Home Owner Insurance - Colorado
Most people never look at their Colorado home owner's policy because the premiums are paid through their mortgage company, but that can be a big mistake. The time that most home owners read their policy is when they have had a claim denied — and by then it's too late. Millions of Americans maintain inadequate homeowners coverage. Once you become the lord of your manor, you must take steps to make sure that your property and its contents are protected from hurricanes, lightning, winds, hail, vandalism, plumbing leaks, snow storms, fire, thieves and more. But what is homeowners insurance, exactly?
Homeowners insurance protects against three types of loss:
Structure (damage to the home itself). Interestingly, the number one cause of claims filed against homeowners policies is water pipe leaks caused by broken water pipes flooding a home.
Contents (loss of personal property). Your personal contents, such as furniture and televisions, will be covered in the event of loss. The coverage usually ranges from 50% to 70% of the structure coverage of the home. Personal property is often insured even when you are on vacation.
Liability (in the event that someone is injured on your property).
Remember that if a contractor injures himself while working on your home, you need adequate homeowners insurance to protect yourself. If your buddy has too much to drink at your house and subsequently gets into an accident, you could be liable. Dog bites are also common claims covered by many homeowners' policies.
Why premiums have gone up
Insurers paid out a lot of claims when Hurricane Andrew hit in 1992. Insurance CEOs choked on their lattes as millions of dollars flew off their balance sheets to pay claims filed as a result of Andrew, Katrina and other disasters. As a result, shrewd insurance CEOs chose to raise prices and decrease coverage. Homeowners insurance now costs more and you get less. Remember that reduced coverage is really just raised premiums in disguise. Since insurance executives decided to charge you higher premiums by reducing coverage, home owners should examine their policies to make sure that they hold adequate coverage.
Tips:
1. Over-insuring because of appreciation. What is the most important determinant of a home's value? Location. Location. Location. However, location isn't important when it comes to homeowners insurance. Homeowners insurance covers the structure, so you have to subtract the land value from your home value to arrive at the amount of coverage you need to have. Your insurance agent can help you to arrive at an accurate replacement value — the cost to rebuild your home from the ground up. They have tools to help with replacement cost evaluation.
2. Pay your premium annually. Paying your premium yearly rather than monthly may save you money.
3. Consider a security system. Insurance companies often offer discounts for homes that are protected by security systems. Talk to your agent first, though, as not all systems qualify for the discount. Many insurance companies offer a 20% discount for homes that have security systems.
4. Preserve or improve your credit score. Many people do not realize that credit score affects insurance premiums. High score = low premium. Remember that there is no such thing as "perfect" credit. Even if you have never had a blemish on your credit history, your score could still improve by doing easy things like transferring balances or charging on credit cards that you haven't used in a while. See my CreditTips page to find tips on how to raise your credit score. Mortgage lenders reserve their best rates for borrowers with credit scores of 760 or 780. The credit score you think is "perfect" might be a mere 697. Doing a few easy maneuvers to raise your score could save you money on your homeowners insurance, auto insurance and next mortgage loan.
5. Surefire way to lower premiums. The easiest way to lower your homeowners insurance premium is to raise your deductible. Many home owners have deductibles of $250 or $500 when they could easily afford a deductible of $1,000. If you can easily come up with $1,000 in the event that you need to file a claim against your policy, consider a deductible of $1,000. Chances are that you will continue claim-free, and raising your deductible is sure to yield lower premiums. (Hint: put your premium savings in a savings account until the balance gets to $1,000 and then spend the rest!)
6. Get 3 quotes. Premiums vary widely from company to company, so get at least three quotes.
7. Living expenses. If your home burns down, you'll need somewhere to stay. Make sure that your policy includes "loss-of-use coverage" — insurance jargon for what the insurance company would pay towards living expenses during the time your house is being repaired or rebuilt.
8. Before you purchase a home. Get a CLUE before you make an offer on a home. Insurance companies swap information using a system known as the Comprehensive Loss Underwriting Exchange (CLUE). If the seller of the home or a previous owner has reported problems with the property such as water or mold, you may have trouble getting insurance. It's comparable to a pre-existing condition in the health insurance world. To be on the safe side, make your offer contingent upon a healthy CLUE report provided by the seller.
9. Home improvements. Many home owners spend $20k to finish out their basement, but they fail to update their homeowners policy. If disaster strikes and your insurance policy was never adjusted by the value added to the home by the home improvement, that equity is lost. If you do a renovation or home improvement, call your agent so that your policy can be adjusted to provide adequate coverage. Do not focus on what you paid for the home. Focus on what it would cost to rebuild your structure board by board.
10. Replacement value vs. cash value. A lot of policies promise "fair market" or "cash value" in the event of property loss. If your leather sofa burns up, you will receive a payment for that sofa adjusted for wear and tear and depreciation. You could get $300 for your $3,000 sofa. If your possessions aren't worth a lot, fair market value coverage may be all you need. However, if your furnishings and household contents would be expensive to replace, opt for replacement value coverage.
Also find out how your insurance company handles claims. Some companies want you to buy the item (think $20,000 entertainment package) and then present the receipt before they will disburse the funds. In the event of a disaster, you may not have the cash to make such a purchase, or you may not want to replace the item at all. The less bureaucracy, the better, particularly in the wake of a disaster. Read your policy carefully.
11. 55 & retired discount. If you have a retired person 55 or older living with you in your home, you may qualify for a reduced premium. Talk to your agent.
12. Exclusions and limitations. Insurance companies try to exclude everything. Read your policy so that you can see what is not covered. Common exclusions include mold, dogs, swimming pools, trampolines, war, nuclear disaster, earthquakes and flood. You will need to purchase separate earthquake or flood coverage if your home is at risk. Limitations are often placed on cash, jewelry, furs, wine collections, musical instruments, gun collections and antiques. To insure these items for replacement value, additional coverage can be purchased at a very affordable price. Almost half of people who own valuable collections do not bother to insure them.
13. Umbrella policies. One way to drastically increase your coverage is to increase your deductible and use the premium savings to purchase more coverage on the back end. Giving up $500 worth of coverage on the front end to get $1 million in coverage on the back end is a good deal, if you can afford the higher deductible in the event of a claim. An umbrella policy sits on top of your auto and homeowners policies providing extra coverage. Let's say that you are at fault in an auto accident. There is a 9-car smash up with Porsches and Range Rovers piled on top of each other. Ambulances are called. It's a bad deal. Lawsuits are brought against you. Total damage? $900,000. Your auto insurance company (thank you, good neighbor) dutifully pays their share — which amounts to $300,000, the limit of your coverage. You are still $600,000 short. If you have an umbrella policy, no problem. If you don't have an umbrella policy, everything that you own could be in jeopardy. People who have umbrella policies are the smart ones. Americans love lawsuits, but umbrella policy holders are protected. The typical premium for an umbrella policy is a measly $200 to $300 per annum for $1 million of coverage. That's a good deal. Umbrella liability insurance usually carries a high deductible of $300,000 or more. It is designed not to kick in until your other policies are tapped out.
14. All risk vs. named peril. "All risk" indicates that your home is insured for all causes of loss except those specifically listed as exclusions. "Named peril" isn't quite as generous, only covering causes of loss specifically listed in the policy. "All risk" is the way to go because it offers more coverage.
15. Extended replacement coverage. "Replacement coverage" sounds like it would cover everything, right? Unfortunately, replacement coverage sometimes comes up short. Most policies do not take into account the skyrocketing costs to build after a major disaster. If your home burns down and you need to rebuild it, your coverage will be adequate as long as you purchased coverage in accordance with the value of the structure. If you are the victim of a disaster, however, replacement coverage likely won't be sufficient because of the outrageous costs to rebuild when everyone else is trying the rebuild at the same time. To protect yourself in the worst case scenario, consider purchasing extended replacement coverage.
16. Last things. Read the fine print and review your homeowners policy one time per year. Insurance companies modify coverage almost every year, so review your policy every year prior to your renewal date.
The Insurance Agent I Recommend:
If you are looking for Colorado Home Owner Insurance, I recommend using Joe Adams. If you think that all insurance agents are the same, think again. Joe is extremely knowledgeable, and he is a third generation insurance agent.
(303) 388-4949 | 4110 E 8th Ave | Denver, CO 80220-3702