The Skinny on Insurance

"How's your mother-in-law's apartment?" my client asked. "I loved the piece you wrote about the rain because we were going through exactly the same thing," Allan confided with a small laugh (patriots in arms). We had an inch of water in the lower level room to mop out the next day."

And Allan and I weren't the only homeowners suffering. Nothing brings phone calls to roofers, contractors, insurance agents, and Realtors alike, like a torrential downpour.  As welcome as the wet weather is for our badly depleted reservoirs and anemic water table, record amounts of rainfall in the span of a few short hours can truly wreak havoc if it has nowhere else to go but inside, as was my case, and obviously, my fellow deckhands. Luckily, Allan and Kathryn are only half way through their own remodel so at least they still had linoleum floors in place - which is why Allan can still laugh about it and I'm finding it more challenging to  . . . (Grrrr.)

As I mentioned in that soggy tale, water from outside is considered "flood water" so my insurance won't cover it as the house isn't insured for "flood damage." Gratefully, my floor contractor, Alvaro, will.

"Don't worry, Julia, we will fix this. You don't need to worry 'bout nothing beautiful lady."

"Gracias." (Alvaro is the best. I may have found my soul mate. Sorry Cliff.)
  
On the heels of many similar stories, DJ invited Jorge Mancheno, a 20-year insurance veteran and owner/broker of Mancheno Insurance Agency, to visit The GRUBB Co. team at this week's Tuesday morning meeting to talk about the topic on everybody's mind these days - insurance - and what is and more importantly,what isn't  covered. So while insurance may not be the sexiest of topics on which to begin our day, as homeowners, we need to know this stuff so we can be well-informed consumers and better prepared for the next BIG storm that comes along. (Jorge has seen it all in his 20 years of selling homeowner's insurance.)

Jorge began his presentation by encouraging us to have "the insurance discussion" with our home Buyers well before the close of escrow, because not all houses are created equal from an insurance standpoint and some, can be nearly impossible to insure without great cost to the owners. That's not something you want to find out after you've removed your inspection contingencies and while waiting for your loan to fund. (Note: NO lender will fund without homeowner's insurance in place!) Smart Insurance Agents will happily supply a complimentary quote for you on a designated property before you even make an offer. 

Forget aesthetics for the moment and whether or not you crave a view.  Here are the basic questions you need to ask yourself when looking at homes and the BIG red flags to consider as they pertain to Real Estate purchases:

1) Does the house have a wood shake roof? (A BIG no-no!)
2) Does the house have original knob & tube wiring? (Many companies won't insure knob & tube.)
3) Is the house located in a high-brush zone? (Most of the hills are heavily identified as "high-brush" zones and require ongoing maintenance and clearing.)
4) Is the house located in a flood plane? (Is there a creek nearby - even one that has been culverted, or a reservoir above the house?)
5) What is the slope of the lot the house sits upon? (Insurance companies don't like slope that is more than 30%. Vertical view homes often surpass this requirement.)
6) Does the home have a brick foundation? (Only out-of-state insurance companies will insure brick foundations.)

The news wasn't all "Debbie Downer" as insurance discounts are available for homes that have undertaken extensive renovation (finally, a break.)and there's a little known gem for couples who are both AARP members from Hartford wherein your insurance is locked in for life. Moreover, Jorge assured us that even the toughest homes are still able to find insurance from companies willing to take on the higher risk here in the state of California - but at a much heftier price tag!

As for earthquake insurance?  This is the $64,000 question and one that's up to each individual to determine. However, the consensus seems to be that if you have at least 40% equity in your home, earthquake insurance is probably a good idea. (Structural engineers would tell you to spend those premiums on earthquake retrofitting instead (earthquakebracebolt.com). But should the big one come along and you find your house to be nearly destroyed and uninhabitable, the next big hit is going to be your DEDUCTIBLE (!!!) which is (drum roll please) 15% of your home's value! Yikes.
  
Say What!?!
  
That's right, thus a home worth $1,000,000 is going to require $150,000 cash out-of-pocket before your earthquake insurance kicks in. In other words, damage under $150,000 isn't going to be covered at all and if your home's replacement value is $3 million - well, than you do the math; $450,000 is a hefty chunk of change to find under the sofa cushions. (Gee, that doesn't seem exactly fair.) 
  
Hmmmm. I'm thinking that when the big one hits, I may need a match. Evidently, fire from an earthquake IS covered under a homeowner's insurance policy (NOT under earthquake insurance), but the cracked foundation isn't and if your house tumbles down the hill, forget about it - that's an "act of God." (Okay, okay, only kidding. Please keep my insurance in place. I promise to pay my premiums on time.)

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