Basic Things to Consider When Shopping for a New Policy
I recommend using a broker instead of an agent when shopping for a new policy. Agents typically represent one company whereas, a broker works with many companies. Contact three different brokers who represent different insurance companies. Insurance companies will not quote the same policy through more than one broker/agent.
At last count, there were about 200 companies operating in Pennsylvania offering residential property insurance policies. For owner-occupied buildings, a mutual insurance company may cost less and may provide more coverage.
Insurance premiums are the dollar amount you pay annually for the policy.
A deductible is the amount you pay out-of-pocket to contribute to the repair or replacement of a covered loss.
Your premiums can be altered by increasing or decreasing your deductible. For instance, if you increase your deductible from say, $500.00 to $1000.00, your premium may go down. However, in the event of a covered loss, a lower deductible is much easier to pay. Having a covered loss with a huge deductible is a deterrent for most people and quickly makes a bad situation worse. Therefore, it is best for most policy-holders to keep their deductible between $500.00 and $1000.00.
While it can be time-consuming, shopping for a good company with good coverage will pay big dividends in the event of a covered loss. Shopping for a company is free and you should ask many questions to be sure you have proper coverage for your situation.
If you own more than one rental building, a Master Policy may provide more coverage and cost less. If you own buildings held for rental to others and also flip properties, a Master Policy may be very beneficial for you. Under most Master Policies, you can own a recently purchased building for 180 days before you need to report that you are the owner. If you can buy, rehab and sell the property before day 180, you were fully insured and never paid a dime for the coverage. Verify and understand the fine print in your policy before making strategic financial decisions based upon your policy.
1) Be honest with your agent/broker – incorrect information WILL hurt you, no later than when you file a claim;
2) Let your agent/broker know your concerns so you can accurately weigh risk versus cost benefits;
3) Do NOT buy any insurance policy on price alone, unless you are absolutely, 100% certain you will NEVER use it and even then, it is a bad idea;
4) The reason to use different sources for quotes is to obtain the most complete coverage for the lowest cost;
5) Avoid Surplus Line companies unless you have no other options. Surplus Line companies have much less regulation than Admitted or Standard companies;
6) Keep good notes as you learn things – this will make it easier for you to get policy quotes that are comparable in coverage:
7) I strongly recommend RCV (replacement cost value), All Physical Risk (also called an HO/DP 03 or Special) policies and a few Endorsements, below;
a) Loss of Use/Loss of Rent – provides ALE (Additional Living Expense) in case your home becomes uninhabitable because of a Covered Cause of Loss. Loss of Rent provides rental payments if your rental unit is uninhabitable because of a Covered Cause of Loss (you MUST have a signed lease for this to be available with dates that correspond with the date of loss);
b) Ordinance or Law – provides additional money when a Covered Cause of Loss requires rebuilding to new/different codes. Think – knob & tube wiring;
c) Water Backup and Sump Overflow (also called a ‘sump pump’ endorsement) – the only way to have Coverage for damage caused by ground water infiltration without a Flood Policy. This endorsement also provides Coverage for Loss by Sewer that originates from outside of the home. For either loss this endorsement typically provides for a limited amount of money, typically $5k, $10k, $20k, etc.
d) RCV (Replacement Cost Value) on Personal Property – as written, most policies only provide ACV (Actual Cash Value) for your personal stuff. With this Endorsement, you will have the money to buy a new whatever was damaged in today’s dollars, when damaged by a Covered Cause of Loss.
e) Scheduled Personal Property Coverage – for jewelry, art, firearms, furs, etc. Most of these higher priced items have policy sub-limits and you may be left unreimbursed for your Loss.
f) Home Business – If your business office is in your home, be sure your equipment is covered correctly. As written, most policies have small sub-limits and Exclusions that may leave you after a Loss.
There are many other Endorsements available and you should let your broker/agent know about your concerns so your policy can be written to suit your needs. Be honest and expect certain items to need written appraisal for valuation.
Specifically For Renters
Tenant/Renters policy called: HO-04
Preferred coverage: ‘All Physical Risk’ (policy may need to be Endorsed for this coverage)
Personal Property limit, suggested minimum: $20,000
Possible Additional Coverage, may be included: Loss of Use
Endorsements to Consider:
Scheduled RCV for Personal Property (Provides money in today’s dollars for your stuff)
Scheduled value for art, furs, firearms, jewelry, etc. Ask your broker to be sure
*All information provided is based upon my claims experience.
PA Public Adjuster, PA#646378
Advocate for the Insured