The Insurance Family Blog

Buying a new home is an exciting time in your life.  Thinking of your new life in your first home...or maybe it's a second or third home in a new city.  But it can also be a stressful time.  This is a huge investment with lots of documents to understand and sign. 

Part of buying a new home is purchasing a homeowners insurance policy.  It is a requirement of your loan that you purchase homeowners insurance to cover the amount of the loan.   This protects the banks interests,  but you also want to protect your investment in the home, your personal property and your personal liability.  I hope to clarify homeowners insurance for you and help you with the process of obtaining homeowners quotes and buying a homeowners policy. 

6 Parts of a Homeowners Policy

1.  Dwelling -  Your dwelling should be insured for the amount it would cost to rebuild it in the event of a total loss.  This is called the replacement cost and it is very different from the market value or purchase price.  The market value takes into consideration things like good schools, a good view, swimming pool, on the beach and large lot.  

2.  Other Structures - This would include any structure that is not attached to the dwelling.  It would include things like a detached garage, guest house or shed.  In California a homeowners policy automatically includes this coverage at 10% of your dwelling  limit.  Coverage can be increased if necessary.

3.  Personal Property - This includes coverage for all of your personal belongings - anything that you would take with you if you move out - clothing, dishes, furniture, computers.  Depending on your insurance company, this limit is typically 50-75% of the dwelling limit.  Some items have special limitations.  Be sure to ask your agent for further information.

4.  Loss of Use or Additional Living Expense - This is a very important coverage that is normally not given much thought.  If your home is damaged by fire you will probably have to move out while it is being rebuilt.  This means renting a home or apartment and possibly renting furniture until yours is replaced.  At the same time you will still be making your monthly mortgage payment.  Loss of Use will pay for any additional living expense you may have as a result of the damage to your home.  It would pay to rent another home and furniture.  The limit varies by company.  Some include a limit of 20% of the dwelling amount.  Some insure it for the "actual loss sustained" with no limit except the length of time they will pay it, usually 12-24 months. 

5.  Personal Liability - This coverage is provided if a claim is made or a lawsuit is brought against you because you allegedly caused injury to someone or damaged someone's property. We had a client that was having work done at his home and there was a small trench in his front yard.  A delivery man twisted his ankle when he tried to get over the trench.  The homeowners insurance policy paid for the man's injuries.  Another example would be if you own a dog and the dog bites someone.  Although some agencies will offer a limit of $100,000 this coverage is typically written for a minimum limit of $300,000 - $1,000,000.  The difference in premium between $100,000 and $300,000 is about $20 per year so it is definitely worth increasing. 

6.  Medical Payments to Others - This coverage will pay for the medical expenses of someone other than the homeowner.  It is different than Personal Liability because the homeowner does not have to be legally liable.  The example I often use with my clients is a medical payments claim my brother incurred.  His wife and her friend decided to roller skate in their driveway.  The neighbor fell and injured her wrist.  This was not my brothers fault nor his wifes, but they wanted to take care of their neighbor so they turned in a claim.  It can be written with a limit of $500 up to $25,000 depending on the company.

Now it is time to purchase your homeowners policy.  When you contact an insurance agent for a homeowners insurance quote he/she will ask many questions about you and your home.  To help you with this process, download our free Guide to Obtaining a Homeowners Insurance Quote.  It will help you prepare by giving you a list of information the agent will need in order to provide you with a quote.  It also provides you with information you should discuss with your agent to be sure he/she insures you properly.  

    

When most people purchase a homeowners policy the main conversation with their agent is around their dwelling limit.  How much should I insure my home for?  There typically is not much discussion about your personal property because it is included on your policy for a percentage of your dwelling limit - usually 50-75%.  For example, if you insure your home for $300,000, your personal property limit will be $150,000 to $225,000.  But what does this include or not include?  If you do not know the answer to that you may be very disappointed if you have a claim.

Sometimes even good dogs bite. And when they do, you can be held liable.  All dog owners need to understand their potential liability should their animal bite, maul or, heaven forbid, kill someone.  A single bite could cost you tens of thousands of dollars - a lawsuit hundreds of thousands - and your insurance coverage might not apply.  Consider these claims:

Two out of every three homes nationwide are underinsured according to a survey by Marshall & Swift/Boeckh (MSB).  MSB specializes in estimating construction costs, and its annual reviews of 3 million insurance policies consistently show homeowners don't have enough coverage.  United Policyholders, a nonprofit consumer education organization, call it the underinsurance crisis. In a survey they found that 75% of California homeowners affected by the 2007 wildfires in San Bernardino and Riverside counties were underinsured by an average of $240,000.

It seems that you can't turn on the news without hearing about someone's home or business being flooded.  Sometimes it is along a river where water has risen over its banks due to heavy rains but very often it is in communities that are not near rivers or other bodies of water.  In Laguna Beach, CA the recent rains caused flash flooding and more than $10 million in damage to businesses, homes, and city property due to flooding.

In today’s economy we are all taking a closer look at our expenses.   Restaurant insurance costs are no exception.  Here are some simple steps you can take to reduce the expense of your CA restaurant insurance.

HOW MUCH COVERAGE DO I NEED?

You are getting ready to close escrow on your new condominium – signing last minute papers. The question comes up, how much insurance do I need for the interior of my condominium, the additions and alterations? One insurance agent says $20,000 is enough, another says $80,000. The correct answer is that you need to review your CC&Rs.

A condominium homeowner’s policy defines additions and alterations as (also referred to as the dwelling):

1. The alterations, appliances, fixtures, and improvements that are part of the building contained within the insured unit (such as kitchen cabinets, partitions, and wallpaper)
   
   
2. Items of real property that pertain exclusively to the insured unit (such as awnings or shutters)
   
   
3. Property that is the unit owner’s insurance responsibility under a property owners agreement of a condominium (CC&Rs)

In order to determine how much you should insure your additions and alterations for, you must read your CC&Rs. They determine what the homeowners association is responsible for and what the unit owner is responsible for.

There are 3 levels of responsibility:

1. "All In" - this means that the association is fully responsible for the entire building and anything within your unit that is considered to be part of the building. In this case you would only need to insure your personal property.
   
   
2. "Original Specifications" - this means the association is responsible for the building as it was originally built. If unit owners have upgraded their unit with granite countertops, cherry cabinets, built in book shelves, hardwood floors etc., they would be responsible for these additions.
   
   
3. "Bare Walls" - this means the association is responsible for the building up to the bare walls. In this case you would need to insure everything from the drywall inward. For example, floor coverings, wall coverings, built-in cabinets and appliances, tile, light fixtures, plumbing fixtures and partitions.

Sutherland-Scherff Insurance uses various company replacement cost estimators in determining the replacement value when “Bare Walls” coverage is needed. In the Los Angeles area we find that, depending on how custom the unit is, the replacement cost can run between $75-96/sq. ft.

Contact Sutherland-Scherff Insurance and free of charge, we will be happy to help you review your CC&Rs, work up a replacement cost estimate, and offer you a competitive condominium insurance quote with an excellent company.

If you own a business, with even just one employee, you need Employment Practices Liability Insurance (EPLI).  As part of a series of articles addressing restaurant insurance, we are going to discuss this coverage from the stand point of the restaurant owner.   However, the information applies to any California business owner.

Operating a business from your home can be both rewarding and profitable.  Nothing better than being able to crawl out of bed, walk down the hall and start working.  What many home based businesses don’t realize, however, is that the vast majority of homeowners policies do not cover you when you file a claim related to your business.  Like any business, a home based business owner faces many potential property and liability claims.   Consider these common scenarios:

• You operate a small e-bay business and have an inventory of $10,000 and computers worth $5,000.  A fire in your home destroys or damages both.  Your homeowner’s policy may cover $500-$2,500 in business personal property.  The balance would not be covered.   A business owners insurance policy would also cover you for loss of income as a result of this fire.
• You are at a trade show and someone trips and falls over your display or you have a customer come to your home where he slips and falls.  A homeowner’s policy excludes business liability so you would have no coverage.
• You operate a home based bakery and a customer claims he broke a tooth or became sick because of your product.  There is no coverage for this type of claim under your homeowner’s policy. 

3 WAYS TO COVER YOUR HOME BASED BUSINESS 

1. ENDORSEMENT TO YOUR HOMEOWNERS POLICY.   Depending on the type of business you operate, some companies will endorse your homeowners policy to include some business personal property and business liability coverage.   Coverage is limited however and is only offered to a business with minimum loss potential. 
2. HOME BASED BUSINESS INSURANCE POLICY.   Also sometimes called an In Home Business Insurance Policy, this is a policy that is designed specifically for home based businesses.  It provides coverage for losses or damage from business activities conducted in your home or off-site at another location.  That means your coverage can extend beyond the boundary of your home to include protection for your business property while you are in transit and provides liability coverage when you are performing business-related activities at a trade show.  It is a very competitively priced policy, starting as low as $150 per year.   Although this policy is broader in coverage and is available to more types of business than the homeowner’s endorsement, there are many businesses that do not qualify for this policy.
3. BUSINESS OWNERS POLICY (BOP).  A business owners policy is the most comprehensive solution to insuring your business.  This is what a full-time business owner with a store front will often purchase to insure their business.  The coverage on a home based business insurance policy and BOP are very similar.  The main differences are that the BOP may offer higher limits and broader eligibility.   The premium starts as low as $500-$1,000 depending on the limits of coverage and type of business. 

By not having insurance, home based business owners are at risk for significant financial losses such as fire, theft, loss of income and liability - losses that can devastate any business.

For more information about California home based business insurance contact Sutherland-Scherff Insurance Services, Inc.

There are many factors that help reduce your auto insurance rates.  The 2 that we are all most aware of is the number of years you have been driving, and your driving record - how many tickets and accidents have you had in the past 3 years.  But there are other factors that affect your rate.  Some within your control and some that are not.  Following are some additional factors that can help you save money on your auto insurance:

• Deductible for comprehensive and collision.  Policies are typically written with deductibles ranging between $100 to $1,000.  Higher deductibles are available.  Naturally, the higher the deductible the higher your discount.  Just be sure not to pick a deductible that is more than you can afford to pay if you have an accident.  Remember, if you have a $1,000 deductible and have a collision claim, you will be responsible to pay the first $1,000 before the insurance company pays anything.
• Multi-policy discounts.  This can be a BIG discount.  Our companies offer between 10% - 25%.  Sometimes the discount on the auto is enough to pay for your homeowners insurance.   Call us and we can work up a quote to include this discount.
• Car alarms.  A car alarm typically only reduces your comprehensive coverage because theft is included in this coverage.  The discount varies by company.  If you have an alarm be sure to check and see if this discount is included in your rate.
• Occupational Discounts.  Many companies offer discounts for certain professions, degrees and even for employees of certain large companies.  For example, we work with Civil Service Employees Insurance Group (CSE) and they offer special discounts for all government employees.  Travelers offers you a discount if you are an engineer, scientist, educator, doctors, dentists and CPA’s.   Be sure your agent checks to see if you qualify for any of these discounts.  When your policy is first written you should receive all of your qualifying discounts but over the years you might change professions and companies add discounts that they offer.
• Good Student Discount.  Most companies offer a discount for full time students with a B average or better.
• Car pooling.  If you are in a car pool, be sure that your agent knows.  Many companies determine your rate by how far you drive to work and how many days a week.  If you car pool and only drive 50% of the time and you work 5 days a week, your rate will be based on 2.5 days per week instead of 5. 
• Type of Car.  The type of car you drive can also have a big impact on your insurance.  The rate is based on the value of your car and whether or not it is a standard performance, high performance or sports car and a variety of other factors.  If you are planning on buying a new car give us a call first and we can work up a variety of quotes for you based on the cars you are considering.

At Sutherland-Scherff Insurance Services we are constantly reviewing our client’s policies to be sure they are receiving the best rate we can offer.  Most times you won’t even be aware we are shopping your policy for you.  But then there is the time we call you to say “Don’t pay that renewal premium you just received.  We can save you money on your auto insurance if we change companies for you.”