There are three storms in the Atlantic as of today.  (Take a look for your self: http://www.stormpulse.com) The first one, Danielle, looks as if it will turn North before it hits the Eastern seaboard.  However, there are more coming.  Now may be a good time to review your homeowners insurance.  Most people get a contract at closing and put it in a drawer until something bad happens.  Then, ten years later when they suffer a loss and they haven’t reviewed their coverage they are stunned to learn that they have gaps in their coverage.  Of course it’s all the insurance company’s fault, or perhaps the agent, or maybe it was the realtor or even the loan officer.  In the end, if you have a loss that isn’t covered and you haven’t reviewed your coverage, it doesn’t matter whose fault you think it is.  You are ultimately responsible for the coverage on your policy! Let me say it again.  You, the homeowner, are responsible for the coverage on your policy.  So, if you don’t have the right coverage, you are self insuring.

What is the right coverage?  Well, as you may have guessed, that depends on the risk.  In order for an agent to make good,  professional recommendations regarding the coverage you have on your home, he or she must talk with you, ask some questions and probably take a look at your property.  It mystifies me how companies can sell homeowners insurance over the internet.  Would you trust a policy you purchased on-line?  To know that you are being covered correctly, you agent needs to assess the reconstruction cost of your home and the replacement of your contents.  Reconstruction costs are more than the cost to build your house as if it were new.  Reconstruction requires the hiring of a contractor and the purchase of materials specifically for rebuilding your house.  When your house was new, it is likely that there was a builder on site who was building your whole neighborhood.  That builder had the advantage of having all the subcontractors already under contract and all the materials purchased in bulk from the manufacturers.  So, just making sure your home is insured to the right value can be tricky and needs to be left to professionals.
Then, you have all those pesky endorsements.  Do you know which endorsements are on your policy and which were not included?  If you were trying to get the lowest price, as many consumers are, then it may be that you did not get coverage for sewer and water back up, or law and ordinance coverage.  You may not even have replacement cost on your dwelling much less your contents.  Not to mention flood and earthquake coverage, which hardly anyone buys unless a bank forces them too.
Do yourself a favor and get a second opinion on your homewoners insurance today.  The storms are coming and if a storm travels up the bay, we could be facing a significant disaster in the aftermath.  Your homeowners insurance policy coverage will determine your ability to rebuild following a storm.  Don’t wait until after you have a loss to find out what kind of coverage you have.

This article ran originally last year.  I thought that given the number of water claims we are seeing this year, it might be a good time to run it again.  By the way, you may be getting a notice in the mail from your mortgage company telling you that you need flood insurance.  FEMA has redrawn the maps and there are many significant changes to the flood zones.  If you think you need it, it would be smart to buy it before someone tells you that you need it.  Often, existing flood insurance policyholders are “grandfathered in” with their original policy ratings based on the original flood zone determination.  The difference in rating could save you thousands of dollars.  To see Fairfax County’s flood map click HERE.

This Spring and Summer we have been overwhelmed with the number of calls from homeowners who are experiencing damage from rising water.  Unfortunately, homeowners insurance does not cover floods.  First of all, it is important to know what a flood is.  Well, here is a definition from the government:

“Flooding is a result of heavy or continuous rainfall exceeding the absorptive capacity of soil and the flow capacity of rivers, streams, and coastal areas. This causes a watercourse to overflow its banks onto adjacent lands.”

If more than one property or more than 1 acre is impacted by the water you have an insurable event.  This means that a flood policy would respond if one was available.  Now, what are your chances of being affected by a flood?  Well, that is a little harder to answer.  However, you can check out NOAA’s weather map  http://www.weather.gov/ahps/ and you can see where there are warnings and watches in place.  Or you can go to the FEMA web site  http://www.fema.gov/ and search “flood” to find lots of good information on the subject.  The government has done extensive mapping of flood plains however, those maps are continuously updated.  Based on changes in the topographical lay of the land due to construction or natural changes, the flow of water in streams and creeks near your home may change over time.  This could mean that your home is in a new (undetermined) flood plain.  You may learn of this change when the water begins to rise and then it is too late.

Another big exposure that homeowners have is the changes they make to the grading near their home during the course of landscaping.  A new garden or tree may divert water toward the house causing it to come in under doors or through windows.   A flood policy may or may not cover you in these cases.  It really depends on whether your flood meets the definition of a flood in the policy.  If more than one adjacent home is impacted chances are it will be covered.

So, is flood insurance worth the money?  The simple answer is YES.  Flood damage is devastating and federal and state aid is not going to restore you to the condition you were in prior to the loss.  Even flood insurance is not a guarantee of complete indemnification.  But, I would much rather have one following a loss than to be dependent on the state for a hand out.  If you are not in a designated flood plain, the cost is about $400 per year.  If you are in a high risk flood plain, the cost could be much higher.

If it is determined that you are in a flood plain and your insurance company has told you that you need to pay thousands of extra dollars per year for flood insurance, there is still something you can do to help with the premiums.  Contact a surveyor and hire them to do a complete elevation survey of your property.  It may be that the risk for your individual home or property is less than what was determined by FEMA.  If it is determined that your home is elevated enough to make it less likely to be flooded then you can save on your flood insurance.  If you disagree with the flood determination from FEMA you can dispute the maps.  However, you will need to provide evidence that the maps are incorrect concerning your home.  To do this, you will need a good surveyor and it will probably cost you about $1500.

Insurance premiums generally reflect the risk of loss that they are paid to protect against.  So, if you are being asked to pay a very high premium for flood insurance it is because your risk of loss is also very high.  This should be a warning to you and you should start thinking about a worst case scenario and plan accordingly.

Here is a link to one homeowners experience with flood insurance following Hurricane Katrina:  http://www.floodsmart.gov/floodsmart/pages/videos/levee_failure.jsp

Yesterday our area was rocked with 70mph winds, 1 and a half inches of rain and lightning, all within about 2 hours in the afternoon.  A house in my neighborhood was struck by lightning and the entire roof and much of the top floor were severely damaged.  Fortunately, no one was injured.  Because the homeowner was home when the storm struck he was able to call 911 right away and the fire department did a terrific job of limiting the damage.  The home could have easily been a total loss if the call to the fire department had come 5 minutes later. Not to mention the possibility of the fire spreading to adjacent homes.   Living in Fairfax County has the great advantage of having one of the best fire departments in the nation.  They responded with 7 trucks and 3 other emergency vehicles.  There must have been 40 fire fighters on the scene.  They had the fire out within minutes of their arrival and they stayed to make sure there were no hot spots to reignite the home.  Our whole neighborhood was impressed with the professionalism of the firefighters and we are all grateful that they were able to contain the fire and get it extinguished so quickly.

Once the fire fighters leave, the insurance company sends in their adjusters and the job of rebuilding begins.  Most companies have employee adjusters whose job is to indemnify you to your condition prior to the loss.  However, not all companies have professional adjusters.  Some use independent adjusters which can complicate and delay claims settlements.  This is an important difference between insurance companies that most policy holders don’t understand until they suffer a loss. 

Typically, homes are not depreciated in value when they are rebuilt, but that is not always the case.  Personal property however may be depreciated unless you actually replace the items.  It is important to be sure that your policy has replacement cost coverage for both the “Dwelling” and the “Contents”.  Never assume that you have the right coverage just because you purchased your policy from a name brand insurer.  Sometimes there are mis-communications with agents and companies or even agents who do not understand the contracts.  Coverage issues need to be resolved prior to a loss.  Once you file a claim, whatever coverage is on your policy is all you’ve got.  So, be sure that you understand your policy.  The best way to know if you have a quality policy is to talk with a professional insurance agent.

An often overlooked coverage on homeowners insurance is the “Additional Living Expense” coverage.  This coverage will pay for you to stay in a temporary home until your home is repaired.  Some policies have very limited coverage.  Typically you will see coverage limits equal to or less than 50% of the dwelling limit or a limit defined by a period of time.  Often, it can take a year or longer to repair a badly damaged home.  If your “ALE” coverage runs out, you will be moving in with friends, family or paying a hefty hotel bill out of your pocket.  Be sure that your Additional Living Expense coverage is not limited by time and had a coverage limit of at least 75% of your dwelling coverage.  Of course, the more the better.  Nationwide has one of the most comprehensive contracts and provides 100% of the dwelling coverage.  This has come in handy for many of our clients who have suffered large losses. 

Knowing what is and what is not covered on your homeowners insurance is important.  Hopefully, you will never need to find out how good your policy is.  But, if you are faced with a large loss, like my neighbor, I hope you have a good policy.  You will know you policy is good if you also have a good agent and a good company that stands behind their policies.

I posted this article earlier this year.  With the recent earthquake in our area, I felt it would be worth re-publishing.  The core message is that earthquakes happen and when they do they damage property.  Most people who own homes do not carry earthquake coverage.  It can be added to your homeowners insurance for 10%-20% of your premium.  For most people, the actual cost is less than $20 per month.  It’s a no brainer!  Just buy it.  You will never regret having this coverage.

Have you noticed that every week there seems to be another earthquake or volcanic eruption occurring somewhere in the world? It seems that the earth movements are becoming more frequent and scientists do not have answers beyond explaining the obvious after the fact. There is no way to predict where or when the next quake will happen. Before the quake in Haiti, it had been more than a hundred years since the last quake. Did you know that about 130 years ago Charleston SC, suffered a major quake that caused catastrophic damage to the city? The point is that no one can predict whether we are safe from an earthquake and the prudent thing to do is to insure against the possibility. So, are you covered?

The short answer is probably not! Most homeowner insurers offer earthquake coverage as an option on their policies. However, most people on the East Coast don’t think the coverage is important or that it is likely that they will experience a loss. Well, it is true that serious earthquakes occur relatively infrequently around here, but when they do, it doesn’t take much to crack a foundation and cause a home to become condemned. Most people don’t realize that their is a fault line that runs just West of Sterling that extends from South Carolina all the way up into Pennsylvania. There are earthquakes along this fault almost every week, but they are relatively small so we usually don’t feel them. But, from time to time a quake will hit and shift the ground just enough to cause structural damage to a building or a home. Unless the property is covered by an earthquake endorsement, that property owner will have to dig deep into their pockets to pay for the repairs. The cost of the endorsement is usually about $100-$200 per year. The prices are relatively low for us because we have not had a major quake recently. Now is the time to buy the coverage. If we have a quake and you do not have coverage you can expect the rates to go up significantly. If we have a quake and you are not covered you will be at the mercy of financial aid from the government to get your home repaired. Also, because you don’t have the endorsement, your family may be forced into temporary shelters while your home is being repaired. (Think about the aftermath of Hurricane Katrina)

Do the smart thing and get this coverage in force now. Don’t try to save money in cases where the stakes are that high. For less than a $10 or $20 a month you can ensure that your home and your family will be cared for if we are hit with an earthquake.

Everyone loves a new car.  The feel of the ride, the smell of the interior and look of the fresh paint.  Unfortunately, according to most auto valuation services, as soon as you drive that new car home it has lost between 10% and 20% of it’s value.  If, you financed the entire value of your car then you are upside down financially in your loan.  Meaning, you owe more than the car is worth.  If for some reason you tried to sell your beautiful new car the day you baught it, you may be sadly disappointed to learn  that you are unable to get what you paid for it. 

So, what happens if you wreck it?  Well, your insurance company may not pay off your loan.  Especially if you have put a lot of miles on your new car.  A client of ours drives 60 miles to work each way.  Over the course of two and a half years he managed to put nearly 70,000 miles on his 2008 car.  He purchased it with little or nothing down and found out that the car was not worth what he owed on it following an accident.  Your insurance policy will only indemnify you to the condition you were in prior to the loss.  That does not necessarily mean they will buy you a new car or even pay off the old one.

There are a couple of solutions available to you.  One is “Gap” insurance.  You can purchase it from your finance company or you may be able to endorse it to your car insurnace policy.  This will ensure that your loan is paid off in the event you total your car.  Another option available on some insurance policies is New Car Replacement or Enhance Value Loss Settlement for older cars.  These endorsements enable the insurance company to pay you top dollar for your wrecked late model car.  If you own a car that is 20 years old or older and you feel it should be insured to a particular value, you can purchased a “State Value” policy or a special antique auto insurance policy.  These policies also allow the insurance company to consider unique circumstances when settling your claim.

So, if you have a new car or you put a lot of miles on our car and you are concerned about receiving a fair loss settlement from your insurance company, call one of our agents and we will help make sure your car is insured correctly.  Making sure you have the right coverage at the time of a loss is the most important job of your insurance agent.  If your agent has not reviewed your coverage or if you don’t have an agent please give us a call.  We will be happy to explain your policy and your coverage even if you don’t insure with us.