Tag: Texas Home Insurance

Home Insurance Claim. Roof with missing shingles.

Paying Too Much For Too Little

by wesleyani

If your agent didn’t ask this question, you could be paying too much for too little.

I don’t like to gripe, but there is one thing about the insurance industry that bugs me. The bar to get in is not really very high. Yes, in order to talk coverage with a client, we must be licensed, but the test isn’t that hard, and you only have to score a 70%. This causes issues from time to time. One in particular is especially grievous because it can cost you more than you should pay AND cause you to be underinsured, which can cause you to pay even more if you have a claim!

I’m referring to the age of the roof on your house. An agent should never assume anything here. Roofs are replaced all the time for a wide range of reasons. This affects both the price of your policy and how your roof is covered.

Insurance companies do in fact have a different rating for every year of age on a home and also every year of age on a roof. Why the roof specifically? Simply put, the roof is one of the leading parts of a property that is damaged and covered by insurance year in and year out. Think about it. It’s essentially the shield of your home. It takes the most daily abuse from all sorts of things. Over time it wears out and as it wears out, becoming weaker, the roof becomes more vulnerable to damage and therefore your home is more vulnerable to resulting damage inside the home.

So, the older the roof, the higher the rate.

Now what about the coverage for the roof? Most insurance companies have switched to some form of depreciating coverage schedule. Allstate led the way with this around 2012 or 2013 and most other companies followed shortly after. Typically, it’s only applied to wind and hail damage. The way it works is that the roof is covered for a specific percentage of replacement cost that is reduced for every year of age. For example, a brand-new roof would be covered at 100%, a 1 year old roof would be covered at approximately 97%, a 2 year old roof would be covered at approximately 94% and so on. These may differ slightly from one company to another, but you get the idea. Most companies also offer an option to buy back full replacement cost coverage. But at a certain age, ranging from 10 years to 15 years, the coverage buyback is no longer available.

So lets say your roof is 16 years old, it’s still in good condition, so it hasn’t been replaced. Then a thunderstorm with very high straight-line winds comes through and tears off shingles all over the roof. Let’s use simple numbers and assume the cost to replace the roof comes out to $10,000. If the coverage is reduced by 3% every year, you’re only going to get 52% of the coverage or $5,200. But your deductible still hasn’t been applied. So, if your home is covered for $250,000 and you have a 1% deductible, that’s $2,500. Your insurance will pay you $2,700 and you cover the other $7,300. If it’s a 2% deductible, that’s $5,000. Your insurance will pay you $200 and you cover the other $9,800.

If you bought back the replacement cost coverage, you’ll only be responsible for the deductible and the insurance picks up the rest.

But what if your roof was replaced, your agent didn’t ask, and you didn’t know to mention it? Well, you’re paying more for less. In a worst-case scenario, you don’t know what you don’t know and you’re just left holding the bag. If you do appeal the coverage decision, you’re going to have to get the underwriters to update the coverage to allow the claim adjuster to correct the payments. That can be very difficult because you’ll be required to prove it. Pictures probably won’t fly. You’re going to have to have documentation. So at best, this will be a hassle and a delay. At worst, you may not be able to prove it.

It’s always best to get this right from the start. Your agent should ask. As long as the inspection process doesn’t throw up any red flags, you’ll have the right coverage at the right price.

The point is that your agent should ask, you should give as accurate an answer as possible and always keep documentation for things like this. If you bought it after an update was made, get documentation from the seller. Your price and your coverage will be correct and in the event of a damage claim, you’ll be glad you did.

Interior of a home that's been burned by fire.

Home Insurance: Know What You’re Buying

by wesleyani

The call typically goes something like this: “Hey Wes. I have a question for you about my home insurance. Does my policy cover damage to …..?”

My answer is usually something along the lines of “Well, it depends…”

If you’ve ever wondered if a particular part of your home, personal belongings or property is covered under your insurance, you’re not alone. Your agent should be a great place to start. They should be willing to discuss the policy and how you are covered in a way that is easy to understand. However, the agent is never the final decision maker in what is covered versus what is not covered. They are different jobs requiring different licenses for legitimate reasons. But, agents are able to answer in general terms and should be knowledgeable about the policies they are selling you.

Let’s dive in.

There are two primary questions that have to be answered. #1 – what was damaged? #2 – what caused the damage?

For more details, keep reading.

First, let’s go back to question one. There are three sections that deal with what property is covered in your policy. First is the dwelling – the main home structure on the property. This would include a garage that is a separate structure but is connected by a covered breezeway. If the garage is only connected by a fence, utility line or something similar it’s not a part of the dwelling coverage. Instead it would be considered an “other structure.” Which brings us to the second section: other structures. These are any structure that is on that same property but set apart by a clear space. This is typically something like a completely detached garage, storage shed, fence, guest house, etc. They have a separate limit of coverage from the main structure. The third section is personal property. This is anything you would take with you if you moved out. Some categories have specific limits of coverage for certain types of damage or loss. For example, if you tried to claim you had $200,000 of cash in a particular bedroom that was stolen in a robbery or burned in a small fire, the insurance company is going to limit the amount you can claim for that cash to something like $200, not $200,000. Or maybe you have a ring with a center diamond worth around $10,000. If that ring or even the stone was lost, it would be limited to probably $1,500. However, you can insure that specific piece of jewelry for it’s total value by scheduling it at an additional cost.

Now for question two.  Some policies (called Named Peril Policies) have a specific list of things that can happen (called perils) which are covered. The most basic policies cover damage caused by fire and lighting (very cheap policies). The next level of coverage may add about 6 other types of damage (peril) such as windstorm, hail and smoke. A level above that might add another 6 perils such as certain types of water damage.  The best type of policies (called Open Peril Policies) will say something like “we insure against direct physical loss to your property unless we have specifically excluded it.” The difference here is that in the Named Peril types of policies, you have to prove damage was caused by something that is covered, versus the Open Peril type where the insurance company would have to prove it was damaged by something they have specifically excluded. The most common type of policy out there, the HO-3, is a combination. It covers structures with Open Peril and personal property Named Peril coverage.

On a side note, those policies that list specific perils that are covered are generally known as HO-A policies. They are going to be less expensive, but for a reason. It’s easy to deny those claims when many times, you may not know exactly how something was damaged. The best type is an HO-B. They are hard, but not impossible, to find and are generally going to be the most expensive. The most common, HO-3, is widely available and can vary in price significantly from one company to another.

Okay, now that we know what was damaged and how it was damaged, we can figure out the answer to your question. The next question is “how much will it cost to repair or replace?” We ask this because of deductibles. If you have a $3,000 deductible but the damage will only cost you $1,000, does it make sense to file a claim?

Well, that too depends on what’s happening around the claim. Is the house livable? That may bring in a whole other set of coverage called Loss of Use. And it could come into play big time. But that’s a topic for another article.

In the meantime, if you’re still here and found this useful and would like to talk to us more about your insurance coverage, you can reach out to us by email here. Or if you know you want a quote, but are short on time, you can click this link and be taken to our program that will take 2 minutes or less to complete. It asks a few questions then asks you to log into your current insurance account and will securely scrape the rest of the details from your current policy so we can get you an accurate quote.