How to Review Your Homeowners Insurance Renewal Statement

For most of us, our home is our single largest and most important investment. Many of us have poured thousands of dollars and countless hours into maintaining, improving and (hopefully) paying off our homes. Many people own their homes free of any mortgage. These assets are pure equity. Certainly its worthwhile to invest 15 minutes a year to be sure it's properly insured.

Thankfully, the insurance company offers you a perfect reminder and opportunity in sending out your annual renewal statement. Even if your insurance is paid by your mortgage company as part of your impound account, the insurance company still mails you a statement of renewal every year to update you with your current coverage limits and deductible.

Here's a few important steps you can take to be sure that HOME SWEET HOME is properly protected.

1. Check the basics. Check your name, address and any other description of the insured property. Make sure there's been no change of vesting or ownership that needs to be updated. Check your address to be sure no numbers are transposed.

2. Check the mortgagee clause. Here's where you can be sure that the current mortagee on your home is listed correctly. Check the lender, address and your loan number. Be sure there's no old information there. Maybe you had a HELOC (Home Equity Line of Credit) or a second mortgage that no longer applies. Be sure to get them removed.

HEADS UP: Whenever you have a significant claim, the mortgage company will be one of the payees on your claim settlement check. Just that alone can be an inconvenience. But it becomes a major hassle when one of the institutions listed no longer has a vested interest in your home. The insurance company is bound by contract to include the mortgage company on all settlement checks beyond a stated threshold.

*3. Check the coverage on your home (dwelling or building). This is without question the single most important coverage to examine, consider and adjust whenever necessary. Having been an agent during the two raging firestorms in San Diego, CA in this decade, I can tell you that underinsured homes are just NO FUN! Two of my clients lost their homes in the 2003 fires and fortunately they were both adequately insured. (we call all our homeowner clients once a year to review their coverages and suggest improvements and adjustments) But I can tell you that there were literally hundreds of people in the area that were not so fortunate. Many were underinsured by over $100,000! Contractors were giving rebuilding bids on homes for $400,000 with insurance policies with limits less than $300,000. See if that doesn't tweak your financial well-being just a little. Here's the solution.

Get an accurate rendering of the square footage of your home. Check county records, take a look at zillow.com, call your favorite Realtor, or get a tape measure and do your thing. Usually you don't include the garage in this calculation. Once you get your square footage, then you need to determine the building cost per square foot in your area for a home like yours. Call a local contractor for a quick estimate or you can call your insurance agent. Average costs in San Diego run about $200 per square foot. With that, a 2000 square foot would take about $400,000 to rebuild. Custom homes can be significantlly more. For a more complete discussion of this, check out: How Much Homeowners Insurance Do You REALLY Need?

Your contents coverage is usually 75% of the amount you have on your home. For example, if you have $400,000 on your home, you'll have an additional $300,000 to cover your personal property (furniture, clothing, dishes, TV, collections, shoes, tools, etc) Usually this is enough, but think through it anyway. If you have antiques, art, collections of any kind then you may need more. Ask your agent for help if you need to.

4. Look at your Personal Liability Coverage. This is the coverage you need when you get sued. Little Johnny runs across your front yard and trips on one of your sprinklers and ruins his chances to become America's Next Top Model and his parents sue your for $250,000. Make sure you don't scrimp here. It's not too expensive to get $500,000 or even $1 Million of liability coverage. If you have $100,000 or less, you could be setting yourself up for a mess just waiting to happen. Put a really big checkbook between your assets and someone who sees an injury as a lifetime paycheck. You might even consider a Liability Umbrella.

5. Check your 'special limits'. This is a REALLY BROAD subject that I just can't do justice to here in this post. Simply stated, there's limits on many things such as cash, computers, cameras, jewelry, furs, goldware, silverware, tools, etc. Call your company and ask for a review. You can increase many of these limits for just a few dollars a year. Sometimes the available increase isn't enough. That's the perfect time to consider a Personal Articles Floater (or it's called many different names) It's a policy that's designed to place stated amounts of coverage on many items from jewelry, business tools, iPods, hearing aids, cameras, musical instruments and on and on. If you have more than 'the average Joe' of ANYTHING, then check this out FOR SURE!

6. Check your deductible! This can be a tremendous cost-control tool in your insurance spending. Simply stated: The larger your deductible, the greater your savings. Usually you can save close to $100 per year just by going from a $500 deductible to $1000. Pick the largest number you can stand without losing sleep at night and ask your agent or company the savings you'd realize by changing. If you have a $250 or smaller deductible, it's definitely time to change it UP! Keep in mind that you usually hit a point of 'diminishing returns' once you get to $4000 or more. This means that you'll save less and less for each additional $1000 you choose. It might make sense to go from $1000 to $2000 if you save $85 a year by doing so, but not from $5000 to $6000 if you only save another $21 by making that jump.

Monitoring your insurance costs and coverages can result in a lot of savings AND peace of mind. Be sure you keep notes and file your thoughts and changes from year to year. These recoreds will make your annual call quicker and easier each year.

Feel free to contact me anytime if you have questions.

Till next time...


It's a Good Life !

Insurance Agents

"There are worse things in life than death.  Have you ever spent an evening with an Insurance Agent?" 
-Woody Allen

The above quote is a common misperception of how people view Insurance Agents.  I thought I would take a minute to address my recent poll results.  Hopefully the next one will produce more response.  The question was asked.. What are insurance agents likely to be doing when not at work?  Unless you know some insurance agents personally it would be hard to say.  Let me give my quick insight into the personal life of an insurance agent:

I was introduced to the insurance business by my father who works in my same office right across the hall.  If you were to ask most insurance agents why or how they got into this type of work they would very likely tell you that it was a family member.  My grandfather started an insurance agency in Ogden, Utah which is run today by my uncle.  My father started with them and eventually was offered another opportunity and decided to join another agency.  We now have several generations of insurance agents working in the area.  I was never pressured into following my father's footsteps into this industry.  I think the things that appealed to me were the opportunities to make a good living, the flexibility of an open work schedule, the good people in the business, and the ability to work with and get to know people across all industries and organizations.  Now that you have some background info on me, what is the answer to the poll question?  Obviously, there is no correct answer.  I was looking to gather info on a perception more than anything. 

I have been able to meet alot of insurance agents by being involved in the industry.  My father has spent the past 25 years or so serving on various boards and committes of the Independent Insurance Agents and Brokers of America and has just completed his year as the National President of this organization.  Being involved with this locally and traveling with my father has allowed me to meet alot of people in the industry.  In general, these are very good people who although they spend time on the golf course can usually be found reading through policies and contracts, serving in a community or industry organization, and taking classes to further their knowledge.  Every Trusted Choice Agent makes a pledge of commitments to their clients which you can read here http://bit.ly/bEQN5V. 

It's true, insurance isnt the most interesting or attractive industry in the world.  But actually, most insurance agents don't get into the industry because they love insurance.  They get into the industry because they are usually very diverse people that like to be involved with many different things.  For me, the long and competitive hours of prospecting and presenting are generally rewarded with an afternoon of golf or a couple hours in the mountains or on the lake.  The late nights of reviewing a contract or returning emails allow us to take a vacation with the family and be there with our children when they have a baseball game.  I also enjoy the Exchange Club and other organizations I participate in that allow me to be involved with my community and give back to those who I can help.  Yes, we spend long hours studying insurance concepts and forms but in the end it turns out to be a very good job with many benefits.  I love insurance because it allows me to meet and work with many outstanding people and gives me the freedom to do the things that I want to do, whatever those things may be.

ALL IN

What do you think of when you hear the term "All In"?  I think of a poker player who is so confident in his ability to win a hand that he is willing to put all of his chips on the line.  I also think of an entrepreneur who is so confident in his ability to make his business work that he is willing to put all of his resources and the livelihood of his family on the line to make it happen.  There are many people in our business community who have committed everything to building a successful business.  This is what it takes.  You have to be "all in".  There are many factors we can control when it comes to building a successful business such as hard work, providing good service, fulfilling a need, developing good products, and hiring quality people.  Essentially, we are able to choose the hand we are dealt.  That is what makes our country great.  Every single person has this opportunity to bring something innovative and new to the table and build a successful enterprise.  However, there are a lot of people who are not willing to put it all on the line.

There are certain risks that we have no control over which scare people away from seizing the opportunity to go "all in".  We sometimes get caught up in thinking:  What happens if I go all in then my building burns down?  What if I hire the wrong person who steals money out of my company and sabotages the organization?  What if someone sues me because I did something wrong or didn't perform my work perfectly? What if my products are no good and cause damage to someone of something?  What if an earthquake or other natural disaster puts me out of business?

Fortunately, there are insurance answers for these questions.  This is why we buy insurance.  Sometimes after several years of running a successful business and never having to deal with something going wrong, we start to think that we are somewhat invincible and that all those things we worried about when we started the business are no longer a threat to us.  So we start to cut back on our insurance spending, commit to larger deductibles that we may or may not be able to meet, and shop our policies so competitively that we take the value of a quality agent out of the picture because we no longer need someone looking out for us.  All of a sudden, we just want the lowest premiums attached to somewhat decent service so we can get our insurance certificates to the people that request them.  When was the last time you sat down with your insurance agent and discussed every business exposure you could think of and looked at insurance options before deciding to retain those risks or transfer them to an insurer?  When you let a new agent work on your insurance, are you looking for a lower price on the same product or are you looking for what they can bring to the table as far as advice, knowledge, and superior service?

If you are "all in" with your business as many people are these days, let's get back to the basics.  Let's make sure you are properly insured.  Let's make sure you know what your exposures are and what options you have.  Let's make sure you know what risks you can and can't afford to retain.  Let's make sure you are getting the knowledge and advice you deserve from your insurance agent.  Please give me a call if you feel like it would be valuable to you to have an in-depth discussion on protecting your business assets and liabilities.  If you are a client of mine, let’s spend a little extra time this next year discussing your options as we always do but taking some time to brainstorm and think about the things we might have missed or haven’t discussed before.  I would encourage everyone to go “all in” because that is where success is found; but don’t do it without knowing what your uncontrollable risks are and creating a plan to protect yourself.