Home Insurance 101 – Part 2, by C.J.

(Continued from Part 1. This concludes the article.)

Having the Right Policy

If you own a farm, ranch or if you have livestock, you most likely will need a farm policy as opposed to a standard homeowner’s policy. Farm policies will offer coverage a standard homeowner’s policy doesn’t offer. Many policies will offer coverage for your livestock and equipment such as tractors, steer skids, etc. Many homeowners’ policies will have strict eligibility requirements for livestock as well as acreage. If your home is outside the typical track home scenario, it is best to verify with your agent that what you have is eligible for the policy you have. Every company will vary on their eligibility requirements and every home will vary on their coverage needs between a home and farm policy. I specifically recommend you do this through e-mail, so you have in writing what they tell you.

Unfortunately, agents work on commission, and many have a tendency to tell you what you want to hear in hopes of not losing your business. This can be common if they don’t have an appropriate replacement option for you. Always get verification of any question to them in writing. Your agent will develop amnesia very quickly after a loss when a coverage or eligibility issue arises. The same goes with coverages. If your policy does not list the coverage, then assume that you don’t have it. Policies can be difficult to follow, so asking your agent is a good way to verify, but please get their answer in writing.

Along the lines of eligibility, be sure your carrier allows your breed of dog, home-based business, trampoline, wood stove and roof type. I know many SurvivalBlog readers may have home-based businesses and the eligibility of these businesses will vary by insurance carrier and the business’s nature. A small home office is quite different than a home-based business with your clients visiting your house (piano teacher, etc) If you come to find out your carrier does not allow wood stoves, this does not mean you need to get rid of the woodstove. Many times, it just means you need to find a new carrier. Of course, if you stay with the carrier that does not allow wood stoves, then understand a loss resulting from the woodstove will most likely not be covered, so in that case I guess you should get rid of it. My point is, don’t feel pigeon-holed into getting rid of something you deem valuable based on one carrier’s eligibility guidelines.

I would recommend going with a carrier that allows wood stoves and keeping it. I am using wood stoves as an example, but this applies to any scenario in regards to eligibility. As much as your agent may paint a picture that no company will take them, in an attempt to have you get rid of the stove so they can keep the business, it’s merely that company that happens to not take them. There are plenty that do. This goes for any eligibility issue. Rarely is it necessary for you to change what you have going on, it’s just necessary to find an insurance carrier that can accommodate it. With that said, you need to make that carrier change as quickly as possible to avoid any coverage issues.

WildFires

I assume many of your homes are located in areas with high probability of a forest fire. Mitigating trees around your home is always a great way to defend your home from fire. Please understand that insurance companies vary greatly on their appetite for these risks. I am sure many of you have heard your home is not insurable due to its location, or the price was just too expensive to consider, based on the location. While there are always exceptions, many times you are just talking with the wrong company. Distance from a fire department, access to the home, and overall risk of the area will certainly play into which companies you will be eligible with, but rarely can I not find a reasonable rate for my clients.

For harder to insure homes, an insurance broker may be a good option to consider. They will typically know which companies do well in your area and are ok with fire risk, and it will save you the time and hassle trying to navigate that on your own. Again, insurance agents work on commission. Many of them will tell you whatever it takes to get a sale. The underwriter is there to protect against that, and you don’t want to waste time buying a policy that will get canceled due to location or risk.

Along the same lines if you live in a risky wildfire area and secure a new policy, I recommend you do not cancel your old policy until the new policy is through underwriting and you can verify there are no issues. Be sure they don’t come back with tree mitigation requests you are not willing to accommodate. Keeping the old policy in place temporarily through the initial underwriting phase will ensure you can fall back on the old policy without issue if the new policy does not work out for any reason.

Many of you may be grandfathered in with your current policy. If you cancel the old policy, realize the new policy is not going to work, and go back to the old company, you may find you are no longer eligible with the old company as a “new” insured. Be sure to verify (in writing of course) your new policy is completely through underwriting before canceling the old policy. Please note you cannot make a claim for the same loss on both active policies if your state has double indemnity laws. Talk to your insurance company or agent on how they specifically recommend you handle the transfer for your state.

We’re all aware of bug out bags but please also consider a fire bug-out bag. This is a bag where you can quickly load family picture albums, important documents like passports, Socia Security cards, insurance policies, etc. Remember, insurance can’t replace old photos so be sure you identify what you must save in the event you need to evacuate quickly. These items may also include survival gear you may need immediately after evacuating or items that are simply hard to or impossible to replace. As with all we do, identify these items now, and be prepared by knowing upfront what you need to take before the hint of a wildfire. Once the evacuation comes, there will be no time to start deciding on what needs to go with you.

Protecting Your Property

I think this goes without saying to SurvivalBlog readers, but I will say it anyway. Don’t let insurance replace common sense. Lock up your valuables, lock your doors, be mindful of fire risks, practice proper home maintenance and upkeep. Regardless of coverage, mitigating risk on your own through home upkeep and common sense will save you the hassle by avoiding the loss in the first place.

Some Closing Thoughts

Be sure to always read your renewal. As I’ve already stated, policies and coverages can change from year to year. The insurance carrier has a legal obligation to notify you of these changes in writing, which is usually done through the policy renewal documents. This is the time to check for raised deductibles, lowered coverage on changes like the above-mentioned roof replacement coverage. It is also a great time to reassess your needs and make changes based on the updates and upgrades you made the prior year. In the excitement of a new shop or barn, we can forget to add coverage for it on the insurance policy. While it is always best to add that coverage at the time of the update, the renewal is a great time to verify you didn’t forget to make those changes throughout the year.

Remember, the policy is simply a contract between you and the insurance carrier. In any claim dispute, the details of that contract will determine if coverage is provided. The details matter! Ask your agent questions for clarification where needed, that is what they are there for. Go with an agent that shows they care about coverage and not just the cheapest rate, and one you genuinely trust has the knowledge and experience to advise you properly.  Of course, you never want to pay more than you need to, but you don’t want to sacrifice coverage for a cheap rate. If you take your time and explore different options, there is no reason you can’t get both.

Your home, in whatever regard that looks like, will be a lifeline for you in troubled times. Protecting it from everyday risks is important, so that it is there for you when you really need it.  Be sure to verify your policy covers terrorist acts and acts of vandalism. These are two perils that are obviously prevalent these days, and you need to make sure your policy covers these perils.

While I kept this article to home insurance, it’s best to make sure your vehicle insurance covers these perils as well. Keep a digital copy of your policy where you’ll be able to access it after a total loss. The paper copy may very well get destroyed in the loss. Your agent will have a copy they can send you as well, but having a digital copy at the ready is always a good idea as the agent may not be immediately available and able to send to you. Don’t get too caught up on what your neighbor pays. Chances are your needs are different than theirs and most likely they approached their policy from purely a cost standpoint. Ask your agent questions and don’t assume “it’ll be covered”.

A lot has changed in the insurance industry over the last 20 years, and making an assumption based on a prior experience from 10 years ago is not a good practice. Be sure to let your agent know you care about coverage. As silly as that may sound, most people don’t actually care about the coverage, they just want the cheapest rate. Your agent may very well assume you fall in line with the masses if you are not clear with them that you are wanting to be properly insured.

Lastly, insurance is not a product you will monitor daily. This means that you need to sit down, spend the time it takes to make the right decisions for your situation, make sure all your ducks are in a row and the details are in place, and then file it away, rest assured that if you need it, it will properly cover you. After a loss is never the time to understand what you’re covered for and what you are not covered for.




7 Comments

  1. Good article. Homeowners is an all in sort of policy. Lots of normal things get included. Farm policies are a la carte, pick what you want so you must think it through. So when you move from the suburbs to the country you have to pay more attention. When you add equipment you have to make a call to that agent.

    Also, surely agents make commission. The other side of that coin is agents have legally established standards of care. So if I leave a coverage out that is commonly accepted or if I insure a building for two million when I know it would cost six million to building it back, I am legally on the hook for the difference. (The valuation issue arises in distressed commercial property.)

    A good agent is up on a lot of economic and business issues. Most independents have more than one business. Tap into their business knowledge. They all drink coffee. That agent should be on your informal “board of directors” if you have picked the right agent.

    This agent handed out boxes of ammo and a handful of mags to a select couple of new to the AR not new to the agency clients. They were lamenting spending the day in line at a store to finish kitting out.

  2. This is a good article. I like the idea of looking at the policy as it is renewed, never thought of that. With the wildfires roaring, would the insurance companies deflect some costs coming to them?

    It’s a pain to read the fine print but that’s where I get caught.

    Thanks again for a thought provoking article.

    God bless you,

  3. Insure everything! It’s a necessary evil. I personally, like most of you, have a budget. And every year my spreadsheet tells me that my number one expense is food and household items. Combined they total just over a quarter of our budget. Those numerically challenged may view it this way – if a pie was cut into only four (4) pieces, one of those is a quarter (I believe that’s why it takes four quarters to make one dollar).
    Don’t have the least problem with this number or percentage of my budget.
    The next largest line item is INSURANCE. This is every policy totaled and it’s Still over a quarter of our budget.
    That over our adult life time going back only 30 years is approximately $375,000. And trust me, we have been adults more than 30 years. So realistically just us – we are talking closer to a half a million dollars easy. Multiply that times all the insured individuals, businesses and pet policies – subtract your benefits (there will be some) and you’ll start to see why the insurance industry own more wealth than any industry that actually produce a tangible product.
    Look into the history of the insurance business sometime.
    Enough said.

  4. Something to consider, in regards of fire. Many jurisdictions place limits on how many gallons of fuel you can store on your property without a permit. In Los Angeles County, it’s 25 gallons. So if your home succumbs to a fire (brush fire, electrical, etc.) and the forensic investigation reveals that you had 6 of those 5-gal containers in your shed, your insurance carrier can use the technical violation of local ordinance to deny payout for your loss of home. Even if you have 25 gallons properly stored in a fire resistant cabinet, but an additional 1-gal container elsewhere with your lawn mower, it exceeds the residential limit.

    Believe me, if one of our infamous brush fires sweeps through and burns twenty homes valued at $500K apiece, that’s $10 million. They’ll be looking for any reasons to minimize their payouts.

    Just a thought.

  5. Always go with an Independent Insurance Agent or Trusted Choice Agent…it’s good if the person helping you build the policy works for you instead of the insurance company…called ‘brokers’ in some states.

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