We started a podcast! This is not your regular insurance podcast.
Since we’re in the business of protecting our client’s real estate assets, we thought it would be valuable to talk about real estate as a primary investment strategy, how to build wealth through real estate, and the best way to protect those assets.
We also talk about current events and how they relate to investing and talk to subject matter experts in the industry to hear their stories and give us some guidance on best practices so you can be financially protected, build wealth, and live your best life. We also have some fun along the way!
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I’m embarking on a new journey this year. Over the last thirteen years I’ve helped homeowners, new home buyers, and real estate investors in California protect their lifestyles and stay out of harms way so they can keep their assets in their pockets.
Very early on I saw the importance of being a problem solver and educating my clients so they could make the right decisions about their insurance protection. It sounds sexy, but it’s not. In fact, most people when you say the word “insurance” they immediately check out and look for the nearest exit.
WHY? I get it. Insurance is boring. Most consumers have no interest in it, until something happens in their life that changes their perception of what insurance actually does and the value it brings.
Insurance is a great tool and when used properly it can create a strong foundation to protect your income, your family, and your health.
I have said before,
the foundation to building wealth starts with financial protection. Understanding how to protect what you already have is one of the primary concepts to achieve financial freedom.
Many of these ideas have to do with the proper mindset. Mindset is everything. Without the right mindset you end up “running for the hills” when someone talks about insurance.
This is where the industry and many of my peers underdeliver. They constantly focus on price and the cost of insurance and overlook the importance of the proper protection. They do consumers a huge disservice by focusing so much of their time and resources on lowering the cost to squeeze every dollar out of the policy that it loses its value. And when the time comes when you need it the most the coverage doesn’t protect your lifestyle.
That is my goal as a personal risk manager. I want to change your mindset and the way you look at insurance. I want to invite you into a story where all your assets are protected, you have peace of mind, and you have the proper plan to achieve financial freedom.
Starting with a plan to be financially protected is the part of the story where we begin our journey. Insurance agents play an important role in guiding their clients in the right direction so they can make educated decisions about the proper protection they desire. That is very valuable to consumers seeking to protect their assets and their real estate investments.
In California, having an insurance agent that works closely with your real estate agent, CPA, and CFP creates a healthy ecosystem of “subject matter experts” that provide holistic solutions to their client’s problems.
Want to learn the benefits of adding a personal risk manager to your team?
And as your needs change they play an intricate role guiding you through different stages of life making sure you stay on the right path to building wealth through real estate.
No matter where you are on your journey through life it’s always best practice to educate yourself on the best way to protect yourself, your family, your income, and your health and well being. You don’t need a million dollars in the bank to start learning how to be financially protected and build wealth.
So let’s start making insurance exciting! Well, maybe not. How about we start with changing the mindset when it comes to insurance. This year I want to lay a foundation starting with some basic strategies that you can implement right now to help you create a plan for you and your family.
Whether you’re buying your first home in California or adding another investment property to your portfolio, this information will help you understand exactly how to protect your lifestyle.
Personal Insurance Protecting Your Home
I’m going to start with some basic tips on how to help you get the best value out of your homeowners insurance in California. These are benefits you can include if you own a home or you’re a first time home buyer!
Make sure your home in California is insured to value and your policy has extended dwelling replacement coverage. Replacement cost is a MUST. Your home has to be insured up to the replacement cost of the structure. How much would it cost to rebuild? That’s replacement cost or insurance to value. I recommend a minimum of 150% extended dwelling replacement. That will come into play if the cost of materials increase or labor costs increase after a covered peril.
Loss of Use. If you have a claim and you cannot live in your home while the repairs are being completed, you need additional living expense coverage. If you have a total loss from a fire you could be displaced from your home up to 1-2 years. This is why having adequate loss of use limits for your lifestyle are critical. Most people overlook this coverage and most agents will reduce this type of coverage to lower the rate. Purchase the maximum amount of loss of use that is available from your insurance company. In California, you can activate this coverage if your home is in a mandatory evacuation zone. Lodging, food, gas, and transportation costs can be covered under additional living expenses.
Liability for your residence premises. If you’re sued due to negligence this will keep your assets in your pockets. In some cases, this coverage can be activated for personal injury as well. Remember, you don’t have to be a millionaire to be sued like one. If you live in California, your property is one of your most valuable assets. You should purchase at least $500,000 in liability on your homeowners policy. Some insurance companies are offering up to $1 Million limits.
PRO TIP: I would also purchase a personal umbrella policy. This is a separate policy you can purchase that provides an additional layer of protection for your assets. It will cover your home, autos, toys, and rental properties and provide you with legal defense in case of a large lawsuit.
Some of my peers say insurance is like defense and if you played sports defense was never very glamourous. But, a good defensive strategy always wins championships. That’s how I want you to start thinking about your insurance protection. As a defensive strategy to help you win so you can live your best life.
After the recent 6.4 magnitude earthquake on July 4th and the 7.1 quake on July 5th, more and more residents understand that earthquake risk is REAL in Southern California. The seismic activity was centered around the towns of Trona and Ridgecrest, but the aftershocks were felt from LA to San Diego.
This last round of earthquake activity has shocked many California residents into rethinking the importance of earthquake insurance to protect their homes and assets.
If you’re looking to fully protect your lifestyle, it is highly recommended you purchase earthquake insurance…Now.
Other than wildfire, earthquakes are one of the leading natural disasters Californians face. Most residents live within 30 miles of an active fault line and only 10% of California residents carry earthquake insurance. 10 percent!
Does it make a lot of sense to partially insure your most valuable asset, your home?
Insurance tip: A residential property insurance policy does NOT cover damage due to earthquake or seismic activity. You need a separate earthquake insurance policy.
Watch this short video about the benefits of carrying earthquake insurance. Contact one of our insurance guides and get an earthquake insurance quote for your home today! Call 888-724-2124.
Can I purchase earthquake insurance after an earthquake? Yes.
The Department of Insurance released a bulletin on July 12th about the requirement of all California Earthquake Authority participating insurance companies to write CEA earthquake policies.
In response to the Northridge earthquake in 1994, the California Legislature created the California Earthquake Authority (CEA)—a not-for-profit, publicly managed, privately funded entity. Residential property insurers could offer their own earthquake insurance or become a CEA participating insurance company.
CEA provides two-thirds of the residential earthquake insurance policies sold in California. By selling policies exclusively through these participating insurance companies, CEA has become one of the largest providers of residential earthquake insurance in the world. The CEA is a not-for-profit organization and receives no funding from the State of California, whether for operations or claim liabilities, and is not a part of the state budget. CEA is financed solely through insurer contributions, policyholder premiums, and its own investment returns.
Following the recent earthquakes in Ridgecrest, the Department of Insurance received numerous complaints that some CEA participating insurers were denying applications for CEA earthquake insurance coverage from insureds who already had a residential underlying insurance policy with that insurance company.
Many agents and brokers were misinforming their clients that there is a “moratorium” on selling CEA coverage, even to those insureds who have an underlying insurance policy with that insurance company.
That is FALSE. There is NO moratorium on selling CEA coverage.
California Insurance Code Section 10083 requires that offers for earthquake coverage made by a Participating Insurer contain a specific disclosure that includes the statement, “If you choose not to accept this offer within the 30-day period, you may apply for earthquake coverage at a later date.” Refusing to write CEA earthquake insurance coverage for policyholders with a residential insurance policy is not in compliance with state law or the intent of the CEA statute and mission.
The CEA has confirmed to the Department of Insurance that it expects all participating insurers to take applications for and bind CEA coverage if requested by an insured who has an underlying residential insurance policy with the insurer.
A moratorium on earthquake insurance has never been declared by the CEA. Some participating insurers have declared a moratorium on the sale of their own new homeowners and other fire insurance policies in areas of California impacted by the recent Ridgecrest earthquakes.
And if that company is not writing new property insurance policies then they would not be making the accompanying mandatory offer of earthquake insurance to those homeowners.
However, this should NOT effect current insureds with a residential insurance policy from a CEA participating insurer. They should be assisted in purchasing a new CEA policy immediately.
“So, if you have property insurance from an insurance company that participates with the California Eathquake Authority you can purchase earthquake insurance NOW.”
Contact us and we can review your home insurance policy and tell you if your company offers earthquake insurance protection with the California Earthquake Authority. We’ll also do a coverage check up to make sure you have the right protection for your lifestyle. Give us a call at 888-724-2124.
Would you marry someone whose history was a mystery? Or are you prone to purchase a car without knowing the facts of its past?
To connect you with the history of a home you’re considering, we’re offering a free report, guaranteed to give you peace of mind and help you avoid time and money-wasting complications during and after the sale.
Get a clue! Come on, seriously.
A C.L.U.E., the Comprehensive Loss Underwriting Exchange, is a loss history information exchange provided by LexisNexis® Risk Solutions Inc. It enables insurance companies to access and use prior loss information in the underwriting process. Think of it as “the cloud of claims”.
Here’s how it works
Each month, participating insurers submit loss information to the C.L.U.E. information exchange, which is loaded to the C.L.U.E. database. Insurance companies request this data by forwarding search criteria such as an insurance applicant’s name, risk address, date of birth, and Social Security Number. The C.L.U.E. system searches its database for information that matches the requested search criteria. A C.L.U.E. report is then generated and forwarded to the insurer. When you or your insurance company receive a C.L.U.E. report, it includes all losses accessed by the search criteria that were reported to us within seven years of the date of the request. Home warranty claims are not included on a C.L.U.E. report.
The C.L.U.E. report is a valuable piece of information to provide you a clearer look into the prior loss history of the property you’re peeking at.
Reading the report
First, you want to look for claims associated with the risk address. The report can sometimes show claims filed on another location owned or occupied by the seller. You’ll want to look for claims frequency rather than severity. These would be claims that indicate a potential ongoing problem or the possibility for future losses. Multiple occurrences to the same areas in the home can indicate faulty or defective systems. For example, water losses and mold are big ones to look for and are one of the most widely reported causes of loss or perils. Other perils to watch out for are fires occurring in the home, not wildfire, and theft or burglary. These type of losses could indicate morale hazards or the home could be in a questionable area. Insurance companies are tightening their guidelines when it comes to water losses resulting from inside water damage, not weather related flood claims. Effective this year, many admitted insurance carriers will decline a risk if there has been a significant water loss on the property within the last 3-5 years. This would include damage exceeding $2,500. Normally, losses follow the insured and can impact the cost of insurance or insurability when moving to a new location. Due to the rise in frequency and extensive costs resulting from water damage claims. more and more companies are looking at water losses at new business and declining.
One Final Thought
The cost of the damage is important and can indicate the severity of the incident and the amount paid by the insurance company for the loss. Accidents happen. Just because a property has been impacted by a large claim or series of claims does not mean you should avoid buying that house. Review the report with your realtor and request a disclosure from the sellers about how the claims were resolved. Were all repairs completed and was everything built back to code? Was the home replaced with like kind and quality?
Talk to your insurance agent about the loss(es) that were filed, how the insurance companies handled the claims and how this will impact insurance for the home moving forward.
What you need to know about protecting your lifestyle
The insurance market is in a “shift”. Rate activity has been increasing, claims frequency and severity has risen, and more than half of homeowners are underinsured by an average of 20 percent according to Christopher P. Hackett, senior director of Personal Lines for Property Casualty Insurers Association of America (PCIAA).
How should homeowners approach their insurance so they make sure they have the right protection for their assets?
We’ve put together a great checklist for homeowners to help you make a plan and take the right path with your insurance.
This is a great resource to use on our Personal TRAIL!
Checkpoint 1: Updates to your home
Whether you recently purchased your home or owned it for many years, it’s important that you review any home improvements with your insurance agent. Things like adding square footage, new flooring, remodeled kitchens and bathrooms, auxiliary dwelling units (AUD), solar panels, etc.
Agent Tip: Ask your agent to recalculate your homes replacement value or insurance to value with the up-to-date information. Be sure to discuss any exposures associated with remodeling or additions with your agent so you have the right protection.
Checkpoint 2: Consider value and cost
A low premium is good, but your home insurance may be less because it doesn’t provide the right protection for your lifestyle. Peace of mind knowing all your assets are fully protected is more valuable than you think. Review your policy and understand the value your insurance company provides; financial stability, exceptional claims handling, and ease of doing business are some of the benefits to consider.
Checkpoint 3: My valuable items?
Look around your house. What are the items that are most valuable to you? Your homeowners insurance generally covers the contents of your home. However, there are limits on certain target items such as jewelry, artwork, collections, antiques and silverware. In order to protect these items up to their full value, you may want to add scheduled personal property coverage. If the items are damaged or stolen, you can have peace of mind knowing you are fully covered.
Review your dwelling coverage. Some home policies have limitations on the coverage for the structure. Make sure your coverage matches the reconstruction cost of your home and add extended dwelling replacement cost coverage. This will provide you with the additional coverage you need in case the replacement cost of your home rises over time due to increased construction costs, labor costs, or supply and demand.
Checkpoint 5: Review the need for earthquake and flood insurance
Homeowners insurance does not cover damage from outside flood waters or earthquakes. You need a separate flood insurance policy and earthquake insurance policy. Talk to your insurance agent about these common perils and how to avoid being uninsured.
Watch our short video to learn more about home insurance
As the market shifts its’ important to understand how to fully protect your home and your lifestyle. After the recent Woolsey and Camp fires, which destroyed nearly 8,000 homes, homeowners need to be aware of how much coverage is required to replace your home if it is destroyed by a covered peril.
Insurance 101 Tip: A peril is a specific risk or cause of a covered loss.
Common covered perils are fire, wind or hail, and water damage. One of the best ways to determine insurance coverage for a home is understanding replacement cost vs. market value.
This infographic from, The Hartford, is a great way to understand the difference between the “cost to rebuild” and the “cost of the air”. Replacement cost is based on how much coverage is require to rebuild a home to its original state before the loss. Market value is based on confidence or how much someone is willing to pay for a home.
Remember, replacement cost can be very different from the market value of a home and after a large natural disaster, like a wildfire, replacement costs can rise significantly due to supply and demand, cost of labor or materials, and transportation costs associated with rebuilding.
Have you reviewed your property insurance lately? Don’t wait until a disaster happens to find out your coverage is inadequate.
Take the right path with your insurance! Start our personal TRAIL today!
Learn more about the important things you need to know about home insurance.
Congratulations! You are in an exciting season of life. One that can be exhilarating, exciting and difficult all at the same time.
We’re here for ya.
Long time homeowners, we’ve got something for you, too!
Seth has three quick tips for you to get through this process as smoothly as possible.
So here you go…three tips for the “homies:”
Compare insurance companies to make sure you get the best rate. The easiest method of doing this? Have your independent insurance agency do it for you. They, unlike a captive agency, have the freedom to help you get the best rate and best policy. They have access to all types of different policies, making it easier for them to find you the perfect policy.
Set up your insurance payments out of escrow. It’ll be less for you to think about every month and lenders like it.
Bundle, baby! As much as possible, bundle your home, auto, rental properties, and “toys.” Your agent can help with this and you will want to pursue this as it can save you up to 30%.
And that’s it!
Click the button below for more insurance tips for home buyers!