Peter's Blog

ActiveRain Gave Me Sales!

2008-08-18T16:22:13Z

I have been on ActiveRain for a few months now – not sure exactly when I got introduced but it sounded very interesting and worthwhile. I have written several blogs to date – some for consumers and some geared toward professionals. A few weeks back I got a call from a woman moving from NJ to CT and as always I asked how did you hear about me? She said I was researching insurance and local agents in CT and read your blogs. She said I liked the information you provided and decided to do business with you. I wrote their auto insurance, home insurance, umbrella and have discussed life insurance.

About a week ago I received another call from a woman looking for Long Term Disability Insurance – she searched Google for a local agent and came up with my name associated with ActiveRain and then read my blogs and looked at the site. I’m working with her now to handle her insurance.

So do yourself a favor and take just a few minutes out of your day to write something about your business. ActiveRain really is great for networking but it’s also a great way to market yourself at no cost. I looked into paying for a marketing group to help us with web design and SEO (Search Engine Optimization). The web was one thing but to pay thousands and thousands of dollars to try to drive people to our site doesn’t make sense now that I know I can do it for free by staying on ActiveRain and writing some blogs. I am very happy that people have found me through this great site and I’m happy to be able to provide both consumers and professionals with information about the insurance world.

Thank you ActiveRain!

Pete

Are All Auto and Home Insurance Policies the Same?

2008-07-26T00:48:12Z

One of the more common questions people have about auto or home insurance is "aren't they all the same?". The answer of course is a resounding "NO!!!!" Many auto and home policies are shopped and sold based on price. I blame the insurance industry for this commoditization more than the consumer. All policies are not created equal and it's not who has the lowest rate. Let's not forget that even though insurance is a necessary evil to most people -- it's there to cover you when you most need it. How many people have a friend who has been in a major accident or who had a major fire at their home. How were these claims handled? Were things denied at times? Why is that? Companies don't just deny claims to save money - they generally exclude certain things and won't cover everything. However, where one company will deny a specific claim each and every time, another might cover that same claim over and over again.

People who are "shopping" for insurance are doing a wise thing - I have no issue with that. Rates change, service levels change etc that cause people to look around - and I encourage that. However - make sure you're dealing with a reputable ageny as well as a reputable agent. You don't want an order taker who is just quoting what you have now -- why would you want that? When you go to a financial planner do you ask, "just do what I'm doing with my money now" --- of course not. You ask for suggestions and guidance. If you go online to get a quote - are you really getting guidance? If you just plug in what you have now are you covered appropriately? How would you know?

A wise insurance plan tailored for your needs will protect your assets - it will protect your future earnings and it will give you peace of mind. Each and every client I work with gets asked a series of questions which allows me to determine what's best for their specific needs. In the end it's the client's ultimate decision on coverage but I work hard to get the best coverage at an acceptable price. If you call some insurance companies and tell them what you have - that's what they quote - beware of those. You want someone to point out gaps and potential issues with your policies. You want claims examples to see how you might be underinsured. Find an agent who will provide this information. I might suggest a million dollar umbrella for one client and a two million for the next - different people, different needs.

You also want to know how one auto or home insurance policy differs from the next. Yes there are many similarities but there can be a world of differences. Jewelry items on a home policy can get something called "Agreed Value" -- some companies don't even offer this. Find out from your agent if you have this. Some home policies cap the replacement cost of the home at an additional 25%-50% of the home's replacement cost - some don't cap it at all - what is it on your policy? Some auto companies will allow a parent to put a son or daughter on their policy with their own vehicle if the parent is a co-signer of the loan/lease. Some say no way and want them insured separately.

Work with agents who work for you. Does your agent automatically shop for better rates for you when there is a significant increase in your rates? Why not? Sometimes it might not make sense to move someone to another company -- but many times it makes perfect sense. I saved someone nearly $2500 on their auto, home and umbrella policies -- and yes I look like a hero - but the plain truth of it was that they were way over-insured and their agent had them in the wrong type of policies for their needs. They had coverage they didn't want and would never use. Sure their sofa would have been covered if someone spilled wine on it but as they said - they would never put in the claim for it and have their rates potentially go up next year. Other clients want this level of coverage. Most don't even know if they have it.

Many people in my industry have turned it into a rate game and have given people the false belief that it's all about saving money and that one insurance policy is no different than the next. Be a wise shopper - educate yourself and get what fits your needs. Find an agent who explains the coverage with you and explains how it works at the time of a claim. If you saved $300 on switching insurance it would be great of course - but if that savings cost you $100,000 in claims that weren't covered -- who wins?

Thank you for reading as always - be safe.

Pete

Increasing Home Replacement Costs to Satisfy Mortgages

2008-07-02T07:56:20Z

Hello-

This is more of an educational piece for both professionals and consumers that's specific to CT but may apply in other states. When you purchase a home or refinance a home you are usually asked to provide proof of home insurance that covers one year and is paid in full. And for our example here let's say you bought a new home at $300,000 and the mortgage is $270,000. We on the insurance side could care less what the mortgage amount is or the home purchase price is -- not a factor at all in calculating the replacement cost of the home. Let's say in this example we calculated the replacement cost (rebuilding cost) of the home to be $220,000. We issue a binder of insurance to the bank stating you're covered for that amount. Then you get the call from the bank saying that $220,000 is not sufficient to satisfy the loan and you have to raise the homeowner coverage up to $270,000 or provide proof that you have guaranteed replacement or some sort of extended coverage on the home to get it to $270,000.

In many cases the insurance policy will have provisions to give extended coverage automatically -- if you look at one of my previous blogs it gets into detail about this. You typically can have 25%, 50% or fully guaranteed extended coverage above and beyond the replacement cost on the home which might satisfy the loan. But as I have seen time and time again in this business over the years -- we do get those homes that don't qualify for extended coverage based on year built etc and when we insure the home at the $220,000 as our example showed --- that's the maximum coverage that will be provided by the insurance carrier. So in this case the bank or broker calls me and says raise the limits to match the mortgage amount. I tell them - the mortgage amount is for house and land - we're just insuring the house and it's illegal for you to request that of me or the consumer.

Now this is where it gets a bit sticky. I've gotten into some heated discussions with attorneys, banks, brokers, realtors etc over this issue. In the State of Connecticut the Department of Banking has clearly defined a statute that protects consumers from the above example when a bank asks someone to increase the coverage on their home to satisfy a loan. It is illegal to request this and is a direct violation of the CT Banking Regulations for ANY mortgage company doing business in the State of CT. Here is the exact statute:

Sec. 36a-757. (Formerly Sec. 36-9u). Mortgage insurance requirements limited. No mortgage lender shall, in connection with any application for a mortgage loan in this state which is secured by mortgage on residential real estate located in this state, require any prospective mortgagor to obtain by purchase or otherwise a fire insurance policy, flood insurance policy, other extended coverage policy, or any combination thereof, in excess of the replacement value of the covered premises as a condition for the granting of such mortgage.

(P.A. 84-212; P.A. 00-95.) History: Sec. 36-9u transferred to Sec. 36a-757 in 1995; P.A. 00-95 added "flood insurance policy, other extended coverage policy, or any combination thereof".

Once I speak to high enough levels of people at the banks - they waive the request to increase the coverage on the home and the loan goes through without a problem. My customers are extremely pleased when I can assure them they won't have to pay more in home insurance premiums due to these requests from the bank. However, it's something that realtors, mortgage brokers and banks should be aware of as well. If you can act on behalf of your customers and head this off before it becomes a problem, everyone wins. Imagine how many people are paying unneccessary costs in insurance due to these requests.

If you have any questions at all on the CT statute above please call the CT Department of Banking at 800-831-7225.

Thank you as always for reading.

Pete

Rental Properties in an LLC -- how this affects insurance.

2008-05-02T10:28:55Z

Hello-

Many of my clients purchase rental properties or inherit rental properties. Attorneys are telling these people that they should be putting the property in the name of an LLC to protect the owner - which is a very wise suggestion. All of those people without LLCs are just opening up their liability exposure and will be personally sued if there is ever a claim on the rental property involving personal injury/death etc. I am not an attorney and will not get into the legal ramifications of all of this but I agree that the more protection you have the better. The LLC is a wise choice for any rental property and I suggest that you speak with your real estate attorney about this option.

That being said -- how does this affect insurance? If someone buys a 1-4 family rental property, many insurance carriers who handle personal home insurance will be able to give a quote on these properties under a policy called a Dwelling Fire policy. It's a policy that includes coverage for the house itself and will many times include the liability and other additional coverage that protects the owner. The majority of the insurance companies don't like to write the rental properties for you unless they have your primary home as well. Some will extend liability from the primary home to cover the rental property (at an additional fee). This is all assuming the home is in the name of the owner.

When someone actually puts the home into an LLC name it drastically changes the dynamics of how an insurance company looks at the risk. Most insurance companies now view LLC properties as pure investment properties and go on the assumption that it could be one of many properties to come for that owner. So what's happened is that a good majority of the insurance companies will now tell you that the rental property in the name of an LLC has to be put on a commercial policy. The commercial policy can provide greater coverage for the owner but generally the cost of these policies is much greater than a personal policy. Many consumers get a little bit of sticker shock as they are not expecting to be put on a commercial policy at a higher rate.

There are a few remaining insurance companies who will allow an LLC property to be put on a personal policy but generally they want to be assured that it's a single-member LLC or a couple who just happens to have the one rental property and who are not in the business of buying investment properties. The people who are planning on buying multiple properties really are better off going the commercial route anyway as the coverage can be much more broad and offers greater protection overall.

So the bottom line here is if you are buying a rental property or selling a rental property -- consult your attorney about the LLC and talk to your insurance agent about the proper coverage. Over the years I've known people who have owned rental properties in their own names - there were deaths from fires and the owner was named personally in the lawsuits. Your attorney can explain the benefits of having such properties in an LLC to protect against losses like this. Just know that once you do that the insurance products that will be available might be commercial products vs. personal insurance products - which is not a bad thing.

One last key point is some insurance carriers will add the LLC on to the Dwelling Fire policy as an additional insured. This is something you want to avoid. In that scenario - both the owner and the LLC will be subject to any liability claims. You want to make sure that the insurance can be put solely in the name of the LLC if you decide to have the property in an LLC name. As always consult your attorney and your local insurance agent for proper guidance.

Pete

When to buy home insurance for a closing on a new home

2008-04-02T20:07:49Z

In my 11+ years of working in the insurance business I've provided home insurance policies for a lot of people. One of the more frustrating things I deal with is people who call up for home insurance 1 day before a closing with the mortgage broker, realtor and attorney all on my heels screaming at me for a binder of insurance yesterday. I would like to help explain the process from the insurance side for realtors, mortgage brokers and prospective home buyers.

In most cases the process starts out with the realtor helping the client out with finding a home. Good realtors generally start to think about making sure their client is lined up with a mortgage broker and attorney and some go as far as mentioning the need for insurance. The mortgage broker then jumps in and starts working with the client to find the best rates, best loan program etc. The broker is generally in touch with the attorney and they work together to schedule closing dates. Good mortgage brokers will also mention the urgency to get insurance quotes for the property as this information is very helpful when figuring out the good faith estimates for closing. The attorney generally is working with the client to look over the contracts etc and once again - should be mentioning insurance and stress the importance early in the process as well.

I never get upset at the clients of course. I know some wait until the last minute to get things done but it's really not their fault if no one in the process has stressed that they need this right away. Between the mortgage broker and the attorney - someone should tell them it's extremely important to get an idea on the insurance rates. I've had several deals over the years fall apart all because of insurance costs being too high or people realizing they need both home insurance and flood insurance. These are all things that should be determined early in the process.

Most mortgage brokers give clients a ballpark estimate on the home insurance. The problem with this is it could be very much different from what the actual rate will be and change the closing costs. Really good mortgage brokers make sure the client is all set with the insurance rates so their numbers are more accurate. Why would you want to have to go back to your client and tell them they have to pay more based on your ballpark estimate? Shouldn't ever happen. With credit scoring on home insurance with the majority of the insurance companies, you can have 2 people buying the same size house next door to one another and one could be paying double the insurance premiums of the other based on their credit etc. It's too difficult now to guess these things.

There is also a huge misconception that you have to have insurance in place first in order to get a closing date established. I can't tell you how many "mortgage brokers" tell me to send them a binder of insurance when the closing date has not been established and they say they need it to close on the loan. It doesn't work that way. The broker and attorney schedule the closing date and we provide an insurance binder for that date. The closing date needs to be established at some point - that's when the insurance gets issued.

For the vast majority of people buying a condominium, please note that when you are told that the bank needs proof of insurance -- it's almost never your own personal insurance policy on the condo -- it's the master policy that the condo association has in place on the building(s) that the bank wants to see. The bank doesn't care if your clothes burn - they want to make sure the building is covered and can be rebuilt. It's in your best interest to get your own personal policy of course and I'll post a blog on condo coverage at a later date!

In terms of timing - most banks want to see proof of insurance a certain number of days prior to the closing date. It would be made effective for the closing date but they want to see it ahead of time to get everything in order. I generally prefer to start working on the insurance 2 weeks or more prior to the closing as it gives me more time to search for the best rates and to have conversations with the attorney and the mortgage broker so we're all on the same page. I know the other parties prefer it as well and it makes the whole closing process run smoothly.

Flood insurance is another huge part of the deal. Here in CT we deal with many coastal homes of course but also many that are inland that could have a tiny stream running through a corner of the property. Depending on the flood zone the home is in, the bank could require flood insurance. The price on this can be double or triple that of the home insurance. It has to be paid in full every year and cannot be canceled until the mortgage is paid off. The client needs to be made aware early in the process if they are required to carry this as it could end the deal as many of you know.

Home insurance in general has become a complicated policy that has many components. It's no longer just the rebuilding cost of the home and the deductible. Now insurance companies base their premiums on all of the house features, age of roof, heating, electric, distance to coast, credit of buyer, age of home, distance to hydrants/fire station, age of buyer and many many other factors. They now have multiple rating tiers -- some companies have hundreds of premium tiers that you could be placed in based on the previous mentioned factors. So do yourself or your clients a huge favor and suggest that they look into the home insurance early in the process. It's just one more thing that could end a deal as quickly as it started.

Home Insurance Concerns

2008-01-02T08:28:02Z

Many realtors, mortgage brokers and attorneys in the home buying process tell their client to get quotes on homeowners insurance for their closing which is expected. In some cases this goes smoothly - and in many cases there are issues that come up with the insurance (specifically with the home or client) that can affect the deal or even kill the deal. I've decided to list the concerns and rating factors that are now involved in the insurance arena so you see how complicated it has become and what you and your clients should be aware of going into the process of getting homeowners insurance.

Most insurance companies have moved to a mulit-tier rating system for auto and home insurance. This means that there could literally be hundreds of factors that the insurance carrier looks at when insuring a home -- everything from the age of the home to your credit score to prior claims etc. Here are some of the things to be concerned with as a home buyer - and now you know why our job has become increasingly more difficult!:

Credit score is one of the leading rating factors in insurance -- low scores produce higher rates -- this is being challenged across the country but so far insurance carriers are legally filed to use credit for rating. There are still a few carriers out there that don't credit score -- these might be best choices for those clients with lower scores.

Prior claims are another big factor in home insurance -- even if the claims were from a previous home they can be used in determining rates at the new home. Insurance carriers do not want customers with a high frequency of claim reporting.

The condition of the home is a huge underwriting issue. Some of the main updates that insurance carriers ask about are plumbing, heating, roof and electric. If these things have not been updated in the last 25 years you will either have higher rates or be declined completely for buying the insurance. The age of the home is also a big rating factor -- older homes (pre-1930) will take on much higher replacement costs as it is assumed that they have older building materials - rough lumber, stone foundations etc. thus affecting the rates.

Multi-family homes built prior to 1978 will quite often be problematic as many insurance carriers want to see a Lead-Safe Certificate (this is different for each state and each insurance carrier). The majority of the people that own these homes do not have such a certificate as it can be expensive -- and in CT if the test is done and the lead levels are above excepted levels -- the owner/landlord could possibly have to pay for housing for his tenants elsewhere as the home goes through lead remediation - again - very expensive. Most people will avoid getting the tests done and will go with those insurance companies that do not ask for Lead-Safe Certificates.

Dogs have become another huge issue in homeowners insurance. Most carriers now have lists that can have as many as 10-12 "Vicious Dog Breeds". If you own any one of those dogs or a mix of any one of those dogs you potentially will not be able to get insurance with that specific insurance carrier. The concern of the carrier is the liability claims that have been paid through dog bites over the years. I can tell you first-hand I've had clients deal with this - the lawsuits are high and insurance companies usually end up paying out a lot of money. The most common breeds seen on the list are Pitbull, Rottweiler, Doberman, German Shepherd, Akita, Chow, Husky, Alaskan Malamute, Presa Canario, and wolf-breeds or any dog that has a bite history.

Coastal proximity has become another major factor in insurance (see previous blog about this). You might have trouble getting insurance if you live near coastal waters -- it will be more expensive and most likely you'll have a windstorm or hurricane deductible that is anywhere from 2-5% of the replacement cost of the home. You might also be required to buy Flood Insurance - this is usually expensive when required and has to be paid in full each year. I've seen many deals get crushed by mortage brokers or realtors failing to mention to the client until the last minute that they need Flood Insurance.

Then there are those things referred to as Attractive Nuisances that can affect the insurance. This includes things like swimming pools, trampolines, treehouses, skateboard ramps or any other structure that would be of interest to passers-by. Most insurance carriers will not accept a home with a trampoline -- there have been too many losses and they just will not write it. Pools can be an issue for many carriers - some do not want diving boards or slides, most require that the pool is fenced and has a self-locking gate.

Other various factors include age, marital status, length of time at previous residence, employment, education, having auto insurance with the same carrier, deductible choices etc. As you can see it's not just a simple quote on a home - there are a ton of factors that have to be weighed now and it has become more challenging to find the proper coverage at the right rate. Make sure your clients start looking into this early in the process as I've seen it affect too many deals over the years. Avoid using the current owner's insurance rates as an idea of what the cost will be --- the new owner could pay less or a lot more depending on their credit or other factors listed above. Many people are grand-fathered in under old pre-credit scoring rates or underwriting guidlelines. A new owner buying their house could be in for a huge shock based on the new guidlelines. Educate your clients - they will thank you and they'll refer more people to you!

Happy 2008!!

Pete

Home Insurance Coverage - Replacement Cost

2007-10-18T21:32:25Z

One of the more common and misunderstood coverages on a home insurance policy is the Dwelling Coverage - also referred to as Coverage A on an insurance declarations page. This coverage is the cost to completely rebuild your home on the same location, the same square footage, with the same quality of construction at today's costs. If any or all of the home is destroyed by a covered loss - this coverage would come into play for the dwelling. It is not tied to the market value of the home and in many cases depending on where you live, you could have a replacement cost that is much higher than the purchase price of the home or in affluent areas - the opposite.

We often hear the consumer say - my brother could rebuild that home for less, my contractor could do it for a portion of that etc. This may be true in pure building costs. What people are not told is that your replacement cost includes other fees such as debris removal and architectural fees among others. Obviously if your home burns to the ground, there is a cost to remove the debris and clean up the area.

The other most common area of concern with the Dwelling Coverage is whether or not the coverage is capped (Actual Cash Value) or if the home has some sort of extension of coverage. An example would be a home insured at $100,000 -- some insurance companies will insure up to that amount and no further. Most companies will add anywhere from a 25% to 200% extension or cap. So the house burns down and the person has a 50% extension - they would have $150,000 of coverage on the home. Then there is the best form of coverage called Guaranteed Replacement Cost which means the home will be rebuilt no matter what the cost of building as long as the home is insured at replacement cost (amount required to rebuild it today). This coverage has been stripped away from many companies policies --- many of the large national companies have gone to the caps. If insured properly, there should not be an issue - but if you can go with a higher extension such as 50% or get the full guaranteed replacement - you'll be better off.

When the major hurricanes hit Louisiana and Florida, the cost of building materials went up considerably - here in the Northeast! So let's just assume your house burned down at that time and you had $200,000 of coverage with a 25% cap. You would get paid a maximum amount of $250,000. If your home was 1300 sq. ft. and it normally would cost $200 a square foot to rebuild -- but because of unforeseen increases in building materials it was now going to be $250 a square foot. The insurance company would rebuild the home costing a total of $325,000. That's a $75,000 shortage to you even with your 25% cap that brought you up to $250,000. You pay the difference. Make sure your clients have the right amount of coverage!

The goal of course is not to ever over-insure. The goal is to keep the home at the proper limits with safety measures in place to offset any inflationary events. I can tell you that many of the people who come to me for home insurance have never had this explained to them and most likely are under insured. For most people their home is their biggest asset -- make sure it's covered that way.

Homeowners Insurance Changes in Connecticut - Coastal Concerns

2007-10-16T08:59:42Z

Many people are not aware that there are many changes going on in Connecticut in regard to home insurance. The largest area of concern right now is Coastal Proximity -- meaning how close your home is to the Long Island Coast Line. FEMA has projected that future hurricanes would most likely strike CT more toward the Middlesex County or New London County areas and East toward Rhode Island. Because of these projections, many companies are scrambling to change their rate structures and guidelines for all coastal territories in CT. Some of the larger insurance companies have even pulled out of CT completely and will no longer write homeowners insurance for new customers. The main concern of course is wind damage as flooding is not covered under the home policy. Anyone who owns property on Cape Cod has seen this impact first-hand. All of the insurance companies pulled out of the Cape and non-renewed all of their policies there. People were forced to go to secondary markets with much higher premiums. Connecticut's insurance department has done a good job working with the various insurance companies to come up with fair guidelines and pricing for the residents in these coastal towns to avoid what happened on Cape Cod.

If you are buying a home within 5 miles of the coast in CT or have clients who are - do yourself a favor and research the insurance companies who have more lenient or even no coastal guidelines. Some companies will require wind-resistant glass, storm shutters, pre-drilled plywood etc. for them to insure the home. However, there are companies that have much more lenient guidelines so it's in your best interest to shop around. As a broker I have the choice of multiple companies and can best place the insurance based on the spcific property location at the best premium. The insurance for a single home in Milford CT could be $800 with one company and $3000 with another so it's nice to have choices.

Remember - home insurance is no longer just age of home, square footage etc -- it's now a very complicated product that can be impacted by coastal proximity, credit, losses, etc.