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!
A Lender’s Perspective: How does the Homeowners Insurance Agent fit in during a Home Purchase?
In the case of a home purchase, the mortgage lender cannot do his job unless homeowners insurance is provided. And a good insurance agent is very important to make sure the client has the correct and adequate insurance coverage. How is the right coverage amount determined and how does the mortgage lender and insurance agent work together to insure this gets done?
As part of the process of buying a home the subject property needs to be appraised by a certified appraiser who works in conjunction with the mortgage lender. The appraiser determines the market value of the property and provides a formal document with all of the detail of the property, like the square footage and many other things.
What I do as a lender is provide a copy of the appraisal to the insurance agent to assist him or her with their process of ensuring there is adequate and full insurance to cover the client and the lender in case of a loss. Once the cost of the insurance is determined, the insurance agent provides that information to the mortgage lender and we factor that information in the cost of purchasing the home.
As you can see the lender and insurance agent need to work together to make sure that this information moves freely between each and in a timely fashion.
What does Home Owners Insurance covers that most people don’t know…
Homeowners Insurance is one of those things that everyone needs, most have, but few really fully understand. Besides your basic coverage which happens when something happens to the home, homeowners insurance covers a few other things that you may not know.
First, your homeowners insurance covers belongings in your car from theft. If someone breaks your window while you are parked anywhere, not just at your home, and steals valuables, your homeowners insurance covers that loss up to a certain amount. Now, how many people think to make a claim to their homeowners insurance when this happens?
Second, let’s say your kid is playing baseball at school, and while swinging, the bat flies out of his hands and hits another player in the head. Your homeowners insurance actually protects you from being sued for monetary damages to the injured player because of your liability coverage. Remember, this doesn’t have to happen in your back yard, or be on the property at all. You’re still covered.
Third, If you store your personal property off site and its lost due to a covered peril, you have protection!
Fourth, If you live on a golf course and are driving a golf cart and run over another player you have Liability protection!
Fifth, if it is not specifically excluded or restricted on the policy back, you generally have coverage any where in the world for these things!
Yes, these things are all great and amazing but I would be remiss to not discuss the things that homeowners insurance does not cover that some people may think or assume it does.
First, it does not cover earth movement. That means earthquakes, sink holes, or other acts of God that may harm your property. There are separate policies that can be taken out to cover these and, especially in the state of California, should be seriously considered.
Second, your homeowners insurance does not cover flooding. It doesn’t matter if the flooding is from a pipe bursting or three weeks of rain, if you do not have separate flood insurance on your home you, your belongings and your home will not be covered.
Third, always be aware the limitations on theft of cash, jewelry, fine arts, and guns. The $20,000 painting in the living room should have it’s own insurance policy, as well as the firearm in the closet and the crown jewels in your safe. Should any of these go missing, your homeowners policy would only cover up to the amount listed in the policy rather than the full amount of the valuables.
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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Protecting your Family’s Financial Future
While Life Insurance clearly does not replace your goal of building your financial security through investments, it is an important part of protecting your family’s financial future and should be viewed as such. You first have to protect what you have, and build from there.
Your family’s financial future could be seriously impeded, if not destroyed, if one of the adult members of the household were to die unexpectedly.
Once you realize the importance of having this protection, you then have to decide how much is appropriate, and just as important, affordable. In today’s world the ideal is having a policy large enough to conservatively replace the major breadwinner’s financial contribution to the family. And, let’s not forget about a non working spouse’s financial contribution to the household which has been conservatively estimated at @$35,000 per year. The amount of mortgage debt, and the cost of the children(s) college education are other items considered vital to the amount of coverage.
Among the two types of Life Insurance available (temporary or permanent) the least expensive is Term (temporary) coverage. When your children are minors (up to age 18) and/or the mortgage debt is large (for new homeowners), Term is an economical tool to provide the larger protection you need during these years. However, 98% of Term is not in force when it’s needed, as most live through the term, allow it to lapse, or cancel it when times are tight. Term is also not as available in your later years as the cheaper premiums do not offset the mortality risk to the insurance companies. Then you will need to consider a permanent policy (Whole Life, Universal or Variable Universal). If possible you want to buy this as young, and inexpensive as possible.
When weighing the amount needed against the amount affordable, I always start with the premise that something is better than nothing! You should consider what the family can afford, on a monthly basis, and work from there. If there is Group Life coverage available at work it is an excellent option to augment that which you can afford personally. But, if you leave that job, in most cases you can’t take it with you, and it is usually not more than 1 or 2 X salary. So it alone is not enough, particularly in California, to provide for your family’s security.
I have come across some who do not “believe” they need Life Insurance because they have plenty of assets to protect the family should a parent die. This may well be, but if one has the assets to protect their family, and can easily afford to provide the means for the funeral for one of such status, wouldn’t it be a better use of those assets to provide a Life Insurance benefit to cover the funeral expenses (at pennies on the dollar), than require the family to use them for their farewell services. If your finances are sufficient, consider buying, as soon as possible, a small permanent policy to bury you, and make up the balance of what you need with term coverage while your need is greater.
Call Corrin to discuss this and other insurance needs. Protect your family! 1.650.FARMERS or ctrowbridge@farmeragent.com.
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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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