As a young boy, amidst the dreams of traveling the globe, winning the World Series, and flying in a rocket to the moon, I always had the goal of owning a home and giving my family a place of peace and security to enjoy being together and making memories that could be passed on for generations. Housing and real estate are an integral part of the “American Dream” and the biggest purchase we will make in our lives. Part of the dream of home ownership is that your home can not only be your place for memories, but also an investment. As with any investment, we need to be able to rely on and partner with professionals to help us to understand how to protect it from losses.
As I considered the questions I receive from clients and friends about helping their home’s value to increase, I reflected about how often those conversations had aspects of homeowner’s insurance laced into our discussions. I have taken note of the questions we discuss most often and have invited one of the top insurance professionals in the state of Utah to help answer those questions in this article.
Q&A with an Insurance Expert
Curtis Terry has been in the insurance industry for over 15 years. He began his career as a claims adjuster where he developed an in depth understanding and a different perspective of the insurance industry. With this understanding and knowledge, he has run a successful agency since 2012 and takes pride in advising his clients on how to protect their most expensive and prized possessions.
1. Everyone’s first concern is usually the cost of insurance, but what should they actually be looking at in their policy?
You are correct, the dot com companies have turned insurance into a price-based commodity. The first thing most people look at is the price tag associated with the policy they are considering. However, the three most important things they should be looking at are: 1- the integrity of the insurance company, 2- the coverage/policy, and 3- the Agent that represents them.
2. When it comes to cost, what factors make the policy more or less expensive?
The formulas used to calculate insurance premiums are very complex and confusing...some of those factors are out of your control. However, there are a few factors that are within your control. #1 your credit score, #2 your claims history, #3 the coverage you decide to carry.
Each company has discounts that apply to help with premiums...some you may qualify for...others you won't.
3. What are the advantages and disadvantages of a higher or lower deductible?
Obviously, higher deductibles will save you a little in premium and a lower deductible will create the opposite effect in premium. More importantly, you want your deductible to be a realistic figure that you can come up with at any moment. For example, you don't want to set your deductible at $1,000 if you don't have that amount of money in your savings or available to you at any given moment.
The extra premium that you will pay for a $500 vs $1,000 deductible is minimal when it is broken down to a monthly charge...but if you need to come up with an extra $500 if/when you have a loss, that can be a little more difficult. Set yourself a realistic deductible.
4. What is covered in the homeowner’s policy?
Here is a statement that I have to tell people all the time..."Your homeowners’ policy is not a home maintenance policy". Meaning, your homeowner’s policy will not cover regular maintenance that you are supposed to do as a homeowner. For example, if you have a roof leak that is caused because you did not clean out your gutters and valleys on your roof, that is not a covered loss. Another common one is a leak in your roof because you put off replacing the shingles until the last minute.
Your homeowner’s policy is meant to cover you in the event of a Sudden and Catastrophic loss that effects the structure and falls within the parameters of a covered loss. Those parameters can change from company to company and policy to policy.
Having an Agent who can help you understand the policy is important and can be invaluable if/when you have a loss.
5. What pitfalls should homeowners look out for?
Unless you are or have been an insurance professional, I don't suggest buying your homeowners policy online and picking your coverage by yourself. When people do this, they tend to buy, more often than not, 100% on price and only pick coverage that lowers that price. That can lead to a VERY bad experience if/when you have a claim.
For most of us, our home is the biggest expense we will incur in our lives. Not only should you take care of and treasure that asset, but you also need to make sure the coverage you carry will provide you a suitable replacement or repair if/when you have a loss.
6. Of the items not covered, what should homeowners do to protect themselves in case of a loss?
Clean gutters and valleys on your roof at the very least once a year.
Drain and blow out your sprinkler systems so they don't freeze and cause underground damage.
If you live in a snowy area, don't let the snow pile up on your roof too deep. Also, if you have snow drifts that settle up against your home shove them away from the structure.
If you live in a hard water area get a water softener.
Keep up on your maintenance as a homeowner.
7. If a clam is needed to be made, what should a homeowner do to prove their loss?
If you are fortunate enough to have an Agent who will help you through the process, that should be your first call. I instruct all my homeowners to call me prior to filing a claim so that we can discuss what happened and I can give them advice and instruction on how to proceed.
Get a restoration company involved from the beginning. I use ServPro and Service Master for many of my losses because they will go out and give the homeowner a free estimate of what it would take to mitigate and repair the loss. They will also help you get the loss under control and mitigate any further damages.
Take photos!
8. Does a video recording/tour of their home provide adequate evidence of their possessions in case of a loss?
A video of your homes content will be a huge help to a claim’s adjuster should your home be subject to a loss that destroys much of its contents. If you do that, update the video at least once a year.
I offer to let my clients bring a copy of that video into my office and I will store it for them just in case their copy is damaged in the loss.
9. In Utah, credit quality is used as a factor to determine the cost of insurance – is this correct?
Yes. Your credit score can and usually does play a big role in what rating tear you get placed in.
This is a factor that is within your control. Some companies will also allow you to re-rate your policy at the time of renewal if you have a better credit score that might lower the premium. Ask your Agent if that applies to you.
10. Share any experience where you have seen the benefit of being well insured or on the downside, where a policy holder has not had enough insurance and suffered unintended consequences.
I have never had a major issue in my Agency, but I have had clients that have come to me after experiencing a loss with other companies. One in particular had coverage that was grossly inadequate from the perspective of Home value vs what they actually insured. Instead of the $1,000 deductible they thought they were paying, they ended up paying I believe in the neighborhood of $30K out-of-pocket.
11. How do you keep your homeowner’s insurance rate low?
Having no claims is the best way to keep the premium low. But sometimes those losses are out of our control. Do a yearly review with your Agent and discuss your policy.
Set realistic deductibles.
Make sure your insurance company is not over valuing your home. We do not insure the land that the home sits on- so you don't need to insure your home for the full property value in most circumstances. This is a common area where I see people being over charged.
Also, find an insurance company that will offer your discounts to bundle your policies.
12. What additional coverages do you recommend specifically for Utah?
The homeowner’s policy with Farmers is a very comprehensive policy with very few holes. But I do usually recommend that people add in some coverage for mold protection, sewer and drain endorsement, access coverage just in case a loss effects the slab under your home, and then specific coverage to homes with specific needs. For example, I always add a special glass coverage for my homeowners that live on a golf course that waives the deductible for broken glass.
13.- What about townhomes and condos? What should homeowners look to purchase to cover themselves outside of what the HOA purchases for the outside of the buildings?
A condo/townhome policy that covers the inside of the unit needs to have coverage to adequately cover everything inside the sheet rock. That includes your flooring, counters, and personal effects.
You also want to make sure that your policy has a coverage that will help you with loss assessment if/when the Master HOA policy has a loss that requires you to help make the deductible. Most of these "walls in" type policies have a "loss assessment" coverage that you can elect to carry.
Also, find out if you are responsible for your garage or covered parking area if you own one. Those need to be taken into consideration.
14. What recommendation do you have for first time homebuyers?
Find an Agent that you trust and who is knowledgeable. Sit down with that Agent and have them look at the property with you and discuss concerns and coverage options.
ALWAYS have a full inspection done!!! Never skimp on the inspection.
15. The lender requires a certain amount of coverage, but how much should you really be covered for in order to cover the rebuilding of your home?
The lender will require you to cover the amount of the loan, but in some cases that amount would not rebuild the home if it were a total loss.
Again, this is where a good reliable Agent is invaluable. Your Agent can help you build a policy that will adequately cover both the home and your possessions.
If you have additional insurance questions or would like to reach out to Curtis, his contact information is below:
I hope this information about homeowner’s insurance helps to clear any confusion you have about this step in the home buying process. These and other tips are all items that I go over with my clients whether you are just preparing for the future or actively looking to buy or sell your home. Please reach out to me at any time at (801) 885-2558 or by email at brandonrwood19@gmail.com and let’s work on your personal plan!