HomeOne of the most common questions that we are asked in our office is “Why is my dwelling coverage so high?”  We all know that the housing market is not where it used to be. This has been the case for some time and probably isn’t changing any time soon. So why does the insurance company insure your home for more than it’s worth?

Amongst other things, home insurance is there to protect you in event that there is a complete and total loss. Regardless of whether you would purchase a new home or rebuild your home, it doesn’t change the fact that the company who is insuring your home is just that….insuring your home. They aren’t necessarily insuring you to go out and purchase another home, but rather are insuring the home that you currently live in and the coverage is determined by how much it would cost to actually rebuild your home from the ground up.

Here are a few things to keep in mind when considering the differences between Replacement Cost and Market Value:

1. The Market Value for a home generally includes the value of the land on which the home sits. The Replacement Cost of a home does not include any land values, but is only concerned with the home itself.

2. The Market Value for a home is affected by changes in the real estate market. When homes in a particular area are in high demand the Market Value of a home in that area will generally go up. In the same way, when demand for homes in a particular area is low, the Market Value of homes in that area may remain level or even go down. Replacement Cost is not affected by the real estate market but is instead affected by the fluctuations in material and labor costs to build a home. For example, if the cost of material such as lumber, concrete, drywall, and carpet are higher in a particular area, then the Replacement Cost of a home in that area will be higher than the Replacement Cost of the same home in an area where materials are less expensive.

3. The Market Value of a new home generally factors in the cost that was required to build the home new. Replacement Cost, however, is looking at the cost to re-build the home, if it were completely destroyed, using all of the same materials and construction techniques originally used to build the home. The cost to build a new home can be quite different from the cost to re-build a pre-existing home due to access issues, labor efficiencies, economies of scale, debris removal and higher price of materials that may no longer be in common use (such as lath and plaster vs. drywall).

When insuring a home, we always use the Replacement Cost of the home to determine the amount of insurance required as this is what it will cost to replace or repair the home should it be damaged or destroyed. Understanding your coverage and what it means for you is just one of the many things that we offer here at Canyon Lands Insurance. If you are interested in a free quote, please visit our website at http://www.canyonlandsagency.com or give us a call at 480-288-5900. Hope to hear from you soon!

Do you know how divorce may impact your insurance policies? (image via flickr)

No one likes to think that it will happen to them but with a 50% divorce rate, it is happening to a lot of us.  The last thing you want to think about while you are divvying up your life is insurance, but it should be at the top of your to do list.  In order to ensure you are protected during and after the divorce, you will need to review and make changes to the insurance policies you have individually and together.  Here are 5 of the most common ways getting divorced impacts your insurance.

Policies that Protect Home and Property

These are your homeowner’s policy or your renter’s policy and provide coverage for damage to your home and/or loss or damage to personal property.  Odds are that at least one person is changing residences as a result of the divorce and when they leave, they will be taking property with them.  It is a good idea to reassess your homeowner’s or renter’s policy to ensure you still need all the coverage you have.  For example, if you have a rider that covers an expensive piece of art you may no longer need that rider or to pay for the additional coverage if your former spouse is taking the art.  If you are moving from a home you own to a rented space, you will want to switch your homeowner’s policy for a rental policy.

Policies that Protect Your Cars

There will definitely be changes to your auto policy unless one of you doesn’t drive.  At a minimum, the policy will need to be changed so that it only includes you as an authorized driver.  If you have more than one car, the coverage for any vehicles you no longer own can be removed as well which will save you money.  Don’t wait to make these changes.  As long as you are both listed on the policy, you are both liable for any claims against that policy.

Policies that Cover Your Life

Most people think that one of your first insurance changes you would want to make would be to your life insurance.  You don’t want to take the chance that something happens to you and your former spouse gets your life insurance payout.  However, there are several reasons why you may not want to make any changes to your life insurance as part of the divorce.  First, if you have children, you may want your life insurance proceeds to go to your spouse because they will be the primary caretakers for your children.  Second, if your spouse is paying alimony and child support and something happens to them, life insurance proceeds can help replace that lost resource.  One change you may consider is changing these policies, the ones meant to provide for the care and raising of children, from whole life policies to term policies.  This would enable you to provide means for their care until they are old enough to care for themselves without having to pay premiums for life.

If you are unsure about the insurance implications of your divorce, work with your agent.  They can help you determine what insurance you need going forward and what changes you need to make in order to have the amount of protection that works for you.

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Are you properly insured if you’re considering a remodel? (Image via google)

You have a big remodel planned this summer that includes a revamped master bedroom and bath, a new kitchen, and a small addition that will create a family room off the back of the house.  You have been dreaming about cooking in your new kitchen and waking up in your new bedroom for months.  You have all the contractors you need lined up.  Your permits are in place and you feel like you have everything taken care.  But, have you called your insurance agent?

One mistake that many homeowners make is doing major improvements to their home without consulting their insurance agent.  There are several areas where this oversight can lead to problems with your coverage while the remodeling work is underway and after it is complete.   First, you need to make sure you have the right kind and right amount of coverage to protect you during the construction.   Don’t wait until work has already started as you don’t want to find out you are underinsured when it is too late to rectify that problem.  Second, your insurance needs may change based on the outcome of the remodel.

Here are some steps you need to take to ensure you have the coverage you need to protect you during the process.

1.     Call Your Agent

It is important to do this before work starts.  There may be additional coverage you need to secure during the remodel.  If you or a family member will be doing most of the work, you may need to boost or enhance your liability coverage in the event someone is injured.  Your agent can also advise you if there are additional coverage’s you need to have in place during the project.

2.     Increase Your No Fault Medical Protection

The medical payments portion of your homeowners insurance is likely very low as the primary concern under normal circumstances is liability.  However, if you or members of your family or even other people like friends are going to be doing some of the work, you should increase this limit.  In the event someone is injured during construction, any medical bills can be submitted to the insurance company for payment.

3.     Check Out You Subcontractors

While many homeowners think to check the references of subcontractors, they don’t always think to inquire about the subcontractors insurance and bonding.  If the person doing work at your house damages your property or injures someone, you need to know that they are carrying adequate insurance to cover those losses.  If they do not, the liability may fall on you and your homeowner’s policy may not cover these kinds of claims, leaving you to pay the bill out of pocket.  Verify coverage by asking for proof of insurance from any company or individual that will be performing work on your house.  If a subcontractor is unable or unwilling to provide proof of insurance, you may want to hire someone else.

4.     Consider Additional Coverage

If you are doing a large project, you may want to purchase additional coverage like a Builder’s Risk policy.  This type of policy protects you from any damage to your house during the course of construction including damage from wind or rain, theft of materials, and vandalism.

 

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Does your insurance policy cover “acts of God?” (image via google)

If you own a car, own a house, or have a family, it’s a good bet you have some kind of insurance.  Odds are you have at least some kind of coverage for the car you drive and the place you live.  If you have personal insurance, you understand the importance of protecting yourself, your financial future, and your property.  But even savvy insurance consumers don’t always know all the ins and outs of their policies.  Here are 4 things customers commonly do not know about their personal insurance policies.

1.     Your Car Insurance Won’t Buy You a New Phone

If you have car insurance and your car is stolen, you know your policy will replace your car or reimburse you for its loss.  But, most car insurance policies will not replace or reimburse you for any personal property that was in the car at the time it was taken.  This also holds true for items stolen from your car.  Let’s say you leave your laptop under the backseat and your cell phone in the center console and someone breaks the window and steals both.  Your car insurance will cover the cost of repairing the window, but you are on your own for the loss of your laptop and phone.

2.     Losing Your Home Won’t Make You Homeless

One thing many people don’t realize about their homeowner’s policy is that it provides for the payment of expenses you incur if you have to live somewhere other than your home for a period of time while repairs are made.  For example, there is a fire in your house that causes significant enough damage that you will have to live somewhere else for 6 months; your policy will pay for the initial stay in a hotel as well as your rent and some other expenses.

3.     Life Insurance Benefits are Not Automatically Tax Free

If you die, the proceeds of any and all life insurance policies go to your beneficiaries’ tax free, right?  Not always.  Whether or not your life insurance payout will be subject to taxes completely depends on the details of your policy.  If you have a term policy where you are the policy owner and your spouse is the beneficiary, if you die during the policy term, the payout will likely be tax free.  However, if someone else, like your parent is the policy owner, there may be tax implications.  Talk to your insurance agent and an accountant to ensure you have a complete understanding of any tax implications.

4.     Natural Disasters are Not Generally Covered

An unfortunate truth in the world is that Mother Nature is unpredictable and sometimes leaves devastation in her wake.  Another unfortunate truth is that many of these disasters are excluded from standard personal insurance policies.  While most people know that flooding is not covered by their homeowners policy, they don’t realize that damage caused by tornados, earthquakes, and other “acts of god” is not covered without purchasing additional coverage.

The best protection you have is to read your policy all the way through and make sure you understand all its provisions and exclusions.  If you are unsure about whether or not something is covered, ask your insurance agent for clarification.

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Be safe while bicycling this summer (image via The Coalition of Arizona Bicyclists)

Arizona’s natural beauty and climate make it the perfect place to ride a bike.  The blue skies, warm weather, and breathtaking vistas elevate a bike ride to a cycling experience.  But while you are out, relishing the feel of the wind on your face and the warmth of the sun on your back, make sure you are taking steps to stay safe and secure.

Be Safe

Whenever you are on your bike, safety has to be a top concern.  The dangers of cycling are inherent wherever you choose to ride, but here in Arizona you are also dealing with the dangers of the desert like dehydration and heat stroke.  Sharing the road with automobiles also increases the risk of riding your bike.  In 2009, the National Highway Traffic Safety Administration (NHTSA) indicates that 2% of all traffic fatalities involved cyclists.  Be safe whenever and wherever you ride by following these simple safety rules.

  1. Use your head and wear a helmet.  Never, ever ride without a helmet.  According to the NHTSA, 70% of fatal bicycle accidents involve brain injuries and bike helmets are 85% effective at preventing these types of injuries.
  2. Follow the rules.  When you are on the road, even if you are on a bike, you need to follow the rules of the road just as you would if you were driving a car.  This helps keep you safe by making your behavior predictable to those you are sharing the road with.  Always stay as far to the right side of the road as you can safely ride.
  3. See and be seen.  The unfortunate fact is that some automobile drivers won’t see you which means you must assume that none of them see you and make sure you do everything you can to ensure motorists and other cyclists see you.
  4. Pay attention.  Don’t let yourself become distracted.  Don’t wear headphones which block out the sounds of oncoming traffic which could alert you to a dangerous situation.  Don’t talk or text on your cell phone.  Don’t try to visit with your friend while you are riding together.  The best way to stay safe is to stay focused and remain alert to potential dangers around you.

Be Secure

Even when you are not on your bike, security should be your top concern.  Bikes range in cost from a hundred dollars to several thousand dollars and are easier to steal and resell than a car.  The good news is that most standard homeowner’s and renter’s insurance policies cover losses to bicycles.  Your policy should cover the same kinds of losses that are covered if you have comprehensive car insurance like damage caused by weather, fire, or theft.  Although this is generally the case, you should check your policy or speak to your representative to make sure this coverage is provided in your policy.

As part of this check, you also need to ask if there is a limit on the recoverable amount for bicycles under your policy.  Even though your homeowner’s or renter’s policy covers damage to bicycles, the amount of coverage may be less than the actual limits on your policy.  This is especially important for anyone with expensive bicycles.  Don’t assume your policy will automatically cover the cost of a new bike.  If there is a limit, ask your agent to explain what options are available to you to increase coverage to cover the full cost of replacement.

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Has your home or car been affected by a hail storm? (image via google)

Luckily, here in Arizona, hail doesn’t happen very often, but when it does, it can do serious damage.  According to the National Oceanic and Atmospheric Agency (NOAA), hail causes more than $1B in damage each year.  It flattens crops, breaks windows, damages roofs, and dents cars.  Even small hail stones can cause major problems because of the speed at which they hit, often approaching 90 miles per hour.  The Insurance Information Institute reports that in 2011, Arizona experienced 20 hail events.  In comparison to some other states, that number is very small, but as we learned in October of 2010, it only takes one storm to cause widespread losses.   The best way to protect yourself and your property from damage is to know what to do when hail happens.

What is Hail?

Hail starts out as small chunks of ice that become larger when they collide with water droplets.  The churning nature of the storm, filled with updrafts and downdrafts, sends these little pieces of ice up and down through the varying temperatures contained within the cloud layer.  When the ice pellets go up, the water freezes around them, increasing their size and causing them to fall.  This can happen over and over again and determines the size of the hailstone.

Hail happens most frequently during thunderstorms in the spring and summer months, but can occur anytime the conditions are right.   In order for a thunderstorm to produce hail, the cloud layer needs to have a high liquid content, large water droplets, the right temperature, and sufficient buoyancy.  The kind of intense updraft winds found with tornados also help create the conditions for producing hail.

The Damage it Does

Hail can cause damage to anything it can hit which includes your home, your car, your crops, your animals, your business, and of course, yourself.  Hail can cause serious damage to the roof of your home, breaking shingles, causing structural damage, and creating leaks.  It can also break windows in your home or business which allows accompanying weather phenomena like rain and wind to damage the building’s interior.  Hail can also break the windows and windshields of cars, trucks, RVs, and airplanes.  Although only cosmetic, hail can also cause hundreds of small dents all over the vehicle, decreasing its value.  Hail can injury humans and animals and destroy crops.

How to Protect Yourself

The best way to protect yourself and your property from hail damage is to ensure you have adequate insurance coverage in place that protects you from losses from hail.  Hail damage to a home is generally covered under most standard homeowner’s policies.  It is also included in most comprehensive auto coverage.  However, it is important to read through your policies to ensure this coverage is included in your actual policy.  If your policies do not provide protection from losses resulting from hail, talk to your insurance agent about the options you have to secure this coverage.

You can also take important steps when a hail storm is eminent to limit the damage to your property.  Move any vehicle inside a garage, car port, or covered parking lot.  If none of these are available, you can cover the car with thick blankets that will help cushion the impact of any hailstones and limit the damage.   Bring any animals indoors and take shelter in a room without windows.  There is little you can do to protect crops, homes, or buildings when a storm is coming, which is why it is so important to have the right insurance coverage in place before hail happens.

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How far away is the lightning you see? (Image via weatherwizkids on google)

Lightning Safety Week begins on June 24th and runs through the end of the month this year.   Groups of all types from your insurance provider to the National Oceanic and Atmospheric  Administration (NOAA) will be spreading the word and making sure everyone knows how dangerous lightning can be and what steps to take when a thunderstorm rolls through.   The National Weather Service’s motto this year is “When the thunder roars, get indoors!” which is a reminder to everyone that in a thunder storm the safest place for people is inside of a building.

According to the National Weather Service, about 54 people are killed each year by lightning strikes.  There are also hundreds that are injured or disabled, sometimes seriously when they are struck.  For those that survive, symptoms like memory loss, chronic pain, dizziness, muscle spasms, and fatigue can persist for years after the initial injury.  This is why it is so important for everyone to be safe when lightning starts to strike.

How Close is Too Close?

New information into how lightning behaves in a storm and how far from the center of the storm it can strike has changed many of the safety protocols and concepts previously taught.  For example, children used to be taught that if you counted the number of seconds between the flash of the lightning and the roar of the thunder, you would know how many miles there were between you and the storm.  Each second equated to one mile so 10 seconds meant 10 miles.  Now, that formula is a little different.  If you count the number of seconds between the lightning and the thunder and divide it by 5, you know how many miles the storm is from you.  In the previous example, that 10 becomes a 2.  When you pair that with the new understanding of lightning’s range, it is easy to understand why the recommendation is to get inside as soon as you hear that first roar of thunder.

The Dangers of Lightning

Beyond the obvious physical harm people face of with a direct strike, lightning also poses other dangers.  One of the biggest is fire.  Lightning strikes can ignite forest and brush fires, especially in places that are very dry.  Lightning striking your home can also result in fire, which makes it even more important to have a family fire evacuation plan and fire protection supplies like fire extinguishers and smoke detectors in place.  If your home catches fire as the result of a lightning strike, it is very likely that the loss is covered by your homeowners insurance.  The next danger, power surges, may not be covered, which means you need to check with your insurance agent to determine if your possessions are protected.  When lightning strikes, it can cause power surges to race through the power grid, affecting homes far from the actual storm.   Make sure all electronic equipment, which is the most vulnerable to power surge damage, is plugged into a surge strip that protects against the type of surges caused by lightning.

Protecting Yourself

Although the safest place to be in a thunder storm is inside a building like your home, this won’t keep you 100% safe from lightning strikes.  When a building is struck by lightning, the electric current can travel through the building in a number of ways.  It can use the electrical system, the plumbing system, and even the metal bars used to reinforce the building.  These currents surging through the house can hurt you if you are not careful.  During a thunderstorm, stay away from all electronics including computers and appliances.  Don’t take a shower or come in contact with water from your plumbing system.  Don’t talk on the phone unless you are using your cell phone.  These steps will help keep you safe if the house or building you are in is struck.

Take some time over the next week to help educate others about lightning safety and spread awareness for lightning safety week.  Just remember, if you hear the thunder roar, get indoors.

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