Home insurance tips

hoffse · June 2014

Just looking to see if anybody has tips for home insurance? We are planning to start shopping for that after we get the results of the inspection. The inspection is tomorrow afternoon.

We are thinking semi-high deductible (like a few thousand), full replacement value (not depreciation value), and obviously general liability for a slip and fall situation. We might also add a rider to insure our musical instruments, because they are actually more valuable than our cars. We may schedule a couple pieces of jewelry too, but I'm on the fence about that.

The house is not in a flood plane, so we probably don't need flood insurance.

Am I forgetting something? Other suggestions? I want to make sure I'm comparing apples to apples when I start to call around.

hoffse · June 2014

Thanks, temporary housing is good. I had forgotten about that. Adding it to the list!

I will also ask about bundling auto. Ours renews in 5 days, but if they can beat it then I'm willing to switch.

brij2006 · June 2014

Do a Google search for "Independent Insurance Agent" in your area. They have multiple companies they can quote you with that will give you the better deal, as apposed to calling individual companies/agents separately to have them just try 1 company.

Most agencies will do a Replacement Cost Estimator on your home to begin with. What the does is gives them the cost to re-build your home from scratch. That would be the amount you would want to insure it at, or at least 80% of that value for it to be a replacement cost policy.

All homeowners policies are a package deal. They will give you the Replacement cost on the dwelling itself, a percentage for Personal Property, percentage for Additional Living Expenses (if you were to live somewhere else for a period of time after a claim), and Other Structures coverage (fences, detached garage, yard shed, etc).

The liability is usually factored into this package also. You usually will have different options for liability. For you and YH, as being lawyers and your earning/savings potential to be higher than most, I would ask them to quote a minimum of $500,000 for liability. If not $1mil. The liability portion of the policy is usually the cheapest part. So there shouldn't be a lot of difference in those 2 amounts.

As far as scheduling items, it is always recommended for items of higher value or importance. Each of those items are originally covered under the personal property, but your higher deductible will come into play when it comes to a claim with them. However, one thing that scheduling covers that the Personal Property does not, is mysterious disappearance. So if you were to lose your engagement ring or instrument, that would not be considered a covered peril under Personal Property but would if you have it scheduled individually on the policy.

Also, a higher deductible is never a bad thing. Especially if you have enough cash flow in your budget to not treat it as a maintenance policy (unfortunately many people do). Most companies have gone to a minimum deductible of $1,000, but you can always choose higher than that. Have the agent quote a few ways so you can see the difference. Sometimes it only saves $100/year for a deductible $2k more. That means you would have to be claim free for 20 years before it makes up the difference. Then it isn't usually worth it.

formerlyGDaisy09 · June 2014

YEs, definitely go with an insurance agent who can pull from several companies. If you already have one for your car insurance that's not a bad way to go. our agent was able to look in and see that it was less expensive for us to have seperate plans for our home and cars.

with the temporary housing, I don't think you're forgetting anything. we did put my engagement ring on our insurance.

do you have any pets? home insurance can also cover injuries your pets might cause to people. when we got our puppy we did check the most current "bite list" to make sure our dog wasn't going to cause our insurance costs to rise. I don't necessarily agree with bite lists as so much of pet behavior has to do with training, but insurance companies do have reasons for flagging certain breeds as high risk.

hoffse · June 2014

Thanks! These are great tips. I'll get some broker recs from folks in my office today and tomorrow.

Question about liability coverage. My firm provides an umbrella policy for $5M if we maintain minimums of $300K for liability under our homeowner's policy. That will just cover me - I know H will need his own once he starts practicing, but I'm pretty sure his new firm does the same thing (we will find out in Sept. for sure).

Do you recommend I go higher than the $300K for liability, even though I have the $5M umbrella rider?

Thanks!

brij2006 · June 2014

Does the umbrella only cover you professionally?

There are 2 different types of umbrellas, Professional and Personal. Most Doctors, lawyers, and business owners have the professional umbrellas.

The way that we work it is once your net worth exceeds the amount of liability coverage you can receive from your homeowners insurance (usually $1mil), then you will want to look into a Personal Umbrella to cover the extra. A personal umbrella will cover your family residing in your household. There is no need to purchase separate ones for each person.

However, Professional Umbrella policies follow the individual or business entity. So you and your H would want to have separate ones.

smerka · June 2014

Getting a $1 million umbrella policy is relatively cheap. I think ours was going to be $200 more a year.

hoffse · June 2014

@Brij, no, it's a personal policy - so it might cover H in the sense that it covers personal assets of ours (liability that arises on our personal property, a boat, from a car, etc.). We have professional liability coverage that the firm also pays for, which is separate.

short+sassy · June 2014

You also don't want to over insure your home. For example, if your property is worth $300,000...but $100,000 of that value is the land...and you could rebuild the house for about $200,000 (or less), then you would only want to buy an insurance value of $200,000.

I actually recommend you at least look at flood insurance. If you aren't in a flood plain, it won't be very much per year. I'm guessing $100-$300/year. There are all kinds of crazy things that can happen and cause a flood. For example, when I was in college, a trash can fell into the street gutter next to my parent's house during a heavy rainstorm. It directed all that water directly into their house. This was in So. CA. It barely rains there, much less floods, lol. But they had thousands of dollars in damage and none of it was covered by their home owner's. Granted, flooding is probably unlikely for you, but it is something to look at considering it's low cost as compared to the high loss potential if the unexpected happens.

I totally agree with keeping a fairly high deductible. Because putting any kind of claim on your homeowner's insurance will typically skyrocket your rates, you typically don't want to go that route unless it is something pretty major anyway.

Although this won't really help you at the moment, I was recently reshopping home owner's insurance and there are a lot of surprising things a home can have that will put it on a "no" list. Some are obvious...asbestos rooves, knob and tube wiring, diving boards, etc. Most policies have a list of dog breeds that are excluded for the "bite" portion of liability.

But most insurance companies won't write policies at all if a house has a metal roof, window a/c and heat units instead of central, even one stairway not having a rail, or outdated plumbing/electricity/old roof.

Xstatic3333 · June 2014

short+sassy said:

You also don't want to over insure your home. For example, if your property is worth $300,000...but $100,000 of that value is the land...and you could rebuild the house for about $200,000 (or less), then you would only want to buy an insurance value of $200,000.
I actually recommend you at least look at flood insurance. If you aren't in a flood plain, it won't be very much per year. I'm guessing $100-$300/year. There are all kinds of crazy things that can happen and cause a flood. For example, when I was in college, a trash can fell into the street gutter next to my parent's house during a heavy rainstorm. It directed all that water directly into their house. This was in So. CA. It barely rains there, much less floods, lol. But they had thousands of dollars in damage and none of it was covered by their home owner's. Granted, flooding is probably unlikely for you, but it is something to look at considering it's low cost as compared to the high loss potential if the unexpected happens.
I totally agree with keeping a fairly high deductible. Because putting any kind of claim on your homeowner's insurance will typically skyrocket your rates, you typically don't want to go that route unless it is something pretty major anyway.
Although this won't really help you at the moment, I was recently reshopping home owner's insurance and there are a lot of surprising things a home can have that will put it on a "no" list. Some are obvious...asbestos rooves, knob and tube wiring, diving boards, etc. Most policies have a list of dog breeds that are excluded for the "bite" portion of liability.
But most insurance companies won't write policies at all if a house has a metal roof, window a/c and heat units instead of central, even one stairway not having a rail, or outdated plumbing/electricity/old roof.

This is awesome information! I have a curiosity question though-it doesn't actually pertain to my house. Is central AC is really required to get homeowners' insurance? That must be a regional thing, right? I'm in New England and living without AC is a big point of pride in many circles. It's also pretty common to just put a window unit in the bedroom and live without through the rest of your home.

Wulfgar · June 2014

I think central AC may be a regional requirement for hotter States. It would be like in New England, having a good furnace system.

short+sassy · June 2014

@Xstatic3333, I really wish I could answer your question. It doesn't even make sense to me. A central system is substantially more expensive to replace in the event of a total loss. And it is not every company, it is just a lot of them. I do have only window units and had two different local insurance agents tell me they didn't have ANY company that would underwrite a policy without a central system. But neither one of them knew WHY that was the case.

It could very well be regional. I live in the South. New Orleans, specifically. We are very "speshul" here. We have the second highest home owner's rates in the country (Miami has the highest) and few companies will even write polices out here at all. I've had Citizen's insurance...which is the "last resort" insurance company, in the past. But was able to find a better policy with Lloyd's of London...despite my window units, lol.

I'm the opposite from you. Heating is like, "yeah, it's nice for the bitter cold winter days when it drops below 45", lol. But a day without A/C in New Orleans in the middle of August is literally hell on earth!

Xstatic3333 · June 2014

short+sassy said:
@Xstatic3333, I really wish I could answer your question. It doesn't even make sense to me. A central system is substantially more expensive to replace in the event of a total loss. And it is not every company, it is just a lot of them. I do have only window units and had two different local insurance agents tell me they didn't have ANY company that would underwrite a policy without a central system. But neither one of them knew WHY that was the case.
It could very well be regional. I live in the South. New Orleans, specifically. We are very "speshul" here. We have the second highest home owner's rates in the country (Miami has the highest) and few companies will even write polices out here at all. I've had Citizen's insurance...which is the "last resort" insurance company, in the past. But was able to find a better policy with Lloyd's of London...despite my window units, lol.
I'm the opposite from you. Heating is like, "yeah, it's nice for the bitter cold winter days when it drops below 45", lol. But a day without A/C in New Orleans in the middle of August is literally hell on earth!

Gotcha-I'm going to assume it's regional. No way I'd live in New Orleans without AC!

jtmh2012 · June 2014

I'm wondering if it's not so much the lack of central air that makes them uninsurable as the window units. Granted, a properly installed unit shouldn't cause problem, but I'm willing to bet the insurance companies have seen enough units either fall out and cause damage/harm or cause a fire or something like that.

maple2 · June 2014

The central air restriction is definitely not universal. We live in the NE and only have a window unit. It never even came up in conversation with insurance agents.

EDIT: I take that back. It came up in conversation but not in the sense of being a deal breaker. Just along with other questions like the age of the roof, etc.

formerlyGDaisy09 · June 2014

I think that the metal roof thing may also be a regional thing. in northern New England where snow-buildup causing roof-cave-ins is a real possibility metal roofs are seen as safer, more desierable materials.

hoffse · June 2014

It's interesting to hear about the regional differences. This house does have central A/C - living in Birmingham without it would be truly miserable. Our inspection is this afternoon, so we'll get some more info on the electric, etc. after the guy gets into the guts of the house.

Also a good point about not over-insuring. I am guessing that about a third of this house's value is the land. Total guess on my part, but it's a good school district, close to down-town, within a nice (if older) neighborhood. Sidewalks, walking distance to restaurants, movie theaters, a Publix, etc. It's a desirable area.

Also a good point about flood insurance. We had an absolute monsoon's worth of rain this week. The house is on a hill, so I don't think they have water issues - but if that basement was going to flood during wet weather, it absolutely would have happened this week. Still, you are right that freak accidents happen, and if it's really cheap because the house is not on a flood plane it might be worth doing.

brij2006 · June 2014

There's also an option to purchase "backup of sewer and water" coverage on your homeowners policy. It will give you some coverage for things flooding can cause, and it's cheaper than flood insurance. However, the coverage isn't usually a whole lot. In our area we put $10k on a regular policy, and the cost is $60/year. It at least gives you enough coverage to replace any HVAC systems you have in the basement if water were to back up in the basement.

formerlyGDaisy09 · June 2014

Public records should have what the town values the property at (broken down by land and structure). Usually the town slightly over estimates property value (for taxes), but I can find the land/structure value for my house (and my neighbors homes) on the town website.

Home insurance tips

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