

Nature can be a cruel mistress. The wet winter we have experienced has been seen as a blessing – it has refilled the reservoirs and ended the drought that had affected over 75% of the state. But while the rain has been welcomed, it has also brought with it an increased risk of earthquakes. Californians are no strangers to quakes and accept the tremors in the ground as part of life. But the record amount of rain over the last few months may have created such a large amount of pressure in the groundwater system to be a trigger for major disasters.

Frightening Research

A recent study by Durham University says that “"earthquakes are triggered by a tiny additional increment of stress added to a fault already loaded almost to breaking point.” Itgoes on to say that hydrological changes do not need to be either large or sudden to cause changes in the water pressure at geological fault zones. It concludes that "It is thus unsurprising that extreme rainfall events might also encourage earthquakes. A number of instances of this have been flagged by scientists."

California’s History of Natural Disasters

Once again the Governor has had to ask for federal help to combat the flood conditions. That will help the state to cope with the damage. However, such help is always post facto. Help cannot be requested for a disaster that is in the future such as the increased probability of earthquakes due to the flooding. Federal and state relief programs are meant to tide over the immediate aftermath of disasters. They are not insurance against them and do not help in rebuilding lives that have been affected by them. However, as a homeowner you can get the flood and earthquake insurance you need to protect your family and your future.

Studies show that the majority of Californians are under-insured when it comes to protection from natural disasters. Your homeowner’s insurance policy may look good on paper and the coverage may seem to be adequate to protect your home, but does it cover flood and earthquakes? A major flooding incident or a massive earthquake could not just damage your home, it could destroy it along with all its contents. Recovering from that kind of loss requires a huge amount of resources. It is not just a matter of rebuilding the house and replacing everything in it. You will need a roof over your head during the months or more that it could take to move back home. Your living expenses will increase during this time. Are you sure your homeowner’s coverage will compensate you for all of this? You cannot hope that you are covered – you must be sure. The best way to do that is by contacting an insurance broker to help you review your existing coverage and supplement it with flood and earthquake insurance to give your family the protection it needs. Paying more for insurance may seem to be a needless expense but the odds of being affected by a natural disaster are not in your favor and they are getting worse. Balancing out your natural disaster protection may be less expensive than you think and an insurance professional will be able to help you find the optimum balance.

Thursday, March 16, 2017

Flooding - California’s Real and Present Danger

It never rains, it pours. The rains that have hit California so hard over the last few months have caused major flooding and damage across northern parts of the state. The Governor’s office says that the cost of repairing flood damaged roads, dams and other infrastructure could be over $1 billion. Just the cost of repairing the Oroville Dam spillway could top $200 million. While all these numbers point to the magnitude of the problem, they do not include the damage and property loss that individuals and businesses have suffered.

What the State Government Says

The California Department of Water Resources says that “every year millions of Californians are at risk from flooding along thousands of miles of streams, rivers, lakes and coastline.” It goes on to say that no one can predict when flooding will occur – it could be a regular event or occurring after a gap of many years. What can be stated with certainty is that lives will be lost, homes flooded, damaged and destroyed, jobs and income lost and ecosystems damaged. Since 1950 flood disasters have been declared in every county in the state at least 10 times. Some counties have had up to 29 state and federal disaster declarations.

The Low Flood Risk Myth

Living in a low flood risk zone can instill a false sense of confidence about the why you do not need flood insurance. Low risk does not mean no risk. Those living outside high risk zones file over 20% of National Flood Insurance Program (NIFP) claims and receive one third of flooding disaster assistance. Bad drainage, heavy rain, snowmelt, and even something as basic as a broken water main, can cause flooding and severe damage. If you live on a hillside you may not be at risk of water damage, but a mudslide (covered by most flood insurance policies) could damage or destroy your home. The bottom line is that no one is completely safe from the risk of flooding. Being at low risk means only that the chances of being affected by flooding is lower. Are you willing to take a chance with your home and your family’s security?

Taking action to protect your home and family from the effects of a flood is not something to be ignored. You may think your homeowner’s insurance policy will help you to recover from a flooding event. But generally speaking, a standard home insurance policy will not cover flood damage and loss. And even if some protection is available, it may not be enough to help your family get back on their feet after the kind of major property and financial loss that a flood can cause. Flood insurance usually requires a separate policy and navigating through the often confusing world of insurance can lead to mistakes that you may only realize when the time comes to file a claim. That is why calling in on an insurance agent to check to see if you have the flood protection you need is the safest way to keep your home and family secure.

Monday, February 20, 2017

Flood Insurance - What You Need To Know

If you have been through a major flood, you know the kind of damage and property loss it can cause. If you haven’t experienced it, it is difficult to image what it is like.

The National Flood Insurance Program (NFIP) was created in 1968 as a means for property owners to protect themselves financially in the event of flood damage. Flood insurance is offered to homeowners, renters and businesses in communities that participate in the program. According to the NFIP flood is the number one natural disaster in the U.S. From 2011 to 2015, the average flood claim was over $46,000. From 2006 to 2015, flood damage insurance claims exceeded $1.9 billion per year. Major changes to the program will come into effect from 1st April this year as continuing with the program with the current subsidized rates is no longer viable, and it is important that homeowners know about them so they can plan for the future.

NFIP Changes

Flood insurance premiums will increase. On an average, this will be about 6.3%. This increase does not include the Homeowner Flood Insurance Affordability Act (HFIAA) surcharge or the Federal Policy Fee (FPF). If the HFIAA surcharge and FPF are taken into account, the total impact on the policy holder will be around 5.4%. There will be no changes to the:


  • Deductible Factors
  • Federal Policy Fee
  • Reserve Fund Assessment
  • HFIAA Surcharge
  • Probation Surcharge
  • Increased Cost of Compliance (ICC) Premiums
  • Tentative & Provisional Rates
  • Mortgage Portfolio Protection Program (MPPP)

The annual premium rate increase is normally limited to 15% but in some cases it may go up to 18%. Additionally, the premiums for following Pre-Flood Insurance Rate Map (Pre-FIRM) subsidized policies will be increased by 25% per year until the rate is at full risk levels:

  • Non-primary residential properties
  • Business properties
  • Severe Repetitive Loss (SRL) properties, which includes cumulatively damage
  • properties
  • Substantially improved properties

In the case of Pre-FIRM Subsidized Policies the following increases will be effective:

  • Primary residences – premiums will increase on average by 5%
  • Non-primary residences – premiums will increase on average by 24%
  • Policies subject to 25% annual increases – premiums will increase on average by 23%
  • All other Pre-FIRM subsidized risks not covered in the first three bullets (primarily

Condominium and multi-family policies) – premiums will increase on average by 8%

How Are You Affected?

The changes that will come into effect are complex and technical. Most home and business owners will have difficulty in understanding the effect these will have on them. Now is the time to contact your insurance broker to know how the changes will affect you and how much you will pay for flood insurance. If you do not have flood coverage, an insurance professional will be able to help you find the policy you need at the cost that is right for you.

Wednesday, February 15, 2017

Earthquake Insurance is Cheaper than You Think

In 2015 the United States Geological Survey released its Uniform Earthquake Rupture Forecast which says that there is a 93% chance that California will be hit by a 6.7 magnitude earthquake in the next 30 years. That is almost double the size of the Northridge quake. Quakes are a clear and present danger for everyone living in the state. Northridge caused about $40 billion is property damage and about half of that was for homes. Because of the huge payouts, not only did premiums rise, many insurance companies reduced the number of polices they wrote. In response to this, the state Legislature created a basic no-frills policy that insurers could offer, but the coverage left a lot to be desired. Earthquake insurance coverage stagnated.

Earthquake Insurance Coverage Is Low

Despite the danger we all face, only about 10% of California homes have earthquake insurance. There are 2 main reasons for this. The first is that the rates for this coverage were high and many homeowners thought that they couldn’t afford it, in spite of knowing the risks they ran. The other reason is that many presumed that if a quake hit them, federal and state aid would help them recover. That is a major misconception. The aid is meant only to help families survive in the aftermath of a quake, not to repair the damage and rebuild their homes. As for the cost of the coverage, it is less expensive than you think.

New Coverage Options

The California Earthquake Authority (CEA) is a publicly managed organization that provides earthquake insurance through a number of leading insurance companies. Today, the CEA provides around 75% of all earthquake policies sold in California. The Authority’s CEO says that a new research has allowed the risk to be recalibrated and that rates have come down by almost 50%. The large amount of options available enables homeowners to tailor their earthquake insurance options to match their needs and their budgets. For example, the deductible can now be set at anywhere from 5% to 25%, instead of the old range of 10% to 15%.  Coverage for property inside the home can now range from zero to $200,000 instead of the old limit of $5,000. And when a home is uninhabitable after a quake, the loss of use coverage can be between 0 to $100,000.

Today, a home with slab foundation and frame construction can get a basic CEA coverage for just $804 per year.

Get the Coverage that is Right for You

If you do not have earthquake insurance, now is the time to get the coverage you need. And if you do have a policy, this is when you can relook to see if it offers you the protection you need and if not, get additional coverage without emptying your bank account. Earthquake insurance is a complex subject and balancing coverage, deductibles and premiums requires expert knowledge. Contact an insurance broker to know where you stand and what additional coverage is available to you.

Monday, January 23, 2017

The Different Types of Homeowner’s Insurance

There is no one-size-fits-all homeowner’s insurance. Each insurance company has its own coverage types and limitations. When purchasing a homeowners insurance policy, spend time looking at all the options available and also discuss the matter with your insurance broker. He will be able to help you find the right coverage at the right cost. Taking out coverage you don’t need is a waste of money, but not having the protection you require could be disastrous. The following outlines are intended to help you understand the basic homeowner’s insurance types that are available.

Policy Types

  • HO-1: Limited coverage Policy – This is a very basic policy that provides coverage against only a few specific types of disaster. It is no longer available in many states.
  • HO-2: Basic Policy – This is an expanded version of HO-1 that offers protection against a slightly larger range of disasters. There is a version of this available that has been created specifically for mobile homes.
  • HO-3: General Coverage Policy – This is the most common and popular type of policy. It offers protection against all types of risks, excepting those that have been specifically excluded in the policy document.
  • HO-8: Old Home Policy – This policy, designed for older homes provides for compensation for damage on an actual cash basis. This equates to replacement cost less depreciation. In some cases, if the home is very old, full replacement cost coverage may not be available.
  • HO-4: Renter’s Policy – As the names says, this policy is for those who stay in rented homes. It offers protection for all the renter’s possession and any fixtures or fittings, such as new kitchen cabinets, that the renter may have installed at his own cost.
  • HO-6: Condo / Co-Op Policy– This policy provides condo and co-op owners coverage for their belongings in the condo or co-op and also for any parts of the structure that they may own.

Options

The following options are normally available for all types of homeowner’s insurance.

  • Actual Cash Value: This covers the replacement of a home and/or possession with  deduction for depreciation
  • Replacement Cost: This covers the actual cost of replacing a home and/or possession. There is no deduction for depreciation.
  • Guaranteed / Extended Replacement Cost: This is the most comprehensive type of coverage with the greatest protection. Under this option, the policy will cover the full cost of replacing a home to what it was before the loss, irrespective of the actual cost. This means the homeowner is covered even if the replacement cost is greater than the policy limit. This option will normally not cover the cost of upgrading the home to comply with current building codes. However, it is often possible to get an endorsement that will also cover these costs. In some cases, an insurance company may offer an extended replacement coverage instead of a guaranteed one. This will cover replacement cost to a fixed percentage over the policy limit.

If you are planning on purchasing a homeowner’s insurance or want to check if your existing coverage is right for you, consult an insurance professional. He will be able to guide you through the different policy types and options to find the coverage that is right for you.

Wednesday, January 18, 2017

Scam Artists Collect Where Disaster Strikes

A disaster can destroy homes and damage lives and futures. That is bad enough, but what could be even worse are the swarms of scam artists, who arrive on the scene of the disaster, eager to rip off those they can get their hooks into. It is the hurt and vulnerable who are the best victims. Fly-by-night contractors and door-to-door scammers descend like flies when they find innocent people whose misfortunes they can benefit from.

No matter how well prepared you are, a disaster can leave you confused and you could probably be confronted by problems, you never thought of. That is when you are most vulnerable. Staying organized and following procedures will help to keep you safe.

What You Should Do

  • Contact your insurance company as soon as possible. Since there may be many people in the same situation as you, getting through may be difficult. Keep trying.  When you do make contact, state your situation clearly. Have all your policy information at hand. Ask questions to get clarity on any points you do not understand. Maintain a log of all the people you talk to,along with dates, times, and a summary of what was discussed.
  • Make sure all your emails to and from the insurance company are properly sorted and filed safely.
  • Follow the instructions you receive from the insurance company. The procedures can often appear to be a waste of time and frustrating, but insurers have mandatory procedures they must follow and that requirement devolves on their policy holders. By doing exactly what is asked of you, you can avoid a lot of delays and hassles.
  • Document everything. Take pictures of the damage that has occurred. File receipts and records of all the payments you have made after the disaster struck.
  • Once the insurance company accepts your claim, do not relax. It is when you have your guard down that scam artists will strike. Do not be in a rush to get repairs done. Returning to normality fast is tempting, but you need to be sure who you are entrusting the repairs to. In the conditions after a disaster, going online to check out contractors and verify references may be difficult. Do what you can. One thing that is essential, is to contact the Contractors State License Board in your area. You can phone the board at 800-321-2752 or go to the website at www.cslb.ca.gov to check a contractor’s license.
  • Try to avoid dealing with middlemen. Going to an attorney or hiring a public adjuster should be a last resort. Your insurance company will provide you with an adjuster at no charge to you. Work directly with your insurance company – that prevents miscommunications and needless aggravation. Ask you insurance brokers for assistance if you need it.
  • Do not start any repairs until the adjuster has given a go ahead.

Being Prepared Is Best

Planning for the worst is not being negative – it is a positive act that will help you to overcome the challenges that arise after a disaster. Remember that your insurance broker is there to provide you with the help you need on insurance related issues. Contact him to get a detailed checklist of what you should do if disaster strikes. And if it does happen, he is there to help you.