Coffee to Car Payments

All Shook Up: Check Your Homeowners Insurance

One of my favorite things to do on the weekends is to sit and watch the History Channel.  A few weeks ago, I was watching a program about the 8+ magnitude New Madrid earthquake that rocked the Midwest in 1811.  Tremors were felt right here in Des Moines, IA (520 miles away).    This massive quake changed the landscape of the Midwest, permanently changing the course of the Mississippi River, and temporarily causing it to flow backward.

This morning, 197 years later, a smaller 5.2 magnitude earthquake again rocked the ground.  Fortunately, so far, there are no reports of damage or injuries.  However, my girlfriend's sister, who lives in Martinsville, Indiana (just south of Indianapolis) said she thought her house was going to fall down.  Here in Des Moines, WHO radio morning co-host, Bonnie Lucas, was sitting in her office and felt her chair move, grabbed her desk, and heard the ceiling panels start to shake.  At first, she thought it was Van Harden working on another invention (like cheese-crust pizza).  Then she read the newswire and realized it was just an earthquake.

This morning's quake likely didn't change the course of the Mississippi but, maybe you should check the fine print of your homeowners insurance to see if it covers earthquake damage.  This is NOT included in most homeowners insurance policies.  It is an available, affordable endorsement that can be added to most policies.  But, especially here in the Midwest, with the last major earthquake happening nearly 200 years ago, it probably wasn't even something you asked about when you took out your coverage.  The risk is nominal but so is the premium.  On the other hand, in the even of an actual loss, it could be financially devastating.

Want a free checkup?

Is your home underinsured?

Does your homeowners insurance provide actual cash value or replacement cost coverage if you suffer damage or a total loss to your home and it's contents?  The truth is nearly 60 percent of all homeowners are seriously underinsured.  There are several things to consider but the biggest one is which type of coverage your policy offers. 

Replacement cost coverage calculates the cost to repair or replace your home with one of comparable size using the same quality of materials as your current home and at today's cost.  Many companies are even allowing you to purchase guaranteed replacement cost coverage which allows you to get as much as 25% more than the estimated cost to rebuild.  This type of coverage is the best at ensuring that you will be back at the position you were prior to the damage to your home.  All with minimal out-of-pocket expense to you.

Now, lets look at actual cash value (ACV) insurance.  This type of coverage uses the same calculation of replacement cost but then subtracts depreciation.  Now different parts of your home depreciate at different rates and it is a complex calculation.  So, I won't pretend to be an expert at that.  But let's say that your 40-year-old home that you re-roofed 12 years ago with 25 year shingles and updated with a new furnace and water heater 8 years ago along with various other improvements you have been able to make burns to the ground.  What is the actual cash value of your home?

I don't know either but, one thing is certain.  It is less than what it will actually cost you to rebuild which leaves you with a couple of options:

• Build a nice, cozy home that is a lot smaller than the one you lost using the money you do get from your insurance company
• Build one similar in size and amenities to the one you lost and pay thousands of dollars out of your savings, retirement funds, or loans from friends or family.

One thing that should not be an option at that point is keeping the same agent.

A recent survey conducted by the National Association of Insurance Commissioners (NAIC) found that 64% of the homeowners who responded said that they were insured for replacement cost, 24% said ACV, and worst of all, 12% had no idea.  Veteran and new agents alike make this mistake and it could cost you thousands.  Go home tonight and review your declarations page of your homeowners insurance policy to see which coverage you have.  You'll probably sleep better....maybe...

Do you sell car insurance?

Sorry it's been over a week since I last posted!  I've been busy studying to take the Iowa exam to offer home and auto insurance and it's got me feeling a little like the picture on the right.  So, I decide to take another test to see if I'm a left brainer or a right brainer.  The result was that I'm 53% left and 47% right.  I guess that makes me undecided.

Anyway, for the last 4 years, whenever I meet someone and tell them I'm an insurance agent, they say "Really!  What type of insurance?"  I say, "Annuities, life, long-term care, accident and health." to which they reply "Oh, do you do homeowners insurance?".  So then I start over, "No, annuities, life, long-ter..."  So, I'm taking this exam so that after next Wednesday, I can just say "Yes".

I'm actually excited to add this new service to my business but the exam is taking all of my brain cells and giving me a mild case of Blogger Block.  I'll be back soon.