Over the past 27 years, I’ve been insuring houses, cars, buildings, boats, motorcycles, and much more for families in Colorado Springs. In that time, I’ve met lots of people, seen and heard all kinds of stories, paid all kinds of claims, and have tried to find a way to insure just about everyone for whatever it is they need.
Over the years, I’ve also found that insurance is something that a lot of people don’t take seriously until they have a claim, at which point it can become an urgent matter. Since working with insurance is something I do on a daily basis, I find myself having the same conversations with people all the time, and today I wanted to write down a few things about what I’ve learned over the years, and ways you can get the right insurance, and go about it the right way. Here are nine things I wanted to share with you that I think you should consider, especially if you’re going to buy or build a new home.
#1) Before you buy or build a home, make sure you can get insurance in the first place
One of the biggest mistakes I see when people want to build or buy a home is that they don’t even think about insurance until the last moment. The problem with this is there may be a reason why an insurance company won’t be able to insure a property or a home, and it’s obviously better to find out about this before you start the process.
For example, I recently spoke to a man who had all his insurance policies with the same company for many years. He owned a medical practice, and ran all his personal insurance (homeowners, auto, life) and all his business insurance (malpractice, liability, property) through the same insurer. But when he went to go buy a new home, it was only after he’d made an offer on the house and put down earnest money that he found out that his insurance company wouldn’t insure the house he wanted (for an unforeseen circumstance). He called his agent and said “I run all my insurance through you, and we’ve worked together for years—why can’t you insure this house?” His agent had to explain that it was because there were issues with the location the home was in and that the underwriters wouldn’t approve a policy, no matter what.
So this poor guy contacted me to see if I could help him, and even I couldn’t help him. He had to shop, and shop, and shop around for a company that would insure his home, and when he finally found one, the policy ended up being 400% higher than what he was expecting. Had he contacted his agent first he could have avoided the whole issue before putting down any money or signing any contracts.
When you have a property in mind, I recommend you contact your agent before signing anything. Make sure that the land you want to build a home on A) in insurable, and B) ask your agent for a basic quote on the coverage you want. And make sure there’s nothing specific to the area that you don’t know about that might cause your rates to be higher than anticipated.
#2) Building a new home can save you tons of money on your homeowners policy
One thing I am happy to share with people who are building a new home is that insurance companies love new homes! Most of my clients are shocked to find out how inexpensive their homeowners insurance policies are when they build a new home.
For example, my agency offers enormous discounts for the first 12 years you own your home. It starts with the highest discount in the first year and the discounts decrease annually until the 12th year. So for at least 12 years, your rates are going to be lower than what they would be if you had bought a home built several years ago. In some cases, the first year can have discounts as high as 80% off! So it’s a win-win scenario: you have a brand new home; you get excellent coverage; and you save major bucks.
#3) You should know that your builder’s insurance covers your builder—not you
Just because your general contractor “has insurance” doesn’t mean you or your property are covered when your home is being built. I hear all the time from people who are building homes “my builder has an insurance policy on the property.” But that doesn’t satisfy me—I always tell them to ask the builder exactly what the policy is, and who is covered on it.
Home builders generally carry a “builders risk” insurance policy, but that is usually designed to cover the builder in case of a loss, such as high winds blowing trees into the house during construction, or vandalism, or things like that. As a homeowner, it’s smart for you to have your own policy to cover your land and your personal property you may have on the job site.
At my agency, I offer a kind of policy just for this purpose, called a “Course of Construction” policy. It covers your liability with the land (such as if a child wanders onto the job site and hurts himself on your property on a Sunday afternoon while nobody is there), and also covers property you may have stored there (such as a mobile storage unit where you might put furniture or fixtures for the new house). Once the construction is complete, the Course of Construction policy then converts into a homeowner’s policy. So make sure to ask your agent for a policy of some sort that covers you for liability and your belongings when building.
#4) When shopping for insurance, beware of “Actual Cash Value” policies
Actual Cash Value policies (often abbreviated as “ACV”) are policies you should run away from. If you’ve ever heard a horror story about how someone lost a home in a fire and didn’t have enough insurance coverage to rebuild, this is usually because they had an actual cash value policy.
Here’s how they work: some insurance companies like to advertise ACV policies because they’re inexpensive and to the price-conscious consumer, it sounds like a good deal. That is until you go to make a claim on a home that’s twenty years old, and your insurance company says “we will pay your claim, but your home was 20 years old, so for your carpet, we’ll give you the cash value of what 20-year-old carpet is,” which can be next to nothing since nobody would ever go out and buy used 20-year-old carpet. In an ACV policy, companies will generally give you about 20% of what the original cost of the item was. So if you spent $5,000 on carpet 20 years ago, you might get $1,000 to replace it all. If you can’t replace all your carpet for that amount… you’re out of luck.
The part that surprises some people Actual Cash Value these days isn’t so much getting an ACV policy, but it may be that your homeowners policy gives you great coverage, but there are a few items in the policy that are only ACV. For example, a lot of insurance companies have started modifying their policies so that your home itself is covered but your home’s contents, or the fixtures, or the roof, will only pay the Actual Cash Value. So the same goes with the roof: if you file a claim on the roof for hail damage, the insurer might pay you the value of your 10-year-old T-Lock roof shingles, which won’t be enough to actually replace your roof.
I don’t like Actual Cash Value policies at all, and I don’t write them for my clients. There’s no way I could sell a policy like this. You should ask your agent to make sure you don’t have one.
#5) Look for ways to lower your insurance costs by building smart
There are all kinds of new technologies and building materials available in new homes now that can either reduce your potential for having an insurance claim, or even lower your insurance premiums. I recommend you find out what they are and take advantage of as many of them as you can.
Most insurance companies offer discounts for siding your home with durable materials such as stucco rather than wood siding (this can be sometimes as large as 15%!). In Colorado, we have a major problem with hail storms, so if you get the best roof shingles (impact resistant 50 year shingles), you might get a discount for using those when building. Installing a home alarm systems also frequently results in a discount on insurance premiums.
Besides simply saving money on premiums, you can prevent major claims in the first place: these days, new systems (like a “water detector shutoff”) can detect a water leak in your home and shut off all the water before lots of damage results. This can be something that costs a few hundred dollars, but can save tens of thousands of dollars in the long run.
So before you build a new home, be sure to ask your agent what kinds of discounts you can get on your policy, and take a look at what kinds of preventive systems you can put in place!
#6) Don’t assume anything about your insurance policy
This sounds obvious, but it’s very difficult to put into practice. I meet people all the time who haven’t read their policies or even talked to their insurance agent to see exactly what their insurance policy covers and doesn’t cover. While I can’t make a blanket statement about how everyone’s insurance policy should look, I will say this: talk to your agent about your policy. Make sure you understand what you’re paying for, what your deductible is, what is covered, and what is excluded. All policies from every insurance company have some exclusions, so make sure you know what those are.
Most people just look at the quote they get, or the summary of the policy when it finally arrives in the mail. But since they haven’t read all the pages in the policy itself, they might not know that there are some surprises in there. For example, some insurance companies don’t like insuring hot tubs, or trampolines, or dogs. Your policy may have an exclusion for liability on these items, which may not be a problem, unless you have a hot tub, a trampoline or a dog. so make sure you check, and don’t make assumptions.
#7) Make sure you know what catastrophes your insurance does NOT cover
Did you know that it’s likely your insurance does not cover soil movement? We live in Colorado Springs which has expansive soils, and although builders are required to perform soil percolation tests and have inspections on the soil before laying a home’s foundation, it still could be that a home has issues with soil movement years later. Erosion, and simple ground shifting, and, in some areas, the existence of old abandoned mine shafts can cause issues with homes moving and foundations cracking. Earthquakes are also generally not covered in a homeowners policy as well. That’s not much of a problem here in Colorado, but there have been earthquakes recorded as close to Colorado Springs as Florissant.
Floods are generally not covered as well unless you’ve signed for insurance with FEMA’s National Flood Insurance Program.
Also, while fires are usually covered by a homeowner’s policy, check to see what is and isn’t covered if your house burns down. It may be that your policy will cover rebuilding your home, but might not cover having the foundation removed, or having debris cleared, or having burned trees clear-cut. Make sure you don’t have exclusions like this in your policy if there’s any chance your home could catch on fire.
#8) Have your insurance reviewed and updated frequently
As with all insurance, with a homeowner’s policy, you usually only be insured for what is explicitly stated in your contract. For example, I have a client who lost his home in the Black Forest fire, and when it came time to pay the claim, he asked me what we would pay for his collectible 1967 Mercury Cougar that was in his garage. I checked my records, and the policy, and all the paperwork I had with him and didn’t see anything anywhere about a collectible Mercury Cougar. He had never mentioned it to me! I had insured him for more than 12 years and in all those years, not once did he ever tell me he had the car. He either just forgot to tell me about it, or may have assumed that it would be covered by his homeowners policy. But his homeowners policy did not, in fact, cover collectible cars stored in the garage.
The best way to prevent this from happening is to make a list of everything you have and bring that in to your agent when you get a new insurance policy and be clear about what you want coverage on.
Also, make sure you tell you agent as you start to acquire new things: if you buy a car, or build an addition on to your house, or inherit a priceless family heirloom, these kinds of things may not be covered unless you add them to your existing policy.
One thing I’ve done for my clients to make sure this doesn’t happen is I go and visit them when I write a new homeowner’s policy. I take a camera and a video camera with me and I have the homeowner walk me through their home and show me the items they’d like covered. While this doesn’t work 100% of the time (as in the case of the Mercury Cougar), it helps me in three major ways:
- It helps me take a detailed inventory of the items you want covered. A lot of times, homeowners don’t take the time to make a complete list of all of their stuff, so the fact that I have a videotape and or photos of things allows me to know exactly what you have.
- It helps me learn about your specific situation. Normally, I can spot things that you might not notice, or make a note of items you have that wouldn’t normally be covered that you might want covered. Antiques, guns, jewelry and a few other things are examples of high-dollar items that are only covered to a certain limit in a typical policy, so if you have lots of these items, I could write in an endorsement to the policy that covers a higher amount.
- If you should ever need to file a claim, I have indisputable evidence of what you had and the condition it was in. When it comes time for an insurance adjuster to make a decision on what you will be paid for your things that were lost, photos and videos are great record keeping. Which brings me to my next point…
#9) Keep detailed records about your possessions, their values and their condition
One of my clients lost her home in the Waldo Canyon fire in 2012. In her house, she had a living room set that was expensive. However, after the home burned, when she was filling out the paperwork for the claim, she wasn’t able to produce a receipt or any sort of documentation on just how nice this furniture was, so she couldn’t show the adjusters the set was worth so much more than a standard set of couches and love seat. However, since I had taken a video of a walk through of the house a few years before, I was able to share that video with the adjusters who then saw the level of finish and detail the couch set had. They paid her claim.
I hope you’ve found this info helpful! If you have any questions or would like to have a policy reviewed, you can always contact my office by calling (719) 593-9916. And of course, if you’d like a home built with Stauffer & Sons you can contact them here, and then give me a call for your insurance! Thanks for reading.