Estimated reading time: 4 minutes, 26 seconds
Back in the ’30’s and 40’s the insurance world was referred to as the “insurance racket” It was likened to and most likely connected to the mafia which collected money very well but was reluctant to pay out. There were no rules or oversite, nowadays there is strict oversite and the State of Idaho governs all companies doing business here.
As a contractor that rushes to rebuild homes after all sorts of disasters, I began wondering whether there is another perspective a client should think about before they file a claim. This leads me to ask my friendly Farmers Insurance agent Brian Frichette to lunch for some answers.
Turns out there is a lot of information he has that is very helpful that is not common knowledge. It just so happens that Farmers is doing a media campaign with a similar sentiment regarding learning about subtle coverage quirks that you might not be aware of.
In Idaho, there is a governing board that oversees the insurance industry that determines what is and isn’t covered as a baseline then individual companies have some latitude to be creative with additional coverage.
Most insurance companies are happy to write you a homeowners insurance policy because home disasters rarely occur. Often the policy is written before the home is even looked at by the insuring company. You may think the policy is covering you and your stuff, but it is primarily protecting the mortgage companies’ assets that they are selling to you over a 30+ year period.
Here are some common situations that often baffle the insured and cause all sorts of confusion. There are so many of these things that I will address in part 1 of this multi-part series.
1. You Need a New Roof!
If you get a letter from an insurance company telling you you need a new roof or what have you. Then by golly, you need to do it. Every now and then these letters are rescinded if a mistake was made. (This Farmers Agency actually does their own on-site inspections).
2. How Many Claims Can I Make?
Home Owners Insurance like medical insurance is there to cover you when something that is out of the ordinary happens. They won’t blink writing you a $350,000 check if your home burns down. They will also write you a $900 check just as fast but you better think twice about letting them because it is a point on a calendar that may come back to haunt you.
The insurance company can drop you for filing too many claims. Once dropped, the word gets out and you may find it hard to get reasonably priced coverage again. getting bumped out of the preferred category can cost you 2-3 X your premium it can also limit you to just the basic coverage that the state mandates.
3. The Big Hint
Once the clean-up and dry-out have been accomplished, you have a choice as to who you want to rebuild. That is about a big hint as you get. Be wary of mitigation firms masquerading as rebuilding a firm. A remodeling firm with insurance experience is a far better solution IMHO.
4. The Cause of The Loss is Rarely Covered
This means when your water heater fails and floods the place, the water heater is not covered. You end up paying the deductible typically $1,000 plus you pay for the new water heater. Note: Water heaters typically last 12 years then you are on borrowed time. It is less expensive to replace it prematurely than wait for it to leak or, heaven forbid fail.)
5. Domestic Source Sudden Release
This refers to the rules used to determine if a water loss is covered. In a recent phone conversation, a client that was remodeling their bathroom discovered that water had escaped the bathroom and went under the bedroom causing rotted timbers that needed replacing. NOT COVERED. The Adjustor carefully reads your policy to determine if the loss is covered, that being said, there are times when the coverage is subject to interpretation. This means that if it rains a lot and comes into your home it is not covered. That type of flood is covered by the federal government only.
6. What Are Some Common Misconceptions?
This one catches homeowners off guard all the time. Your Homeowners insurance does not cover lack of proper maintenance, faulty installation, or poor craftsmanship. This is a major category of cause of loss. This is where a home warranty might come in handy.
7. Where Does My Coverage Stop?
Typically losses that occur outside the envelope of the home are not covered. This is why the water company offers waterline insurance. Although IMHO I believe it is a scam, there are rare occasions where someone who just got insured had a claim. Water lines that come from the meter to your home rarely rupture and are often inexpensive to replace.
TO BE CONTINUED
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