Homeowner’s Insurance: Don’t Let It Lapse

A couple years ago, I wrote about homeowners and renters insurance and I strongly recommend investing in it. I sure hope those who live in Lake County happened to read and heed that advice. If you live in an area that has not been devastated by fire recently, and you don’t have insurance, this is a great time to sign up for it, if you can.

During and immediately after natural disasters—like the Valley Fire—insurance companies will sometimes put a moratorium (stop) on new policies in and around the disaster zone. They also tend to increase premiums, particularly in remote areas, once they realize the cost of paying those insurance claims, and they get quite particular about who they will insure. For example, if you have a house on Cobb that was not reduced to ash and you would like to purchase homeowners insurance, you will likely have to prove you have an adequate source of water—at the very least, a well with decent pressure and a storage tank. If you are lucky enough to have a house still standing in Cobb and you have insurance, DO NOT LET IT LAPSE. Once a policy lapses, insurance companies are under no obligation to renew the policy at any price.

Homeowners insurance and renters insurance are pretty much the same, except renters insurance does not include the structure—only the belongings. A standard policy covers loss from fire damage, as well as things like having a computer stolen out of your car or the health care bills for the UPS delivery guy who slips on your driveway. It will often cover acts of vandalism and even worker’s compensation for a handyman who is injured on the job while at your house.

A home’s insurance value is based on the cost to rebuild, not the market value, so in determining how much insurance is enough, you’ll need a policy that covers the cost of rebuilding your house to comply with current building standards. If your insurance policy only includes enough coverage to rebuild your home exactly as it was, then you get to pay cost of bringing your house up to code out of your own pocket. You can pay for less coverage or a higher deductible, but it’s a risk.

As with any policy, it’s best if you actually read and understand it. This way, you won’t be surprised to find out that flood and earthquake insurance are separate and cost more. If your home is in a flood plain—even a 100-year flood plain that hasn’t flooded in anyone’s memory—your lender will require flood insurance. With an El Nino winter approaching, flood insurance is an extra good idea.

Earthquake insurance is often very costly, and honestly, hard for me to recommend. Typically, there is a 15 percent deductible. This means, if your house is insured for $300,000, you’ll pay for the first $45,000 worth of damage. That’s a lot. If the earth opens up and swallows everything you own, then you’ll wish you had earthquake insurance. Otherwise, you’ll be paying expensive premiums and still be on the hook for tens of thousands of dollars if an earthquake hits.

We have some excellent insurance brokers in Ukiah. If you’re new to homeowner’s insurance, you can ask for a quote from the company that insures your car. If you want to do a little independent research, go to https://eapps.naic.org/cis/ to see if people have filed complaints about the insurance company. As always, your Realtor is a great resource for this type of information.

By the way, don’t forget to submit your ideas on how to make Mendocino County safer; the contest (and chance to win $500) ends November 15. To learn more, visit http://realtyworldselzer.com/safe-mendo.

If you have questions about real estate or property management, please contact me at rselzer@selzerrealty.com or visit www.realtyworldselzer.com. If I use your suggestion in a column, I’ll send you’re a $5.00 gift card to Schat’s Bakery. If you’d like to read previous articles, visit my blog at www.richardselzer.com. Dick Selzer is a real estate broker who has been in the business for more than 35 years.

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