Top 5 Insurance Coverage Mistakes

Welcome to this week’s episode. Here at Simple Roofing and Exteriors we are super worried about you and your family’s insurance coverage for the coming storm season. How do we fix that? We talk to an agent. So this week’s question is, why is having an insurance agent so important to you and your family? We’re gonna cover five reasons why you could be underinsured because you didn’t speak to an agent. The values that each agent brings to you, whether to use an independent agent or a captured agent. Like an employee of one of the companies such as State Farm or Country Financial. These things are going to be something that you don’t want to miss when you consider this week’s episode. Let’s get right into it.

Why should you use an agent and why do we at Simple Roofing and Exteriors care if you use an agent? Well we’ve had so many of our clients come up with lots and lots of problems in the process of trying to get their claim covered because they hadn’t spoken to their agent. They bought a house and their house had their original policy that the mortgage lender or the real estate agent had put on there. They never adjusted it. They didn’t even know what their deductible is. So we’re gonna make sure that by the time you’re done with this, you know exactly the reasons why you should not only have an agent, but some of the things that you might be up against.

Should you use an independent agent or should you use a captured agent, an employee of one of the companies? That is something that is up to you. Both of them have pros and cons and one of the major things we see with captured agents is that they have a full understanding of all of the valuations and and abilities that your specific policy coverages allow. The thing that you get out of independent agents is that they know multiple different carriers and they’re able to price shot for you. Both of them can provide you individualized coverage and considerations. Both of them are experts and so it doesn’t matter to us. We just recommend that you use one of them.

What are some of the things that we’ve seen when people don’t have an agent? Well, they don’t understand their policy. Agents can simplify the coverage and the whole process. They can help you to know exactly what kind of coverage you need, exactly what kind of coverage you have, and to be prepared for the coming storm season.

Let’s talk about the five reasons that you need an agent. The five things that we see time and again that cost our homeowner’s money. That hurts them financially because they just aren’t covered properly. Number one, it’s very important that your coverage is an RCV coverage. A Replacement Cost Value policy. These are the most important three letters in the alphabet on your homeowners insurance policy. Let me illustrate what would happen if you didn’t have an RCV policy. Replacement Cost Value means that if you’re driving a 1980 Cadillac and you get in an accident and that Cadillac is totaled, you get the cost of buying a brand-new 2020 Cadillac. If you had an ACV policy, or an Actual Cash Value policy, you would only get the replacement cost of that product that day. Your 1980 Cadillac maybe is only worth $600. That’s what your insurance company is going to give you.

The same is true of your property. If your windows, your roof, your gutters or your siding doesn’t have replacement cost value insurance and they’ve used either ACV as the type of coverage that you have or RPS, Roof Payment Schedule which are being used under the guise of being and RCV coverage, they are only paying you a certain percentage of your older roof.

These type of things are designed to put you, the homeowner, in a position where you have to pay a much larger share out-of-pocket. We want to help you avoid that. So, having full replacement cost value coverage, not having a policy that doesn’t cover your roof or doesn’t give you a full coverage of your policy or gives you only an ACV (Actual Cash Value) coverage that could put you in harm’s way. Your agent can help you fix this. That’s number one.

Number two, law and ordinance coverage. We see this as code coverage. In fact that’s how I’m going to describe it from now on. Why do we call it code coverage? Because every jurisdiction has a certain code that they require your roof to be built under. If your home was built in 1996 and this is the last roof you have ever put on or maybe in 2004 when there was a big storm or 2009 when Aurora had its big storm maybe you’re thinking to yourself, “well that’s the last time. It should be up to date.” Since 2009, many of our jurisdictions have gone to the 2009 IRC, the 2012 IRC, the 2015 IRC and now this year the 2018 IRC. These are the code coverages that are required for us to build your roof. So, here in Aurora, what are we seeing? Ice and water shield is now an absolute requirement for your home to be covered on. If you haven’t paid the extra money to get law and ordinance or code coverage onto your policy, then you might have to pay out-of-pocket on those specific situations. I know you’re thinking, “I don’t want to pay more money for my insurance.” Code coverage may be only ten or twenty dollars a year for your entire coverage amount. Wouldn’t it be more valuable for you to have that twenty dollars a year out-of-pocket expense than a two, three or four thousand dollar expense because your existing roof isn’t up to the current jurisdictions code? We want you to have law and ordinance or code coverage. Speak to your agent about this as soon as you can.

Number three, a manageable deductible. Why is this important? Well, every homeowner has to pay their deductible according to Colorado law. So, we want to make sure that when you have a claim because of hail or wind loss, here in Colorado, that you know your deductible amount and you’re ready to be able to take care of it. Very often we’re put in awkward situations where we’re trying to find ways for homeowners to do their own work or to come up with a solution to make payments or to offer them financing so that they can cover exorbitant deductibles that they didn’t even know they had. What kind of exorbitant deductibles are we seeing in the market? One percent or two percent of the home’s valuation. What might that mean? Colorado’s median average home price is $538,000. That means a 1% deductible would be $5380 here in Colorado. Many of our homes are up over seven
or eight hundred thousand dollars in Colorado. We don’t want you to be stuck with a five or ten thousand dollar deductible because your mindset is “oh 1%. That sounds cheap. It’s one, the lowest number.” We know better.

Make sure you have an established flat deductible. Why is this important? These percentage based deductibles are based on how much your insurance is every year. Every year your valuation on your property goes up and so you might have been told early on that you have a $2500 deductible, but it’s not true. You had a one percent. Which was based on your $250,000 valuation. Now, your deductible is $500,000 worth of valuation and so it is $5,000. Make sure your deductible is established. That you know what it is and that it’s manageable. Think about the difference between the valuation in deductibles versus cost of premium. Your agent can help you to understand “If I raise your deductible to $2,500, you’re going to have a $62 a month deduction in your monthly premium.” There are deductibles out there that are as low as $250 or $500 still. I know I have a family member that will never let go of his $250 deductible and yet it costs him way more than the deductible amount every year in premium because he wants to make sure it’s manageable for him. On the opposite side of the coin, many people have thought to themselves, “I could afford a $10,000 deductible. I just became a lawyer or a doctor.” Well, do you have $10,000 set aside two or three times? Because many of our family and friends have had multiple claims in a year. A hail claim, a flood claim and they dropped their iron on the floor while ironing. Those things could cost you thousands of dollars and maybe you’re not prepared for that. We want to make sure you’re prepared with a manageable, set deductible so that you have no problem getting it covered when you do have a loss in the coming storm season.

Number four, adequate coverage. We talked a little bit about this with the deductibles, but the valuations of our homes in Colorado have gone up so much. Maybe you bought your little Highlands bungalow in a terrible state in 2008 and you did a bunch of remodeling to it and the $150,000 house that you had is now $700,000. Well, early on you might have actually only applied for coverage for the $150,000. You may have been left in that position thinking that you were doing a smart thing protecting your home only up to that $150,000 valuation while keeping your premium low. Make sure you’re properly covered. Homeowners in Black Forest, five years ago when they had their houses burned to the ground in that fire, many of those homeowners got a check for whatever their valuation was back in 1998 or 2001 when they got their insurance. So, the coverage for their $700,000 two acre home in Black Forest turned out to only be $110,000. Don’t put yourself in that risk. Talk to your agent right now about whether or not you have adequate coverage for your home’s loss. We’ve had some hail claims in the last couple years that have been upwards of $200,000 as prices of roofing products go through the roof, as window lines and siding lines are more and more expensive. We used to be able to get our house painted here in Colorado for $2,000 and now we’re seeing five and six and seven and ten thousand dollar house paint jobs. Make sure your home is adequately covered.

Number five. The fifth and final way that we see people being hurt financially because they’re under-covered or underinsured, is a waiver. A cosmetic waiver or a marring clause that’s been put into place at their renewal date. When your policy renews or when you have your coverage papers come it’ll often come with new words. Make sure you read through it or better yet make sure you talk to your agent so you know what kind of waivers might be in place. A cosmetic waiver might mean that when your metal roof or your metal gutters get completely damaged by hail and are all dented up, that you don’t get coverage. Because they’re saying they’re not functionally damaged and they’re still shedding water. Now, you and I both know that a car that has hail damage on it is worth a lot less money. The same is true for you and your home. Your house that has hail damage or dents all over the roof is also worth less money. Make sure that you don’t have a cosmetic damage waiver. Make sure that you don’t have a marring clause that’s going to put you and your family at financial risk. Talk to your agent about how you can move around with that.

These have been the five situations that we see over and over again as contractors that harm our clients and put them in a position where they’re underinsured and they’re not able to get adequate coverage for their property and they end up having to come out-of-pocket for their own coverage so that we can get them back to pre-storm condition. So, these are the reasons you need to talk to an agent now. They’re the reasons that you need to have a relationship with your agent. It’s just as important as your family doctor or your family attorney. A family insurance agent can put you in a position where you never are underinsured and you adequately cover your risk. If you don’t have an agent, we at Simple Roofing and Exteriors work with hundreds of agents throughout the Denver market and we’d be happy to make a referral to two or three of them. That lets you decide who you’d like to use. We realize that we’re trying to provide you with the most all-inclusive solutions to all of your needs.

Next up, we’re going to be talking about why you need to use a contractor that handles the entire insurance claim. Not just the roof and gutters, but the roof, the gutters, the painting, the siding, the HVAC, all the things that impact you and your home. We’re gonna make sure that we talk about that in our next video. I hope you liked what we had to say here today. We’re looking forward to you visiting us on our next one.

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