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!

Are you adequately insured? (image via wikipedia)

Most of the time when people talk about specialty insurance, they are talking about insurance coverage that provides companies with specialized protection based on their industry or on specific risks they are face.  However, there is also a side of specialty insurance that is all about covering personal interests.  Many people believe that their auto, renter, or homeowner’s policy provides coverage for these specialty risks and depending on the policy, it might.  But in many cases these specialty items actually indicate a gap in coverage that leaves them open to liability claims and property loss.  To help you understand if you have any of these specialty risks, here is information on some of the most common types of specialty personal coverage.

Boat/Watercraft Insurance

If you own a boat, you may have some coverage under your existing homeowner’s or renter’s policy.  Many companies will provide limited coverage for small boats like canoes as part of their base homeowner’s protection but it would be a mistake to assume any and all watercraft related risks are covered this way.  Even if minimal property coverage is included in your homeowner’s policy, it is unlikely that liability protection will be included.  Additionally, if you have a boat with an engine that can go more than 25 mile per hour, you may need to obtain additional coverage.

Flood Insurance

While most homeowner’s know that damage caused by floods is not covered by their homeowner’s insurance policy, there are still many homes that remain unprotected against this specialized risk.  Additionally, flood damage is also excluded from most renters insurance policies which means that even renters need to secure this specialty protection, especially if they are in a flood zone.

Earthquake Insurance

Damage from earthquakes and other natural disasters is generally excluded from personal insurance coverage which means it must be purchased separately in order for you to be protected.  Most earthquake policies or riders carry a much larger deductible than other personal policies.  If you live in an area where earthquakes happen often, having this insurance is critical to protecting your financial future.  But remember, earthquakes can happen almost everywhere and in areas with low risk, the cost of adding this coverage is often minimal.

Motorcycle Insurance

Riding a motorcycle, just like driving a car, carries certain risks and responsibilities and most states require drivers to carry a certain amount of insurance.  However, your motorcycle is not always automatically covered under your existing auto policy.   A motorcycle insurance policy protects you from property loss or damage if something happens to your bike and with liability coverage in the event you are responsible for causing damage to something or someone else.   In addition to this base coverage, you may also need to add coverage for accessories or specialized equipment.

Recreational Vehicle Insurance

Like other types of specialty coverage, recreational vehicle insurance provides additional protection from risks specific to your RV.   This type of insurance goes beyond what is covered by auto policies, property damage and liability coverage, and often offers additional protection from breakdowns and travel related risks.

If you are concerned that you have a specialty risk that may not be covered by your existing policies, talk to your insurance agent.  They can walk through the details of your policies and help you determine if you need additional coverage and which type you need.

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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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Remember as you’re having fun, be safe this summer (image via google)

When most of us think of summer, we don’t think of the increased safety risk associated with everyone’s favorite season.  Along with cloudless skies and outdoor fun, summer brings a new set of safety concerns and homeowners need to take specific steps to safeguard their family, friends, and property from these additional dangers.

Here are 7 tips sure to make your summer as safe as it is sunny.

1.     Secure Your Pool

If you have a pool, you have a problem – you must secure the pool and take serious measures to keep everyone with access to the pool safe.  According to the CDC, of the 3,400 people who drown each year, 20% of them are under the age of 14.  Make sure your pool is secure by erecting a solid barrier around the entire perimeter and installing alarms that will ensure no one can enter unsupervised or unattended.

2.     Supervise Children

Adults don’t realize that it only takes a few moments of inattention for a child’s life to be lost.  This is especially true when children are near a pool, lake, or other body of water.

3.     Don’t Mix Alcohol and Water

If you are doing something around water, like swimming, boating, fishing, or waterskiing, save the drinks for another day.  According to information gathered by the CDC, 70% of adolescent and adult deaths resulting from water recreation involved alcohol.

4.     Get Certified

From drowning to dehydration, the dangers of this season are present in almost every summertime activity.  The best way to protect your family is prevention.  The second best way is to be able to respond immediately in the right way to preserve life.  Becoming certified in basic first aid and CPR will give you the skills and knowledge you need if the worst happens.

5.     Mow with Care

According to the Insurance Information Institute, more than 75,000 people must be taken to the emergency room each year because of lawn mower related injuries.  Almost all of these are caused by human error.  Make sure you know how to use your mower properly and that you are vigilant in your attention while the mower is on.

6.     Dress Appropriately

This holds true no matter what you are doing.  If you are mowing the lawn, wear clothing that protects your legs from flying objects.  If you are hiking, wear layers.  If you are lounging by the pool, wear sunscreen and a hat.   If you are in a boat, wear a life jacket.  If you are using the grill, wear protective gloves and a heavy apron.

7.     Grill Responsibly

Grills present several possible dangers ranging from serious burns to starting house fires.   To protect your family and property, make sure that your grill is stored and used in a safe location.   Never use a gas or charcoal grill in the house and store all gas canisters outside and away from the house.  Check to make sure that all grill components are working properly before using the grill each time and keep a fire extinguisher close by in case there is an emergency.

Summer is supposed to be about having fun, being on vacation, and enjoying the best of what nature has to offer.  Keep your summer fun and carefree by paying attention, taking the right precautions, and eliminating those risks that you can control.

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If your home were destroyed, is your insurance policy enough to rebuild and replace your possessions? (image via Delaware state fire school)

When was the last time you looked at your homeowner’s policy If you are like most homeowners, you looked at it when you bought it and then you filed it away in your filing cabinet or fireproof box for safe keeping.  But like the other insurance policies you have to protect you, you need to review and reassess your homeowners policy on a regular basis.  June is Home Safety Month which provides a great opportunity to review everything related to the safety and security of your home, including your homeowner’s policy.

Start by reading through your policy to make sure you understand all the terms and conditions and any exclusions.  Don’t hesitate to ask your insurance agent to explain anything that is unclear or answer any questions that come up during your review.  One of the most important things you need to understand about your policy is the type of replacement coverage that it provides.  This makes a big difference in determining the amount of coverage you need and explains how the insurance company will assign a value to your home and its contents if you experience any losses.

There are two primary types of replacement coverage, actual cash value and replacement value.  If your policy provides actual cash value for your losses, the insurance company will value your possessions and your home at the actual cash value minus any depreciation.  If your policy provides replacement value coverage, the insurance company will value your possessions and home at the current cost to replace them.  Understanding the difference between these two types of coverage is critical to understanding how much protection your homeowner’s policy is actually providing.

Let’s look at how the amount the insurance company would pay differs for the same loss under each of these coverage types.  There is a fire in your home that causes damage to the kitchen and the living room.  Both rooms have extensive damage and will require significant work to repair.  The fire destroys your stove, refrigerator, television, couch, and an antique desk.  Here is how the payout would differ.

If you have actual cash value coverage, the insurance company would use the value of the home to calculate the value of the portion of the house that was damaged.  Once that value was established, any depreciation would be subtracted from that value and that is the amount the insurance company would pay out for the damage to your home.  If your policy provides replacement coverage, the insurance company would get an estimate from a contractor on the cost to repair the damage and the payout would cover the cost of the repairs regardless of the value of the home or any depreciation.

The same process would be applied to the possessions damaged in the fire.  If your policy provides actual cash value, the current value of your stove, refrigerator, television, couch and antique desk would be determined and if appropriate, any depreciation would be subtracted in order to determine the payout.  If your policy provides replacement value, the cost to purchase comparable items to replace those that were destroyed would determine the amount of the payout.

As you can see from these examples, if your policy provides actual cash value coverage, you may not receive enough money from the insurance company to repair your home or replace your possessions.  Since most people don’t have the cash on hand to make up the difference in costs, most homeowners should consider having a policy that provides replacement value coverage.

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Earthquake

Are you protected in the event of an earthquake? image via martinluff on Flickr

No matter where in the U.S. you live, there is a chance that there could be an earthquake in your area.  Of the 50 states, there are only 8 that haven’t experienced a single earthquake in the last 30 years according to the United State Geological Survey (USGS).  But even those states that have been safe the past thirty years are not immune from quakes or from damage caused by quakes occurring in adjoining states.  The simple fact is, if you live in the U.S., you run the risk that an earthquake will cause damage to your home.   If that happens, the only way that your insurance company will pay for the damage is if you have purchased additional coverage specific to earthquakes.

For those living in Hawaii, Alaska, and California, the three most seismically active states, earthquake insurance may seem to be a requirement.  However, even in those states, many homeowners haven’t purchased the extra coverage that would protect them from large losses.  According to the California Earthquake Authority (CEA), which provides the majority of earthquake coverage to California homeowners, only 12% have purchased earthquake coverage.   In Alaska, which is one of the most seismically active areas in the entire world, this number is only a little higher at about 33%.

Why Don’t Homeowners in High Risk Areas Buy Coverage

There are several reasons that even homeowners in Alaska and California don’t have earthquake insurance.  Unfortunately, one of the main reasons is that there are still people who believe that their homeowner’s policy will cover any losses resulting from an earthquake.  In almost every case, this simply isn’t true.  Other homeowners have made the conscious decision not to purchase this additional coverage because they feel the cost of the coverage plus the high deductible that is standard on earthquake policies makes the coverage unaffordable.  Still others believe that if there is a disaster, the government will be there to help make them whole and help them rebuild their house.

So, Why Do I Need it?

There are four reasons that every homeowner should look into purchasing an earthquake policy, even those who live in states that are not high on the earthquake risk list.

1.     If you live outside the big three, coverage is likely much less expensive than you think.

2.     Houses outside of the big three are rarely built with earthquake resilience in mind.  This means that if there is an earthquake, there is likely to be more damage to structures and property than there would be in California, Alaska, or Hawaii.

3.     It doesn’t take a catastrophic quake to cause catastrophic losses.

4.     Between 2001 and 2011, the USGS reports that there were more than 40,000 earthquakes in the U.S., almost 5,000 of which did not occur in the big three states.

5.     FEMA estimates that a major earthquake in a city with a large population could result in damages exceeding $200B.  Without insurance, you will be completely reliant on federal and state disaster relief for any assistance.  As the average award individual/family falls between $2,000 and $4,000 per family and the maximum grant is less than $15,000, you will be hard pressed to rebuild and recover.

Earthquake insurance is the kind of thing that it is easy to convince yourself you don’t need… until you do.  Then, it’s too late.

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Marriage

Are you properly insured after a major life-changing event? Image via cheesy42 on Flickr

Many people don’t realize that different life events can have an impact on their insurance needs as well as their insurance premiums.  You might think that turning 25 will bring your auto insurance down or realize that getting married means you need to combine your coverage into a single policy, but there are many other ways that major life events can impact your insurance.   A survey conducted by Trusted Choice and reported in Insurance Journal found that more than 30 million U.S. households have insurance policies and/or coverage that don’t fit their current needs.

Here are 3 of the major life events that can change what kind of insurance you need, how much insurance you need, or how much your insurance costs.

1.     Getting Married

When you tie the knot, your insurance needs and costs can change in a couple different areas.  First, your car insurance rates may go down because you are married and combining policies may qualify you for a multi-car discount.  If you are purchasing a house, you will need a new homeowner’s policy.  If you are moving in together but renting, you will want to combine your renter’s insurance and make sure the coverage limits of the policy are enough to replace both of your possessions.  Regardless of whether you are a renter or a homeowner, you may want to make sure your property replacement coverage will cover your wedding rings.  Finally, now that you are married, your life insurance needs may be drastically different and should be reviewed.  Even if you have enough insurance, you will likely need to make beneficiary changes at a minimum.  Talk to your insurance agent to make sure the coverage you have is the coverage you need and that you aren’t paying more for it than you should be.

2.     Getting Divorced or Becoming Widowed

A change in marital status can mean that you need to make changes to your insurance coverage.  Going from two cars to one, moving to a smaller house, selling valuables, and splitting assets can all result in the need for less coverage and lower limits.  This can be a big cost savings for you that you may not think of during such a difficult time.  You will also want to change any beneficiaries on life insurance or other policy payouts.

3.     Having Children

Becoming a parent for the first time or the last time is a big change and it can mean you need to make changes to your insurance coverage.  According to a life insurance fact sheet put out by LIMRA, almost 70% of U.S. Households with children under 18 would be in jeopardy and destabilized financially if the primary bread winner died.    If you have added a new family member by birth or adoption, it is a good idea to sit down with your insurance agent and make sure you have enough life insurance coverage to meet the needs of your family and that beneficiaries are designated properly.  You may also want to review your auto and home insurance policies to ensure that coverage limits are adequate for your larger family.

While these are 3 of the major life events that can affect your insurance costs and needs, there are several other events that should trigger a review of your policies with your agent.  If you have a new teenage driver, buy a vacation home, have a significant change in income, buy or inherit valuable property, or as you get ready to retire, sitting down with your agent can make sure you and the ones you love are protected.
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