Indonesia, Haiti, New Zealand, now Japan… Are you ready for the Big One?
We have had several major Earthquakes around the world the past three years, and the USGS has predicted an 80% chance of a 6.0 or larger earthquake will hit northern California within the next 30 years, or for most of us, sometime in our lifetime. There is a 60% chance of that Earthquake happening in the Bay Area. It’s not IF, but WHEN the big one will happen!
California houses two-thirds of the nation’s earthquake risk, with most residents living within 30 miles of a major fault. But just 12 percent of homes with fire insurance also have earthquake coverage. This is particularly ironic considering our Home, for most or us, is our largest asset. Buying auto, homeowners and life insurance is considered a normal part of our insurance portfolio, yet most of us consider it an acceptable risk to leave our largest asset unprotected from this inevitable peril.
What would happen if a major Earthquake occurs and you do not have earthquake coverage? Many believe the government will assist those devastated by this eventuality. But Federal disaster relief has historically been to offer low interest SBA loans to eligible homeowner’s and businesses, to repair or replace damaged property.
This is additional debt that you will be adding to your current mortgage which you are still be responsible for. The maximum SBA personal property loan is $40,000 and the maximum SBA real property loan for primary home repair is $200,000. FEMA disaster grants are available to those who do not qualify for a loan, but the average grant is less than $15,000, and the maximum is $26,200. Would that rebuild your home in the Bay Area? It can be argued that it is even more important for those with less resources to invest in Earthquake Insurance.
Along with your earthquake kit, (which should include camping gear, water, food and cash, all of which may be difficult to access if the big one hits); you should give strong consideration to adding an Earthquake policy to your Insurance portfolio. As recent events have served to remind us, we live in an area that has seen, and will see again, this type of calamity. It’s a wise investment in your peace of mind.
Health Reform Timeline
June 2010: Medicare beneficiaries pay less for preventive services, Tax credits for certain small employers begin
July 2010; Uninsured people with health problems eligible for state insurance program
Sept 2010; Insurers required to cover sick children, Lifetime limits on insurer payouts prohibited, Children allowed to remain on parents policy until age 26
January 2011; Seniors who exceed medicare drug coverage limit receive $250 rebate, Voluntary payroll deduction for long term care coverage starts
January 2013; Medicare taxes rise on incomes above $200,000 per year
January 2014; Medi-Cal eligibility expanded, Insurers barred from denying coverage, Individual requirement to obtain coverage begins, insurance exchange opens for business, Subsidies for buying coverage available
2016; Long term care benefit available
2018; Federal tax on high value benefit packages begins
*data from California Healthcare Foundation
Use your discounts!
When comparing your insurance premiums you need to make sure you are looking at the whole picture rather than looking at one mono-policy compared to another. Often the various discounts available through a multiline carrier will make your overall insurance cost less than if you just compared one mono-line policy to another.
For example, your auto/renters discount can save you so much on the auto premium that it can pay for the Renters policy. In other words, you can get two car insurance policies and a Renters, for the same total cost as two auto insurance policies.
Discounts you want to look for are the: Multi Line Discount, Good Driver Discount, Multi Car Discount, Persistency Discount, Safe Driving Discount, Business or Professional Group Discount, Anti-Theft Discount, Passive Restraint Discounts,AntiLock Brake Discount,Alternative Fuel Discount,Senior Defensive Driver Discount,Good Student Discount,Inexperienced Driver Training Discount,and the Electronic Stability Control Discount.
Be sure to compare the cost of the total household insurance premium cost rather than a mono line comparison. That way you can be sure you are getting the best value for your insurance cost!
If you would like a free, objective review, please call me at 650-355-5396!
Mortgage Protection Insurance
Buying a home brings many responsibilities in addition to providing the income to cover the mortgage, and maintain the residence. Along with your Homeowners insurance you also need to consider having Mortgage insurance.
Some Mortgage insurance is called PMI (Private Mortgage insurance) which the lender tacks on to the loan as an additional fee (if you put less than 20% down). This generally protects the lenders from the loan defaulting.
But Mortgage insurance can also be provided by purchasing a Life Insurance policy on one, or both, of the spouses in the household. This protects the families financial future should something happen to either of you.
If a working spouse were to pass away the financial hardship that would put on the household will only compound the emotional hardship. At the very least, Life insurance gives the family time. Time to readjust to the loss of a loved one, and reassess their financial situation.
Ideally it would provide sufficent income to maintain their lifestyle. But, while many families have morbidly joked about being worth more dead than alive, the ultimate factor in calculating sufficient Life Insurance is its affordability.
A non-working spouse’s economic contribution to the household has been calculated to be $30,000 a year. That is what a basic housecleaner, errand runner, baby sitter would cost conservatively. To replace that you need to have enough coverage to conservatively generate that amount of income. At a 5% return that would mean $600,000 in Life insurance.
This is easiest to obtain with a 20 Year Term policy which would cover this expense for the time the children are young and the mortgage is large. And a multi line carrier should provide discounts on your personal lines which will also help defray the cost!
Contact me today and we can discuss how we can be sure your family is sufficiently covered! 650-355-5396, or ctrowbridge@farmersagent.com.
A Smarter way to buy Group Health Insurance
Health Insurance premiums are a topic all over the news these days! Their annual increases have shocked the buying public into demanding some kind of action from the government. What kind of change that will take is somewhat in the air, as the government has put off the effective date several years into the future, and who knows what will end up actually being incorporated into the rules and regulations? But, there is a strategy that you can take advantage of right now, that can lower your premium by 30%!
This strategy takes into account the actuarial knowledge gleaned from years of experience and thousands of different types of customers. It is based on the reality that only 4-7% of your employees will max out their deductibles in a given year, and 50-70% of your employees will not use their health insurance, or will use it so little as to have little effect on its costs.
It entails using a high deductible plan, from any of the main carriers in the market today, and using the impressive savings they produce to pay for the actual deductibles used through a pooled company owned savings account (not an HSA which is individually owned). After deductibles, and a small fee to the TPA to administer and coordinate the plan, the net effect is a 30% savings off what the typical plan costs.
This strategy is currently being used by over three thousand companies, in all different types of businesses. I call it a “Smarter” way to buy your group health insurance as it is geared more towards paying for what you are actually using.
Your carrier is not motivated to tell you about this because the 50-70% of employees who are currently not using their health insurance are pure profit to them. And, your Broker may not have told you about this because 1) they are not aware of it, or 2) they don’t want to rock the boat and lower their commissions by 30% when they have a good thing going! I just did because I want to earn your business! All your business, including your Business Owners Policy. Workers Comp, Group Life, 401k, etc…
If you would like to see how this works I need to show you a side by side comparison to what you are currently paying. All I need is a census (DOB, Home Zip, Dependent Status and Carrier Plan) along with a copy of a recent bill from each carrier. This is probably your largest overhead expense, after salaries!
Contact me today! 650-355-5396, or ctrowbridge@farmersagent.com.
How Much Insurance is the Right Amount of Insurance to Have?
Homeowners may not realize it, but it is their responsibility to make certain they have sufficient coverage to replace their home (if it were to burn down)! Insurance carriers do not offer “Gauranteed Replacement” coverage anymore. They offer “Extended Replacement” coverage. This adds an amount over the rated Dwelling amount to take care of any discrepancies. Typically this is 25-50% over the rated amount.
But, the base amount needed is the responsibility of the Policy holder. Thats not to say a good agent will not be able to give you a good idea of what would be appropriate for the area. But, many people rely on their carriers to tell them, and there is no assurance the voice on the other end of the phone is anything more than an order taker.
The right amount of Dwelling insurance is easily calculated. Just take the square footage of the home, and multiply it by the local construction cost per square foot.
Also, don’t skimp when t comes to liability coverage as you can have a lot more to loose than the cost to rebuild your home if you become involved in hostile litigation. Remember, your Liability coverage protects you from people suing you for monetary damages.
Since the likelyhood of you having someone over who would sue you is not high this coverage is a real bargin, and should be enough to cover your “assets at risk”, (these equal your Equity in property, savings and investments, and 4Xyour annual income).
You face most of your Liability exposure in your car so make certain that your Bodily Injury, and Property damage coverages are sufficent to cover your “Assets at Risk”. Since most homeowners have considerable “Assets at Risk” they may want to consider an Umbrella Policy. That is, a seperate Liability policy, that goes on top of the underlying Liability coverages found in your home, auto and boat policies. They come in increments of $500,000 to $1,000,000 and are exremely cheap considering the peace of mind they provide.
Pay attention to this part of your Insurance policy or you may discover, painfully, that you didn’t have the right amount of insurance coverage. What a miserable way to learn that the cheap insurance you were paying for is insufficient to protect you when you really need it.
Contact your agent today to confirm you have the protection you are paying your hard earned money for? Or, call me, Corrin Trowbridge at 650-355-5396, for a FREE REVIEW!
What should I expect from my insurance agent/agency when I buy a new home?
Insurance is a part of your home closing process. So, outside of being sure that you have an agent that cares about your purchase and protection, offers a reasonable rate and appropriate coverage, you want to make sure that there will be no hiccups in your closing process!
Some insurance companies have specific issues with certain properties that can cause a delay if they are not addressed in a timely manner. Consequences of not doing this include delays in closing your home, delays in financing,and even possibly losing your deposit and the home if you miss your close of escrow date.
A few examples of things that can cause delays in your insurance are:
- A house that has Knob and Tube wiring is extremely hard, if not impossible, to find coverage for and can cause delays in closing if it can even find the appropriate coverage.
- A house with less than 100 Amp service is again not going to be cheap, if its even available.
- If the property has un-repaired damage to it, especially if visible from the street, may cause an insurance carrier to cancel the policy.
- If there are tree branches touching the roof, or moss of the roof, you are in for difficulties with your insurer.
Making sure these obstacles are addressed before you get to the closing table is important! But, don’t fret! Good communication between your insurance agent, Realtor, loan officer and title company will be sure that your closing goes smoothly and all these issues are addressed and won’t be surprises later.
It’s always a good idea to be cognizant of these types of issues and be proactive in preventing them.
If you have any questions on this please feel free to contact me at ctrowbridge@farmersagent..com or 1-650-Farmers.
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What are my options with Home Owners Insurance and how do I figure out what I need?
Homeowners insurance is provided with a basic package that covers most things like dwelling, personal property, liability, loss of use, and separate structures already included. Variations of this basic package are available depending on how your home fits the criteria insurance companies look for, such as owner occupied, multi-unit, or owner occupied with renters. These same variations are available for the different types of ownership as well; that is homeowners, condo owner, or landlord.
Essentially, to begin to answer this question you first need to see what boxes your home and needs fit in. Do you live in your home but have roommates? Do you have multiple units? Are you a landlord? Then you need to see what the basic package of insurance offers you in terms of coverage and assess your own personal property and expenses and see if extra coverage will be needed to cover your needs. If so your insurance agent will know how to adjust your homeowners insurance to cover the extra.
How do you assess what is needed? Take a realistic look at what you are trying to protect. Find the local cost per square foot (This information can be found by calling some of your local builders and asking them if a house burnt to the ground what would it cost (per square foot) to rebuild it?) and take that and multiply it by the square feet of your home to get your appropriate dwelling coverage amount. You should also account for any Extended Replacement Coverage in that calculation. Add up all your personal property to make sure you have enough coverage to replace it.
Don’t worry– a good insurance agent can help you to figure all of this out as well, but having an idea of where you stand when you go to speak with them can help the process and make sure you have everything you need.
Also, with homeowners insurance you should consider flood and earthquake insurance as these do not come standard with homeowners insurance policies. Even when the risk of flood or earthquake may be rare, not having the appropriate insurance to cover these occurrences can be costly.
If you have any questions on this please feel free to contact me at ctrowbridge@farmersagent..com or 1-650-Farmers.
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Homeowners vs. Condo Insurance
The two different types of home ownership are reflected in the differences found between Single Family homeowner’s insurance policies and Condominium homeowners Insurance. Single Family homes are owned entirely by the Homeowner, including the dwelling structure as well as its contents. Condominium homeowners own their property from the Walls in, with the exterior Walls, and Roof, being owned by the Condominium Homeowners Association.
Single family Homeowners need protection for the whole dwelling in their policy, whereas condo owners generally need to only protect their personal property and any internal improvements that might not be covered by their Homeowners Association insurance policy. Condo Homeowners need to read the governing CC&R (Codes, Codicils and Restrictions) of their Homeowners Association to see for themselves just what is covered by the Associations policy and what is their responsibility. Hopefully the following will generally simplify this question: (X means applicable)
| Single Family | Homeowners Insurance |
Condominium Homeowners Insurance |
|---|---|---|
| Dwelling | X | - |
| Personal Property | X | X |
| Loss of Use | X | X |
| Separate Structures | X | - |
| Liability | X | X |
| Medical | X | X |
| Building Improvements | - | X |
Since many Condo Association policies cover only the exterior of the building, if the Condo Homeowner wants to have protection for the investment they may have made in interior upgrades, or improvements, they should make sure to add this coverage to their condo policy. But, because they don’t need the Dwelling or Separate Structure coverage’s found in Single Family policies, Condo policies tend to be a little less expensive that Single Family Homeowners.
All the other similar coverages (Persona Property, Loss of Use & Liability) require the same consideration in both the Singe Family and Condo Homowners policy. However, your Liability coverage, in a Condo policy, also has the possibility of your neighbors suffering a loss from a fire caused by your unit, more so than in a Single Family Home fire.
If you have any questions feel free to email them to me (ctrowbridge@farmersagent.com) or call me at 650-FARMERS!
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The Difference between Homeowners and Landlord Insurance
For the average Homeowner, who is moving out of their home and wants to maintain ownership, at first blush there may not seem like a big difference in what kind of Property Insurance you need. But Homeowners Insurance is priced on, and includes coverage’s for, the owner of that residence. This can be quite different from the protections a Landlord will need when renting out the residence to others.
The assumptions, and in most cases requirements, of the insurance carrier is that the homeowner will exhibit a pride of ownership, and will maintain the property in the condition they would want to live in. While many tenants respect the properties they live in, not all do, and the very fact that they renting instead of being in a position to own means they will not have the means or motivation to maintain the property as well as the owner. But, before we can discuss the difference’s, let’s look at the various coverage’s involved.
Good coverage’s for Homeowners Insurance are:
Dwelling coverage:
Enough coverage to replace your home if it were to burn to the ground (local construction $ p.s.f. X sq. ft. of property).
Liability coverage:
Enough coverage to protect your assets at risk (Real Estate Equity, Investments & Income) from being liquidated, or attached, in a judgment against you if you were sued for monetary damages. But, it is much less expensive for the Homeowner as the chances of them inviting someone over who would sue them if they slipped and fell, are not very high.
Personal Property:
Enough coverage to replace your personal property (that which would fall out of the house if it we turned upside-down).
Loss of Use: enough coverage to rent a similar residence until your home was rebuilt (max time limit is 2 years)
Separate Structures: enough coverage to rebuild your detached garage, or work shed
Now let’s look at what a Landlord might need:
Dwelling Coverage:
again enough to replace the property, but in most Landlord properties the workmanship and quality of the fixtures are not as high as those found in personal residences. Thus the dwelling coverage could be adjuster to a lower cost per square foot.
Liability coverage:
This is the major difference with Homeowners because the Landlords exposure is so much greater. Tenants, in today’s litigious society, are more likely to go after the Landlord if they suffer a loss on the property, through no perceived fault of their own. And if they, or another stranger they invite on the property suffers an injury caused by the physical property (slip & fall), they also are likely to sue! For this reason, it is also a more expensive coverage then Homeowners Liability.
Personal Property; The Landlord, by the very fact that they are not living there, has a very limited need for this coverage. This is much less than a Homeowner would require.
Side note: it is important for the Tenant to carry Renters Insurance as it’s generally their Personal Property at risk, as well as they have a Liability exposure also. It is very inexpensive, and cross line discounts from their auto insurers can pay for most, if not all, of it!
Loss of Use:
For a Landlord this is called “Loss of Income”. If the property is damaged by a fire (for example) the Landlord needs this to pay the mortgage as the rent will not be being collected while the house is being rebuilt.
Separate Structures:
Again, a slightly higher risk for the Landlord, but generally the same coverage is needed as for the Homeowner.
Note: In the Homeowners and Landlord policies: the Personal Property, Loss of Use, and Separate Structure coverage’s can be simply a percentage of the Dwelling amount, and are not priced separately, but included in the Dwelling coverage premium. They are usually adequate, but if not, can and should be adjusted.
One would think that because the Dwelling coverage need not be as high for a Landlord as a Homeowner that the Landlord policy would be less expensive. But do not be surprised if the Landlord policy is as much, or even higher than a Homeowners policy would be, because the increased exposure and need for higher Liability limits.
