“Ok, so here is my main pet peeve with the dork population.” That was the opening line from an established insurance adjuster who happens to be my sister ... the one with the pool (refer to last week’s article). As we were relaxing on our respective food-shaped floaties in said pool (me on a pineapple, her on a pizza), we began discussing business. Since most homeowners are also insurance policy holders, we share a common thread that ties our businesses together. This can result in some fairly thought-provoking, proverbial food for thought (pizza and pineapple, to be specific).
To be clear, an insurance policy is required by lienholders (namely mortgage lenders) to protect you from unforeseen events and prevent financial ruin should such events occur. Unforeseen events that insurance provides for are usually in the "sudden and accidental" language of the policy. An average or good insurance policy will cover the following perils, with some limitations: fire/smoke, unless intentionally set (refer to article on Fourth of July festivities); lightning strikes, as described, some lightning strikes can be near the home and will cause real havoc on low voltage systems; wind or hail storms, unless windows/doors are left open intentionally; explosions; vandalism and malicious mischief; damage from aircraft, car or vehicle; theft (one of the big insurance fraud red flags); falling objects; weight of ice and snow or sleet; and water damage.
Water damage comes with a definite caveat. Homeowners insurance will cover sudden and accidental pipe breaks or leaks from a drain system inside the home. Specific exclusion for flood and ground water would be covered separately by a flood policy. If you live in a flood plain, flood insurance is required on your home if you have a mortgage. FYI: A flood can completely destroy a home and your homeowners insurance will not pay for flood under any circumstance unless this is a named peril on the policy. It does cost extra.
On the other hand, homeowners insurance is NOT a maintenance plan. Thus, the opening statement by my sister. For example, if your roof wears out, this is not sudden or accidental. Having 40 years of wear and tear on your 20-year shingles is not going to be covered. Despite what the roof salesperson says, old shingles can be easily distinguished from wind or hail damage. Yes, a roof is expensive, but an insurance policy is not a savings account to draw from when your roof wears out.
Another item it won’t cover is your 20-year-old water heater when it finally rusts through and starts spraying water into the home. This is true for all other appliances and includes your faucets and drain. If the drain pipe under your sink leaks and you do nothing about it for six months until is rots out the cabinet, warps the flooring and grows mold in the basement ceiling, walls, and flooring, you are probably out of luck; remember, it must be "sudden and accidental." You have an obligation to mitigate damages. Riding them out to get a new kitchen and remodel your basement will only cost YOU money.
Now allow me, on behalf of my sister and all other adjusters, to extol the virtues of homeowners insurance. First and foremost, it is cheap, meaning super cost effective. For example, a homeowner’s policy coverage, which includes building, personal property, additional living expense and liability on a $650,000 home, equates to about $1.7 million in coverage for about $1,700 a year. That’s .001 cents per $1,000 of coverage. This is a no-brainer financial move — the possibility of complete financial ruin or the .001 cents per $1,000 of coverage.
One last thing to consider, and then I must reapply the sunscreen, if you tell your agent of choice that you want the cheapest policy they have, that is exactly what you will get. You may save 50 bucks a year but seriously, you will have sub-par coverage with a higher deductible. Pay the extra 50 bucks. Hopefully you will never use it, but you will sleep better at night. Heaven forbid something actually happens and my sister shows up at your door; invite her in and make friends. Her pool is amazing (even though it doesn’t add monetary value to her home).
Jen Kirchhoefer is an associate broker and Realtor. She can be reached at firstname.lastname@example.org or 801-645-2134.