Saturday, July 13, 2019

EARTHQUAKE!!! Should You Get Insurance?

You Ask Yourself:  Do I need earthquake insurance?


Let's try to make this clear and simple:


1.  Homeowner insurance does NOT cover direct loss from earthquake.  Period.  Either you have earthquake insurance and you're covered or you don't and you're not covered.  Simple.  Without earthquake insurance you are on your own.  However, in California, state law requires that Fire damage be covered by the homeowner policy if it is the result of an earthquake.

2.  Earthquake insurance is generally NOT cheap.  Usually around the same as your home insurance or more and occasionally less.  With that ballpark figure in mind, can you afford it?  If it is outside your budget then put your thought, money and time into preparedness and prevention.  Forget about the insurance.  If there's an earthquake and you have damage then earthquake insurance is a great deal.  If you never sustain any earthquake damage, well, it seems to be a waste of money.  Again, if you can afford it, get it.  


3.  Earthquake insurance deductibles are high, usually 10% - 15% of your Coverage A Dwelling Replacement Cost on your homeowner insurance policy.  Pull out your home insurance declarations page.  Look at Coverage A.  Let's say it's $400,000.  Your earthquake deductible will be $40,000 - $60,000.  The first $40k - $60k of damage is all yours to repair on your own.  

Other causes of loss, such as wind and hail and hurricane and fires, etc. happen often enough that insurance companies can figure the probabilities pretty well and set aside enough funds.  However, earthquakes that cause damage are few and far between and seldom result in claims, partly because of the very high deductibles on EQ insurance.  For instance many of you felt the 7.1 Ridgecrest quake.  There have been thousands of foreshocks and aftershocks of that quake.  On July 10th there were 6 earthquakes around Ridgecrest of magnitude 4.0 or greater;  in one day!  But there were very few claims.  How do you predict and how do you figure?  It's not so easy with earthquakes.

Earthquakes are going to happen.  Maybe earthquake insurance should be mandatory in southern and central California.  In the meantime you can work on earthquake preparedness and have your home checked for earthquake retrofitting.  Some experts say that you should sink your money into retrofitting your house before worrying about earthquake insurance.  Maybe so.  But there's still no substitute for having earthquake insurance.

Bet you didn't see this one coming:  When there has been an earthquake recently in your area, most insurance companies will stop offering earthquake insurance until things calm down.


Why?  Insurance is for accidental losses which is further defined as sudden, unforeseen and unexpected loss.  You can't buy life insurance if you are diagnosed with a terminal illness.  You can't buy fire insurance if there is a forest fire near your house.  If the loss is certain to happen, it is no longer an accidental loss.  However, California Earthquake Authority does not have that restriction.

But there's a catch to using the CEA.   Your home insurance company must be a participating member of CEA in order give you access to CEA insurance.  Only a handful are members.  If your home insurance company is not a member company then your company must offer it or you have to go elsewhere to get EQ insurance, but you can't get it through CEA.  Sound complicated?  You should see it from my end.  Oy!

Call me now (626) 584-6303 or use the quote form to get a quote and I will check which companies are available and which are closed.

For more information:

Here is the California Department of Insurance website page on Earthquake Insurance




Saturday, October 20, 2018

CONDO INSURANCE: SHOULD I HAVE IT?

Why Should I Buy Condo Insurance?


Many condo owners believe that the HOA Master Policy covers all the insurance they will need. Nope. There are several reasons to buy condo insurance:

  • The HOA Master Policy usually covers the master structure: exterior walls, foundation, roof, plumbing, wiring, heat, a/c, etc.  The specifics are in your CC&R's.  You have an obligation to rebuild some portion of the interior, defined, again, by the CC&R's.  Check with your HOA for specifics.
  • Condo insurance may be required by your finance company as a condition for your loan.
  • A condo policy covers your personal property which is to say the contents of your condo, aka: your stuff, against fire and theft and other losses.
  • A condo policy can provide coverage for you against personal lawsuits.
  • Condo coverage can protect you against a surprise bill from your HOA for obligations you have as a condo unit owner that you didn't know about, such as damage to the common areas of the condo for which each owner will be assessed a portion.
  • A condo policy covers the portion of the condo interior walls and structure that you are obligated, by the HOA, to replace in the event of damage that are not covered by the Master Policy.
  • Loss of Use coverage pays for your room and board if you are turned out of your condo for a loss that's covered in your policy, such as fire.  It supplements your normal budget until repairs are done and you can return to your condo.

    Get a Free Quote for Your Condo

Sounds pretty simple, right? Well, the other thing is that condo insurance is the most misunderstood and complex form of homeowner insurance.

The most popular coverage on a condo policy (designated as Homeowner Form HO6) is the Contents Coverage, referred to as Coverage C on your policy. It is the value of all your personal stuff in the condo. It includes your clothes, linens, electronics, rugs, furniture, drapes, decorations, appliances, bedding, china, dishes, silverware, cutlery, pots and pans. Everything. Get an idea of what the replacement cost of all that stuff would be. Just ballpark it to begin with. You are buying protection for your personal possessions against damage from Fire, Theft, Wind, Hail, Storm, etc.

Replacement cost of your contents means just that; what will it cost to replace it, new for old, not the garage sale value. If you have a twelve year-old TV, it's not worth much but the cost to replace it may be $1,000. That will be your replacement value. Come up with a figure to replace all your stuff in the condo. 

Dwelling, Structure or Additions and Alterations coverage. This will be referred to as Coverage A on your policy. With condo insurance this coverage refers to the portion of the interior that you are responsible for replacing in the event of interior damage. Your Home Owner Association should be able to tell you or show you in the CC&R's what your responsibility is to replace interior construction if there's fire damage, for instance. Often the condo owner's area of responsibility is described as "wall in" or "wall-covering in" . In other words you are responsible for replacing everything from the studs in, including the drywall or you are only responsible for replacing the wall covering, e.g. paint, wallpaper, paneling, etc. It almost always means that you are minimally responsible for replacing the wall covering, floor covering, cabinetry, fixtures. Sometimes it includes rebuilding the entire interior, including drywall and water pipes and electrical cable, etc. that is contained in the interior walls of your condo. That's a lot. Get it clarified with your HOA.

Comprehensive Personal Liability Protection, referred to on your policy as Coverage E, covers you against lawsuits made by persons who feel you have injured them as the result of your negligence, such as leaving a hose across the sidewalk that causes a person to trip, fall and sustain injury.

Loss of Use or Additional Living Expenses coverage, referred to as Coverage D on your policy, will pay you for the additional room and board and living costs if you are turned out of your home as the result of damage covered in your policy, while the repairs are being done, after a fire, for instance.

Loss Assessment coverage is peculiar to Condo policies. If there is damage to the common areas of your condo, such as pool or club houses, then each condo unit owner will be assessed a portion of the damage (the loss) that isn't covered by the master policy. So you may get a surprise bill one of these days. How much could it be? Ask your HOA. They should know what is and is not covered on their master policy and how the cost would be divided up. 

When you own a condo you are responsible for insuring what is inside. You must provide insurance for your personal possessions,of course, but also for portions of the interior structure of your condo in the event of structural damage. Your condo association provides insurance for the exterior of the building, called the Master Policy, but not the interior, fixtures, cabinetry or even interior walls. Make sure you are covered. Generally Home Owner Associations Master Policies only cover the outside of the building, your unit framework, common areas, and, possibly, some fixtures to your condo. 

AUTO INSURANCE RATES IN CALIFORNIA - GOING UP!

Auto insurance costs in California are on a steady rise.

Almost all, if not all, car insurance companies are increasing their rates. Auto insurance in California is becoming unprofitable, some companies have stopped writing new auto insurance business and few if any new companies are coming in to the state. I've never seen anything like it. Here are a few reasons:

The costs of paying claims, bodily injury and car damage, are increasing dramatically. We all know that medical costs have gone up and the cost of auto parts is also way up. The complex integrated computerized and robotic systems in today's cars means that a $70,000 car that sustains only $25,000 of body damage may be totaled-out because of the cost of those complex systems that would need be replaced in addition to the cost of body and mechanical damage repair. The total cost ends up being more than replacing the car and the insurance company declares the damaged car a total loss.

Frequency of accidents is way up. There are a number of reasons for this:
  • The already congested urban areas are even more congested.
  • People are more stressed than ever; we are having the craziest political and news cycles I've   ever seen.  Bonehead politicians are talking about nuclear war. Stressed people make mistakes.
  • Increased use of drugs, legal and illegal, prescription and recreational. 
  • Increased use of cell phones, texting and other sources of distracted driving.
  • Modern car design with built in blind spots, presumably compensated for by complex camera systems that many people use instead of, themselves, looking around behind them.

Consequently, Loss Ratios are up and are unsustainable. Loss ratio is the ratio of claims-paid-out to premiums-received-in. There are major auto insurance companies that are operating at ratios close to 100%, where 58% - 70% is profitable. 

Competition among auto insurers has decreased. With the auto insurance market less profitable, some companies have stopped writing new business (I have lost 15 companies in the past 2 years) and new companies are not venturing to enter the California auto insurance market because it is not profitable, thereby strangling competition. Without competition the consumer is at the mercy of the remaining companies. 

Increasing government intervention, direct and indirect. This also deters competition and restricts the flexibility needed by insurance companies and businesses to respond to normal cycles or extreme events.  

This is a summary of reasons for your rates going up. There are some more technical and legal ones, but this should give you a good idea of what's happening in California regarding your insurance rates.

Stephen B. Groton
YourInsurancePal.com

Tuesday, June 2, 2015

RENTAL CAR COVERAGE: DO YOU HAVE IT OR NOT?



This is a very common question:  Does my auto insurance transfer to or cover rental cars?



There are two entirely different situations where most people want "rental car coverage." 


1. You want your current auto insurance to transfer to a car you are renting so you don't have to buy insurance from the rental car company.  You may be traveling or you may have your car in the shop for mechanical repairs not related to an accident.

2. You want your current insurance to pay for your rental car cost while your car is being repaired as the result of an accident. 


In the first example, generally, whatever coverage you have on your current auto insurance will transfer to a rented vehicle. Coverage you don't have will not transfer to the rented car, of course. You should always call your company if you are in doubt. Some companies will transfer basic liability to a rental car but nothing extra. They may not transfer the Comprehensive and Collision coverage to the rented car. They may transfer only the minimum liability limits which, in California, is $15,000 per person bodily injury up to a maximum of $30,000 bodily injury for the whole accident and $5,000 property damage per accident even though, on your policy, the limits may be higher.  

Again, when in doubt, check with your company. Don't make any assumptions. Some policies are more generous than others. If you have a policy from a preferred company like Hartford, Travelers, MetLife, GEICO, State Farm, Farmers, Allstate, Progressive, AMICA, Liberty Mutual, Safeco, etc. then whatever you have on your policy will transfer to the rented vehicle. If you have an "off brand" company or one that might be considered high-risk, then you definitely better check with them first.

In the second example you want your insurance company to pay for your rental car while it is being repaired or replaced as the result of an accident or theft. This coverage is called Rental Car Reimbursement Coverage. It is usually optional. You have to buy it. And in order to buy it you must first have Comprehensive and Collision Coverage; they go together. If you do not have Comprehensive and Collision Coverage then you cannot buy Rental Car Reimbursement Coverage.  

So let's say you DO have Comp and Collision Coverage and you have purchased Rental Car Reimbursement Coverage. When can you use it? Only when your car is in the shop for a claim or it has been stolen. If you have filed a claim with your insurance company for damage to your car or theft of your car then your Rental Car Reimbursement Coverage will come in to play. But look once again at what it is: REIMBURSEMENT coverage. You pay out of pocket for the rental, then the company reimburses you when the claim is finally settled. How much? Again, look at your policy. Where it says Rental Car Reimbursement on your declarations page, it will show figures like $30 per day / $900 maximum. That's your limit.

Rental Car Reimbursement Coverage does not pay for the insurance that the rental car company would like to charge you for. We're back to the question of whether your insurance will transfer to a rented vehicle. See the explanation above. Your current insurance may transfer in full or in part to the rented vehicle. Your claims adjuster should be able to tell you what to expect. 

Okay? Got it? Two different scenarios and applications of "Rental Car Coverage." 

Steve