Monday, June 24, 2013

BUSTED: homeowners insurance myths revealed

Do you know whether or not your home has sinkhole coverage? Do you know that there are two types of standard sinkhole coverage and that your policy is required to carry one?

Most people don't realize that catastrophic sinkhole (definition later) is required by Florida law to be included on every homeowners policy. What most homeowners do realize, however, is that it is becoming almost impossible to find standard sinkhole coverage in Florida.

Let me explain the difference between sinkhole coverage and catastrophic sinkhole coverage.

Catastrophic sinkhole coverage
This coverage is required by Florida law to be included in every homeowners policy. Essentially, if you home is considered a complete loss or unlivable due to sinkhole activity, your homeowners insurance will honor the claim and pay the required amount.

The key in this coverage is that your home must be deemed unlivable. A good example of this is the horrific sinkhole catastrophe in Seffner at the beginning of the year. The home itself and some of the surrounding homes were deemed unlivable due to the sinkhole activity and their homeowners insurance had to cover the expenses.

Sinkhole coverage
Sinkhole coverage is different than catastrophic sinkhole coverage. While catastrophic sinkhole coverage will cover your home if it is deemed unlivable, sinkhole coverage will cover the slightly less extreme claims, such as a misaligned wall or door due to severe ground settling (depending on the company).

The problem with sinkhole coverage is that it is nearly impossible to find in Florida due to the tremendous amount of "sinkhole" claims and fraud that has occurred over the past few years.

The myth that people believe is that there home will not be covered in the event of a sinkhole claim. However, your home WILL be covered if the claim falls under the catastrophic sinkhole coverage.

If you have any questions about sinkhole coverage or your homeowners policy, please don't hesitate to contact Fearnow Insurance in Seffner, FL. 

Monday, June 17, 2013

BUSTED: Homeowners insurance myths revealed #3

This next myth is probably one of the most common misconceptions about homeowners insurance, so much so that our agency has created a video blog explaining the following terminology:

Actual Cost Value vs. Replacement Cost Value

So, if someone breaks into your home and steals your television, or a random act of nature destroys your TV, your insurance company will replace your damaged TV and everything will go back to normal, right?

Well, no. Not necessarily.

Most people think that contents coverage (which is common, but not required on homeowners policies) will replace any stolen or damaged contents in the dwelling. However, insurance coverage is not that simple.

There are two options for contents coverage (should you chose to have that coverage on your policy in the first place): actual cash value (ACV) and replacement cost value (RCV). Actual Cash Value generally costs less to put on your insurance policy than Replacement Cost Value, but the coverage is not as high.

Actual Cost Value is exactly what it sounds like. If your 2009 40' television is damaged in a natural disaster, the insurance company will pay you the cash value to replace that television. Since the TV is four years old, the payout will be the DEPRECIATED cash value, because the TV is not worth as much now as it was when it was new. ACV means the insurance company will pay you the ACTUAL VALUE for the TV. Think of it as the "Kelly blue book" value when you trade in a car. You won't get the money that you paid for it, but only the depreciated value of what its worth now.

Replacement Cost Value is the exact opposite. This is the coverage that we recommend on all polices. If your 2009 40' television is damaged in a natural disaster, the insurance company will either replace your TV or give you the money to replace your TV. Since your coverage is to replace the item, rather than to get the cash value for the item, the insurance company will likely buy you a 2013 40' television to replace your old one (they might buy you a 2009 40' TV, depending on the policy). Regardless, you will get same or better than what you had. With ACV, you will get less than what you had. If a huge storm comes through and wipes out all of your contents, you can understand why having RCV would be much more beneficial than having ACV.

If you are wondering what coverage your policy has or if you can change your coverage, call the agency. We will be happy to look over your policy (customer or not) and make sure that you are fully covered.

Monday, June 10, 2013

BUSTED: homeowners insurance myths revealed #2

One of the most common things I hear from our clients is that they don't need flood insurance - it's covered under their homeowners policy.

I am going to debunk this myth right now. It's not true.

Homeowners insurance does not cover flood damage. There are no exceptions to this. It does not matter if the flood was caused from a massive hurricane or a summer shower - HOMEOWNERS INSURANCE DOES NOT COVER FLOOD DAMAGE.

Now that the myth has been debunked, let's talk a little bit about what is considered flood damage and how you can protect yourself from out-of-pocket expenses.

"Flood" is classified as rising water. So, if the rain continues to pour everyday (like it has been for the last two weeks) and your yard is having a hard time draining the water, you might be at risk for flood damage. It does not matter if the outside of your house is damaged by the rising water or if your contents inside suffer water damage - there is nothing on your homeowners policy that will cover the damages incurred by flood.

That being said, one of the main reasons for people not carrying flood insurance is that they do not live in a flood zone. While this seems logical, last year 25% of the flood claims occurred in preferred/low risk flood zones. The fact of the matter is that Florida is surrounded by water and does not have much land elevation. No matter how "preferred" your living zone might be, you will always be at risk of a flood. Based on the flood statistics from FEMA, about 80% of homeowners in Florida are at risk for flood by not having a flood insurance policy.

The good part about being in a preferred zone is that your flood insurance premium is fixed. You pay one annual rate based on the dwelling coverage of your home. The premium can be as low as $129 but will not exceed $458 annually. The premium of your flood insurance is determined by the amount for which your home is insured.

If you have any questions about flood insurance, please do not hesitate to contact the agency. Flood insurance companies do not allow any new policies to be bound if there is a named storm in the Gulf. I strongly advise everyone who does not have flood insurance to get a flood policy bound before the hurricane seasons goes into full effect.

Monday, June 3, 2013

BUSTED: homeowners insurance myths revealed - #1

The National Association of Insurance Commissioners released a shocking statistic a few years ago: Over 50% of people don't read their insurance policy until a claim is denied. If the first time you look over your insurance policy is after a claim is denied, then you are behind the ball. Most clients believe that it is the insurance agent's job to make sure each policy protects the client's possessions. While this is true to an extent, the only person that fully understands the value of his/her possessions is the client - not the agent. As an agency of integrity, it is our job to educate you, the client, so that you can make informed decisions regarding your own protection.

That being said, there is an alarming amount of people who have never read their homeowners policy and have grave misconceptions about what is and is not covered. This blog series is designed to address the five most common misconceptions and hopefully provide valuable information to help you better assess both your risks and needs.

Week One: Dwelling Coverage does not equal purchase price

So many times I hear clients ask why their dwelling coverage (Coverage A) is so much more than what they paid for their home. People become outraged at insurance companies, believing that they are being over-insured and losing money. However, this is not the case at all. While there are ways to lower the dwelling coverage amount, the coverage should not be lower than the purchase price of the home.

The dwelling coverage is the amount that you will be paid in the event that your home is a total loss. This covers building costs, including materials and contractors.


Rather, the dwelling coverage is dependent on the cost of materials and labor. For homes bought in the past five or so years, the purchase price of a new home was extremely low compared to previous years. Therefore, a home that was bought at a market low of $150,000 might cost over $300,000 to rebuild due to the continual increase in material and labor costs.

Check your dwelling coverage amount on your homeowners policy and make sure that you are confident that you could rebuild your home for the amount disclosed in Coverage A. If you are unsure or have any questions/concerns, contact the agency immediately. We can help you find the coverage that best fits your needs.