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Insurance Coverage Forms

Insurance coverage isn’t always the same. Understanding what is covered under your insurance coverage form is important. Sometimes you will hear agents throw out the terms basic, Broad, or Special in regards to the coverage. These are called coverage forms, and they basically indicate what the policy will cover you for. Other times they will use terms like DP1 which typically has basic coverage. Or DP3 with has special coverage. Below is what these usually mean, and what is covered under each form (a little leagalese here check your policy, these are general explanations carriers can include and exclude coverage, so its best to check your policy).

Again, these are general and a company has the right to exclude things like Vandalism and Malicious Mischief from a given policy (like a vacant home policy), or if something changes in the home coverage can change. For example, if you run a business out of the home or rent part of it out things can change so tell your insurance agent because these things can change coverage, but generally, this is what is included in each form. So which is right for you? If you ask your insurance agent they will typically tell you are special and deserve that coverage, I would tend to agree. Special is the best is so many ways, and don’t you deserve the best? With the Special form you are covered for it unless it is excluded, and there are lots of things that can be excluded. These include flood, earthquake, and landslide. These can be purchased separately, and we suggest that if you live in an at risk area that you do so to insure you get the coverage you need.

Again, this is a general explanation of insurance coverage forms. Please check your policy for specifics, and your policy will have different terms and conditions, definitions, and can change coverage. Carriers can include and exclude coverage, so its best to check your policy.

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Valuing Your Investment Property For Insurance

Investment Property Safford, AZValuing of an investment property can be difficult. Add in the idea of a different value for insurance and you have a complicated world.

Demystifying Insurance Valuation

Lessons from Goldilocks

The valuation of any asset can be tricky, and who better to understand that than an investor.

I once approached an owner of a property that I liked.  I had heard through a mutual friend, that he was thinking of selling it and I approached him, hoping to close the deal before he put it on the market. The short of it is, I asked him what he wanted for it. His response illustrates the point I am trying to make. “Well…” he said. “I had it appraised, and as an owner occupied unit it is valued at $121,000. As a Rental Property, it is valued at $185,000.” Okay…truth is, he never did answer my question.

The “market” value of a home is in the eyes of the beholder, and thus the negotiation. Obviously we try to be objective by looking at comparables and the price per square foot.  A home can be appraised, but even that can be subjective (funny how they often come out to the same price as what the seller was asking, right? But I digress). Then you have your finance gurus who talk about valuation models that seek to determine the return, and therefore the value. We hear things like “Cap Rate,” and “Discounted Cash Flow,” that are other ways investors valuate properties.

For insurance purposes we care about one thing and one thing only; indemnifying you. We care about what the replacement cost of the home is. What it is going to cost to get you back to where you started. For investors, this means we are going to get the asset back where it was, producing cash flow. Also, we don’t care how much the land cost. The land will still be there to build upon; we only care what it costs us to start installing the walls, roof, floor coverings, deck, etc. We are looking for the replacement cost.

How do you determine that? It could be through appraisal (minus the land value), or through another expert opinion (i.e. a contractor or real estate agent). It could be through a “Cost Estimator Tool” provided by your insurance agent, or a combination of all these sources. The key is to find an accurate valuation and insure the home for 100% of that amount. Not more and not less.

Why? For a couple of reasons:

  1. This is the amount that the company will pay if there is a loss. You already will be on the hook for a deductible. Let’s not complicate things. Let’s minimize your out of pocket expense.
  2. You don’t want to over insure it, you will pay too much for premium and the company will raise its eye when you insure, your $125,000 property, for a million dollars. They will be inspecting it, and will cancel your policy, if it looks like things are not accurate.
  3. You don’t want to under insure it. First off, the most the company will pay is their “limit of liability” or the value you have on your policy. So if you under insure it, you will have your deductible, plus the difference between the replacement cost and what you insured it for, as your out of pocket expense. Finally, if you get too low on the valuation, you start getting penalties. Usually this kicks in at lower than 80%. Some companies will penalize you by saying that if you insure the home for less than 80% they take the claim to an actual cash value world. Others start reducing the amount they will pay of the claim, by the same percentage that you have underinsured the property.

So, when it comes to valuation, remember Goldilocks and the Three Bears. You don’t want too hot (over insuring the property). You don’t want too cold (underinsuring the property). You want 100% of just right (replacement cost). So do some homework, figure out what the home is worth and insure it just right!

To get an incredible quote these coverage sections start our online quote form. To Talk to a licensed agent about this coverage call us at 1-877-784-6787.

This coverage explanation is for illustration purposes only and is general in nature. Coverage explained here may not apply to your policy, State, company, or situation. For more information about how your policy would respond in the event of a loss, please refer to the terms and conditions and declarations page of your policy.

Additional Coverage for Your Home Insurance

Homeowners Insurance policies, whether for your own home or a rental property, are very specific about what they cover, but oddly enough they throw in a couple of “extras” or additional coverage. What are those? Let’s take a look!

Home insurance Safford, AZADDITIONAL COVERAGE

There’s free stuff in my insurance policy? Yes.

So, great news there are only four Homeowners Insurance Coverage parts, so that part was simple, but next comes the complicated part; additional coverage (s). Yeah! Now for any of you that might be catching the sarcasm in that last comment, there are actually some good things in here. Every policy is different so here are some of the most common and important:

  1. Debris Removal – Have you ever seen a fire? Walls may still be standing but completely destroyed. What knocks those crumbling walls down and hauls them away? Debris Removal! See, good stuff.
  2. Trees, plants, shrubs – Not a lot here, but you can usually get coverage up to $250-$500 or so per tree. Obviously there will be limits, but landscaping can be expensive.
  3. Fire Department Service Charge – Sweet, nice that you don’t have extra stuff, like cost of fire department services coming your way.
  4. Collapse – This is an odd place to have this coverage, but it’s nice that they add it.
  5. Glass – Sweet.

Again, there is more to each of these, but nice that they add them and make them available as additions for your homeowners insurance. Start your quote online or call us for an immediate quote 1-877-784-6787.

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Loss Settlement Options

One of the most important insurance issues you must understand is how you will get paid if you have a claim. Its called the “loss settlement.”

Loss Settlement

I once heard someone say, that “insurance is a complicated business.” Well, at Gila Insurance we try to keep things simple. But, there are a couple of points that frustrate many consumers when it comes to claims. The first is whether or not something is covered, which we address on numerous places on this site, the second is loss settlement, and the third is valuation. Loss settlement is how the company determines what they will pay you in the event of a loss. The HOW, not the HOW MUCH. How much is important, but the how is the best place to start when determining the how much. There are several different ways a company can determine how they will pay you. The good news is that they tell you how their loss settlement options will work, before you have a claim, and you get to choose how.

  1. The Better Option – Replacement cost – This is the option that you’ll want, and the one that most people buy. Replacement Cost pays the full amount that is required to rebuild the rental property, or damaged portion of the structure, with material that is of like kind or quality. In other words, they rebuild it the way it was.
  2. The Cheaper (or worse) Option – Actual Cash value (ACV)- Yes, Actual Cash Value or ACV is a cheaper option, but the problem is that it’s cheaper for a reason. To calculate the ACV of the home, you start with the Replacement Cost; what it would cost to replace the rental property, THEN you deduct for the depreciation of the asset. While depreciation on taxes is one thing… a great thing, depreciation on an insurance settlement calculation is another, and it’s not good. Before we get to a couple of examples; in summary, Actual Cash Value is the replacement cost minus the depreciation.

Some may try to do the math to see if the discount provided for the ACV option makes sense, and for some it may, but on a larger loss the calculation of depreciation will be damaging to small investors. For larger investors with a diversified portfolio, they may be able and willing to absorb the cash hit. However, even larger investors can get hit hard by Actual Cash Value settlement options on larger losses, especially when roofs, walls, flooring etc., etc. are damaged, all at the same time.

Bottom-line, most investors will be better off with the replacement cost option, which also helps to eliminate confusion and complications when there is a claim.

To get an incredible quote these coverage sections start our online quote form. To Talk to a licensed agent about this coverage call us at 1-877-784-6787.

This coverage explanation is for illustration purposes only and is general in nature. Coverage explained here may not apply to your policy, State, company, or situation. For more information about how your policy would respond in the event of a loss, please refer to the terms and conditions and declarations page of your policy.

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Understanding Perils Insurance

Perils insurance against, what in the world does that mean. Here’s an insurance guy trying to explain the insurance options for rental property insurance.

Rental Property Insurance Coverage – Section I policy Form – Perils insured against.

Demystifying the stuff coming out of your insurance agent’s mouth

Perils insured against…. What does that mean? Let’s see if I can take off my insurance man hat for a second and put on my investor hat. Why? Because I believe this is where A LOT of insurance folks tend to lose their clients. It’s a simple thing, but we often get too caught up in the insurance lingo when we are explaining this stuff. So, here is my best attempt.

A peril is stuff that happens to cause a loss. So, stuff that happens, for which you are insured, is a covered peril.

Okay. Sometimes you will hear an adjustor or an insurance agent say something like, “in the event of a covered loss.” Well, what in the world is a “covered loss?” How could you know? That’s where the policy form comes into play. Policy forms are like a series of hooks on a wall, so we take our policy and we hang it on a form, then every time we read something like “in the event of a covered loss,” we can look at our hook, and we see if it’s covered in the policy.

Okay, so there are essentially 3 types of “hooks” or options for rental property insurance buyers. There are basic, broad, and special forms. That’s easy, but of course you will often hear agents referring to these as DP-1, DP-2, or a DP-3. This basically says it’s a dwelling policy with this kind of form… Now, each form has a list of stuff that gets covered. Basic being the worst and special being the best. Now that I have gone all insurance guy on you, let me break it down visually so that you can understand it.

THIS IS A GENERALIZATION, CHECK YOUR POLICY! THERE ARE THINGS THAT CAN CHANGE THESE LISTS LIKE THE PROPERTY BEING VACANT OR OTHER FACTORS!

Now before you get all crazy and say, “hey Broad has most of what special has, I bet I can save some money,” slow your roll. Let’s look at that last one; Risk of Loss with Exclusions. What does that mean? It means that unless the insurer specifically excludes it, it’s covered. That is a HUGE difference.  In the first two options the insurer will only cover a handful of things, and if it’s not on the list, then it’s not covered. The last option, the special “hook,” says if it’s not excluded, its covered, which leaves hundreds of covered situations with a handful of exclusions.

LONG STORY SHORT? You’re special so get special. It’s as simple as that.

Start your quote online or call us for an immediate quote 1-877-784-6787.

Homeowner’s Liability Coverage

Home insurance Safford, AZIn general terms the liability portion of your homeowner’s policy makes two promises:

1. It pays for the damage you cause to other people’s property and for the injuries you may cause to others. For example, in the case of an auto policy, if you crash into someone else’s car the liability portion of your policy pays to replace their car, and the medical bills due to the bodily injury that you caused to the other party.

2. It pays for your legal defense in the event that you are sued for something covered in the policy. For example, in the case of a homeownwers policy, if someone slips and falls on ice on your front porch, and sues you, the liability portion of the policy would provide coverage to defend you against the suit.

However, there are different types of liability, and that are offered on different types of policies.

Personal Liability – This is a broad form of liability often found on homeowners policy. It provides coverage for the bodily injury and property damage that an insured person is found to be legally responsible for. It can provide coverage on the home’s premise, but also away from the home’s premise.

Premise Liability – This liability form typically is found on dwelling policies where the home is a secondary home (meaning you have personal liability from your primary homeowners policy), a rental property, or a vacant home. It also covers bodily injury and property damage, but it only provides coverage when the cause of the loss is on the insured premise. In other words, if something were to happen at the dwelling because it was unsafe and you were sued, then Premise liability would respond, but unlike personal liability it provides no coverage off the insured premise.

Personal Injury – This liability can be Excluded OR Included on a given policy, so if you want this coverage, you need to make sure the company you have chosen makes it available, and purchase it. Personal Injury excludes things such as False Arrest (keeping someone against their will even for a short period of time), Wrongful Eviction or Entry (Landlords pay attention), Invasion or violation of privacy (Landlords pay attention), and slander and defamation (have any kids on the internet?). You can see why this is important, but this is also often excluded under personal or premise liability, so if you have these exposures (you probably do) you will want to consider adding this to your policy.

How much liability to purchase? That is a good question, and one that only you can make, but more is better which is why we offer an umbrella policy so that you can purchase additional coverage.

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Ways to Save With Your Deductible

I recently went to go see “The Greatest Showman,” as one who is often found singing or whistling show tunes, I loved it. But the sound track is probably better than the Movie. A great mix of music with strong beats and base lines and violins coupled with distorted guitar, and great melodies. Followed by hopefully ballads. Anyway, there is a song that talks about the long-lasting idiom, “Walking a Tight Rope.” What does this have to do with Saving money on your insurance? Anymore Insurance companies know about your home or auto by running reports. They know if you have had losses, they know when your home was built, what materials, the size, etc., etc., etc. They know. So, there isn’t a lot of wiggle room on a lot. But there is when it comes to deductibles, but it’s a tight rope walk.

When you have a covered claim the insurance company will pay the amount of the loss, less the deductible.

So for example, if you have a $1,000 deductible on your auto, and have a fender bender that costs $2,000 to repair the insurance company will pay $1,000, it is your responsibility to pay the rest of the amount due to the auto repair shop.

On a home if you have $1,000 deductible, and a hail loss that requires you to replace your roof, if the cost is $10,000 to replace the roof, then you would be paid $9,000 and you would be responsible for paying the contractor the other $1,000.

So how is this a type rope? There is a inverse relationship between the cost of your insurance policy and your deductible. The higher the deductible the lower your rates. The lower your deductible the higher your rates.

So how is this a tight rope? Well, on one hand if you have a BIG loss you won’t want to be coming out of pocket to pay a large amount of the claim. On the other hand, if you have a small loss will you actually turn it into the company? Think about it, if it’s a $1,500 loss and you have a $1,000 deductible. The additional $500 dollars you get from the insurance company will cost you dearly once you lose your claims free discount. So what should your deductible be? That depends? Do you have cash on hand usually? Do you have the ability to cover small losses yourself? If so, then the answer is higher.

Once quick example to close. I recently helped a real estate investor get an insurance policy on a Manufactured Home he had purchased as a rental. As an investor he has cash on hand on a regular basis, and he knew the only time they would ever report a claim is if it was BIG. So we looked at the deductible. At a $1,000 deductible the rate was $1080 annually for this manufactured home. With a $2,500 deductible the rate was $817. With a $5,000 deductible the rate was $349. Wow! A 70% discount because of the deductible. Now he knows if there’s a loss he is probably covering it, but what he is most concerned about is a catastrophe, so he decided to go with a high deductible. But now you see, choosing your deductible is like walking a tight rope.

For questions on how to save money on your insurance policy, contact Gila Insurance Group. We’ll review your current policy or provide an insurance quote.

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What have you done this summer

Do you need to update your insurance policy?

Fix and Flip Home InsuranceAhh summer time. A time of fun, sun, and DIY projects around the house. The extra light in the evenings lends itself to getting stuff done. So, I have a question: What did you do this summer? Maybe you’re not a DIY sort of person. Maybe you had a contractor or handyman do it for you.

 

Did you add a shed? Did you add on to your home? Did you add a block fence or a pool? Heck did you buy a new car? Did you get Married? Did you get a new Girl Friend?

 

Now for the most important question: Did you tell your insurance agent?

 

What Why would I do that, dude’s a square (and clearly uses insults from the 1950’s… loser).

 

Because it can affect your insurance. Consider this lesser known insurance clause:

 

Your house has to be insured to at least 80% of its value or you can be penalized in the event of a claim.

 

Yes penalized. Well that wouldn’t happen to me. Did you tell your insurance agent about your addition? Because if not, you just change the ratio of the insurance coverage to the value of your house.

 

“Well, I just added a pool.” Will your insurance company cover you if you have a pool? Some don’t or have strict rules about fences.

 

Did you get married? You probably need to make sure your spouse has been added to the policy? You also need to combine your policies for savings purposes. Finally, do you need to cover that rock you just bought her? There may be coverage on a homeowner’s or renter’s policy, but there may not be depending on the value.

 

If your girlfriend just moved in with you did you know that she may not be covered if she drive’s your car? Or that coverage can be limited? (this can vary GREATLY by company).

 

See. Your insurance agent may be a goober, but you need to tell him or her stuff because if you have done something to your cars, home, or if you have just had some changes in life, talk to us about how that impacts your insurance needs. He/She can help you anser the question do you need to update your insurance policy.

All homeowners insurance is the same, Right?

5 Coverage options to ensure you have on your policy!

Home Insurance Exclusions in Safford, AZHomeowners insurance is all the same, right? So, I should always buy on price, right? Wrong. It’s true that most stick-built homeowner’s insurance policies have a similar base. It’s called an HO3 policy form. It covers your house and other structures for everything, unless its excluded. It covers your personal property for a list of specific things that could happen and pays their actual cash value, it has liability, and medical payments. That’s about everything you need right? Well, not really. While the base policy is very similar from company to company most customers have higher expectations of how their insurance policy will respond. So here are 5 things most customers should consider purchasing to ensure your policy responds like you think and expect it will.

 

  1. Personal Replacement Cost – We don’t like leaving insurance companies with the ability to wiggle out of paying things they should. Personal property replacement cost does exactly that. Imagine your TV is 4 years old. It is damaged by a fire in the kitchen. Can you imagine the company coming in and saying your TV new cost $500, but its 4 years old so here’s $100 bucks, and we all hate insurance companies again. Adding Personal property replacement cost eliminates this possibility. You have a TV that cost $500 we will buy you a new TV of like kind and quality. Meaning we aren’t going to buy you a 70inch Sony if you had a 35 in Vizio. We will get you as close to what you had before. Personal property replacement cost awesome addition.

 

  1. Special Form on Personal Property – This is tricky, but remember I said on a basic HO policy your personal property, your stuff is insured for a list of things. Your house on the other hand is insured for everything unless its excluded. Question: Why would you insure the house differently from how you insure the couch inside the house… seems odd. Again, this is about meeting your expectations, and make sure your policy responds in the way you want it to.

 

  1. Extended or Increase replacement cost – When your house burns down, and you choose to rebuild you understand the idea of replacement cost. Before that it can be a fuzzy concept, so here goes my attempt to explain. You may have purchased your house for $200,000, but how much will it cost to rebuild? In times where the cost of things is going up (like now) it might cost you $225,000 to rebuild. Your agent may have even run a “cost estimator” to determine that it would cost $200,00 to rebuild the house when you bought it, but who pays for the additional $25,000? Extended or Increased replacement cost will if you have it. What this endorsement or change to the policy does is create a slush fund of a little extra cash in case it costs a little more to rebuild. There are some rules about this add on. So, don’t think you can underinsure the home to save money and be saved by extended replacement cost.

 

  1. Personal Injury – Did you know libel, slander, defamation, and cyber bullying are excluded on your insurance policy? Here’s a question for you have you ever said something bad about someone? What about on a social media site? What about your kids, have they? If so you have probably been guilty of defamation. These lawsuits can be hard to prove the social media has opened a whole new can of worms. Adding personal injury to your policy can ensure that you are prepared and covered for even the weirdest of lawsuits. I mean people are sensitive these days, but not you ; ).

 

  1. Water backup of sewers and drains – Gross. Yeah it is, and its typically not covered unless you add it to your policy. It can get expensive but $5,000 or $10,000 of this coverage can be worth every cent.

Just because you think it should be covered, doesn’t mean that it is. Be sure your policy will respond the way you think it will and start with these 5 coverage options.

 

 

Coverage C Personal Property Insurance

Personal Property Insurance is important, but often overlooked. What’s included in personal property? It’s what you put in the moving truck, or what would fall out of the home if you could pick it up and turn it upside down. Your clothes, furniture, electronics, toys, some appliances, and all the stuff in your garage. So how do you cover it?You will be asked to figure out what your stuff is worth. This can be a tough exercise. Let’s be real, it’s difficult to even keep track of what stuff you have. Lots of questions; few answers. So let’s get to some answers:

First off let’s start with taking inventory. We recommend taking a look at KnowYourStuff.org its a great website from the Insurance Information Institute, and they have several tools and an app and lots of information that can help you figure out what stuff you have, and what should be insured.

From there you can determine the value of your stuff and what it would take to replace it in the event of a claim, like a fire. Typically insurance companies will include a percentage of the value of the home for your personal property. In some cases its 70%, 50% or for others its 40%, but these are just rules of thumb, and more coverage can be purchased, but you have to have some idea of how much coverage you need.

There are two ways that personal property can be covered.

1. Replacement Cost – As always the replacement cost option is always the best option. In the event of a claim it replaces what was damaged with like kind and quality. Meaning you would be able to replace what was damaged with a new version. It does not account for depreciation.

2. Actual Cash Value – What is the value of your TV you purchased 5 years ago today? What’s the value of the shirt you’re wearing, if its the most comfortable you own, probably not much. In an actual cash value loss settlement situation, that’s the question that comes to mind. Take what it cost new and depreciate it to figure out what it is worth today, and that is what the insurance company pays. That often means you are getting pennies on the dollar for your stuff. Not great for sure, but it is what is the cheapest, and most common way for people to insure personal property.

Typically you have a choice between Replacement Cost and Actual Cash Value for your personal property. This is a choice you should make based on your personal property and how important it is to you.

A few other cool things about insurance for personal property.

  1. If you have special property like jewelry, guns, furs, and other super cool stuff you will need to “schedule it.” This means that you will want us to make a special note saying this stuff is covered,  because its usually is subject to limits.
  2. Your stuff, or at least a percentage of your stuff is often covered worldwide, even when its out of the house. Okay, it’s not much, but 10% worldwide coverage can go a long way if you have a weird loss.