People might not like to talk about insurance, but getting an agent to evaluate your needs is an essential aspect to life for buyers and renter
Think adulthood begins when you first have sex? Nope, teens do that. Ditto for driving a car and voting and graduating high school, even attending college.
No, you realize you’re an adult when you discuss insurance maybe not because you want to, but because you have to.
Auto, health and disability aside, there are many kinds of policies, types of coverage and insurance companies out there for the homeowner, and wading through them all can be daunting, not to say confusing. That’s why an insurance professional can be a godsend for the new homeowner or renter.
“We’re independent, which gives our customers an advantage because we shop the policy for them,” says Steven Graves, owner of Graves Insurance Agency, which markets a full slate of policies. “And because [an independent agent] represents the consumer, if the consumer has a problem we can go in and fight for them.”
He sat down to explain some of the considerations in picking the insurance right for you.
Looking at rates
Not all insurers are equal or at least, not all are best for every consumer. Even supposedly full-service companies have specialties, although that might not be widely known.
“Every company has things they want to insure and things they don’t. Some companies don’t have an appetite for particular coverage, but they offer it, though their rates will be higher,” Graves counsels.
But rates alone aren’t the only consideration. Some companies are well known for not paying their claims; others are nearly instantaneous in getting a check to the policyholder. A good agent can help direct consumers to the one best suited to them.
What about the dictum that insured should switch insurers on a regular basis to get the best rates does that really benefit the insured? Not necessarily, says Graves, although an agent can help you shop policies for the best deal.
“We had a client placed with a very good company, then another company lowered their rates,” Graves says. “We were able to save him $400 a year. Another we got more than $1,000 a year on his home.”
This is not to say that the other companies weren’t good, just that a particular insured benefited from a switch because of a change in the market and their own underwriting. That’s not always the case, though.
Rates depend on what you’re insuring.
“Condo insurance is difficult to get right now a lot of companies aren’t writing it,” Graves says. “But there’s one company that is new to Texas and they love insuring condos. They’re very good on their prices, service and claims.”
Single-family dwelling coverage
Homeowner’s insurance provides coverage not only for damage to the outside of a house and its structure, but also the contents, interior and most kinds of losses you can think of fire, natural disaster, vandalism, theft, you name it.
Because the insurance industry is highly regulated, Graves says there’s little chance for a price break most of the time.
“Most homeowner’s companies put the deductible” the amount you have to pay before the insurance kicks in “at 1 percent of the appraised value of the dwelling. Some companies are now going with a 2 percent minimum deductible,” Graves says. On a $100,000 home, that means the deductible can run $1,000 to $2,000 minimum.
And there’s little incentive to try to negotiate. While a higher deductible can substantially affect a car insurace premium, that tends not to be the case with homeowner’s policies. According to Graves, “There’s no price break at a higher deductible for a homeowner’s policy.”
Graves advises people not to make claims willy-nilly, either. Rates don’t usually depend on the amount paid. Rather, the number of claims is considered: the more claims that are made, the higher a premium is likely to go.
“If they’re not cutting you a check for at least $3,000 more after you back out the deductible, don’t file it it will cost you more in premiums in the long run,” he says.
Cancellation can occur with the first 60 days of a policy, but typically a policy is not canceled, it is simply not renewed.
Key considerations in homeowner’s insurance have little to do with the appraisal, the taxes the district makes you pay or the sentimental value of items. Insurers are concerned with construction costs: How much will it be to rebuild the house today if it burns to the ground?
Most policies, Graves notes, are not replacement policies sometimes replacement coverage isn’t even available. One way you can tell: If your policy says replacement or “RCV,” you have it; if it says “ACV” you have an actual cash value policy which will depreciate the items inside.
If you have especially significant items of value high-end computers, jewelry, expensive watches, fine art or heirlooms you might consider preparing a schedule
Once a person obtains insurance, Graves sends them on a mission: Go home, grab a digital camera and photograph everything.
“Open closets, the rooms, drawers, valuables. If you have jewelry, lay it out on the bed and photograph it. But the images on a disc and give it to your insurance agent to keep on file,” he says. (That way, if the property is destroyed in a fire, there’s a record of the contents in a safe place.)
Liability and umbrella coverage
Liability insurance is another thing many homeowner’s don’t think about when obtaining protection for their home from damage, but it is actually essential in today’s world. Liability coverage protects an insured from a lawsuit or claim by a third party for such things as slip-and-falls or even slander.
“I’ve seen best friends become enemies because of an injury on a property” for which there was no liability coverage, Graves says. He recommends a minimum of $300,000 in liability coverage for all of his clients.
“It’s very cheap, but when you need it, you need it,” he says.
Graves also counsels clients with a gross household income of more than $38,000 to obtain a liability umbrella policy in addition to the regular policy. Umbrella coverage is available in increments of $1 million up to $5 million.
Although that sounds like a lot of coverage and sounds expensive Graves says it is not.
“We run about $190 to $210 a year for a $1million umbrella,” he says.
Like its name suggests, an umbrella policy kicks in to cover large losses once the underlying insurance is exhausted. Graves tells the story of a client who lived on the 16th story of an upscale building. The client had $300,000 in liability coverage, but also bought an umbrella.
One day, a painter working for the client triggered the emergency water system. A dozen floors of the building were soaked by the spill, causing nearly $500,000 in damage. The painter had no money, but because it happened in the client’s condo, his insurance paid for it. The umbrella covered the losses in excess of $300,000.
Condo and apartment living
In practice, condo insurance can sometimes slip through the cracks it poses pitfalls for consumers, because coverage they think they have might not be complete.
“People buy a condo, they pay homeowner’s association fees which includes insurance,” Graves explains. “They sometimes assume that the master policy [for the building] covers the interior of their unit. It is highly unusual that it would.”
Sheetrock, interior doors, light fixtures none of those are covered by the master policy, which usually has a $5,000, $10,000 or even $15,000 deductible. And the condo association is loath to make a claim for even slightly above the deductible.
Each unit owner, therefore, “needs to purchase a condo owners’ policy, even if they rent the unit to someone else,” Graves says. “It will protect the interior of the unit, the personal possessions and provide personal liability.”
Graves also recommends renters’ insurance for those who lease a property but do not own it.
“Most of the devastating fires in North Texas are in multi-family homes. It’s also pretty cheap,” he says. A renter’s policy can protect the contents of your apartment.
Getting “‘gay’ coverage
It might come as a surprise to find that many mainstream, white-shoe insurance companies usually known as bastions of conservatism welcome gay and lesbian policyholders.
“We have many companies that allow up to treat gay couples as married if they are in a committed relationship,” Graves says.
That allows two gay men to be covered under the same policy, which can offer benefits in terms of pricing (multi-coverage discounts, for instance) and ease in handling claims.
The best way to make sure you’re getting all the coverage and bargains due you? Use a gay agent, Graves says.
“They appreciate the issues of the community,” he says.
Steven Graves Insurance Agency, 3500 Oak Lawn Ave., Suite 110, 214-599-0808.
This article appeared in the Dallas Voice print edition, March 3, 2006.