Top 5 Pitfalls When Buying Home Insurance in Atlanta

Do you think the only thing differentiating one Atlanta home insurance policy from another is the price?  Many insurance providers would like to make you think that’s the case, so they can win your business with the “lowest cost” home insurance policy. Unfortunately, all they are doing is encouraging you to expose the single largest asset you have…. your home.

The reality is the difference between one home insurance policy and another might be the same as comparing a mobile home to a mansion! Below, we’re sharing the top five pitfalls to be aware of when purchasing home insurance in Atlanta.

 

  1. Not Enough Coverage to Rebuild Your Home – This is an area where misinformation reigns supreme as most home buyers have no idea how much money it would take to rebuild their home. Some people believe the home should be insured for its market value while others believe you simply need to cover the loan amount. Both methods are likely to leave you unprotected at the time of loss. This problem is amplified when unscrupulous insurance providers sell you a lower coverage policy to reduce the price. If all policies paid what it takes to rebuild your home, this wouldn’t be a problem. Unfortunately, the fine print limits the amount most insurance companies will pay out. Only a handful of companies still offer true guaranteed replacement cost so be certain your coverage is adequate. Given estimates have shown two out of every three homes are underinsured, it would behoove you to check your policy!
  2. No Backup of Sewer and Drains Coverage – Do you have a finished basement?  If so, your worst nightmare would be a large basement backup causing considerable damage to your living area. When you call your insurance company, you are probably assuming they are going to happily stroke a check for the damage. This is the moment you’ll find most home insurance policies provide limited or no coverage for this loss. How could this be? Due to heavy industry losses over the years, some of the largest insurance companies began capping this coverage and most of the smaller companies followed suit.  Bottom line, if you have a finished basement, you better hope your home insurance company isn’t going to have bad news when you call with a sewer backup claim.  
  3. Named Peril PolicyMost home insurance policies provide coverage for your personal property on what is called a named peril HO-3 homeowners policy.  This means they’ll only cover losses if they are caused by a specifically listed peril on the policy. An open peril, or HO-5 homeowners policy, is the exact opposite as it covers everything unless the peril is specifically excluded. The examples of losses that may be covered are endless, but which policy would you rather have?
  4. Not Enough to Pay for Alternative Living ExpensesIf you are displaced from your home for a significant period due to a loss, your reasonable expectation would be to live in a comparable home and stay there until your home is ready. However, your home insurance company may not help you accomplish one or either of these goals. Many home insurance policies limit both the amount they will pay AND the length of time they will pay it. If you have a long rebuild ahead of you, this could leave you paying your own bills after the insurance company checkbook runs dry.  It is best to find a home insurance company that will keep paying the bills both for the quality you need AND the amount of time you need it.
  5. No Coverage for Your JewelryLike many other areas of an insurance policy, most people just assume everything is covered with no limitations. Theft or mysterious disappearance of jewelry is one of the best examples of a “gotcha” buried within the home insurance policy. If you have a $10,000 engagement ring, most policies will only pay a fraction of that amount if the ring is lost or stolen. Additionally, if you have a collection of many different jewelry pieces the amount an unendorsed home insurance policy pays still stays the same. Often, this cap is as low as $1,000. To make sure you are truly covered, it would be prudent to specifically schedule any high value jewelry or make sure your insurance company provides a higher blanket coverage limit than a standard policy.  

 

Although these pitfalls are certainly not the only issues with a typical home insurance policy, making sure you don’t fall victim to them will go a long way in protecting the asset you worked so hard to attain.  Any one of these items could cost you tens of thousands of dollars at the time of loss. By taking a few minutes to discuss these items with a knowledgeable home insurance advisor will be time well spent.

Citations: http://www.cbsnews.com/news/most-homeowners-are-underinsured/

Why did my car insurance rate go up?

It is the number one question we get from our personal insurance clients when their policy renews. “My car is a year older and worth less but my insurance premium has increased. Why?”.

Unfortunately, we have been asking this question for five consecutive years as car insurance rates in Atlanta and the entire country have continued to climb. Back in 2015, we had just finished enduring three consecutive years of car insurance rate increases and felt confident it would be leveling out….we had no idea the hammer had not even dropped yet. What has occurred over the past two years is likely the largest auto insurance market rate crash in the past twenty plus years. Almost every insurance company in Georgia has taken one or more car insurance rate increases during this time and many of the increases are in the double digits. One of the largest auto insurance companies in the country even announced a Seven Billion (with a B! ) loss on auto insurance countrywide in 2016. So, what is driving this extreme increase in auto insurance in Atlanta and around the country?
Essentially, we are experiencing a perfect storm involving several factors leading to the increased car insurance premiums.

Distracted Driving

Distracted driving is one of the primary root causes of the increase in accidents which leads to an increase in your insurance premiums. Texting and driving has become an epidemic around the country with estimates that over 50% of drivers on the road not paying attention in some capacity. What is even more concerning is one study found 77% of drivers believe they can safely text while driving! The numbers are clear that this is not the case and the problem is only getting worse. In just the past two years, deaths from car accidents have increased 14% which is the first noticeable rise in 50 years! In Georgia, the issue is even worse with a 22% increase in car fatalities in 2015 after nine consecutive years of decreases. It is clear something drastic needs to be done not only to save on car insurance but more importantly to save lives.

Increase in cost to repair vehicle

Compounding the issue of distracted driving in Atlanta and around the country is the rapid increase in the cost to repair vehicles. With all the modern technology in our vehicles the cost to repair them has been skyrocketing. Think about it, ten years ago it may have cost $1,000 to repair or replace a standard bumper. Today, many bumpers have built in cameras and sensors which drive the cost to repair or replace up dramatically. As cars become more technologically advanced in their safety features these costs will continue to rise for the foreseeable future.

More people on the road than ever before

Until the recession in 2008, the number of total miles driven in the United States continued to increase each year. During the recession, we saw a break in this trend until 2014. However, as the economy has improved and gas prices have decreased we are now seeing more cars on the road than at any time in American history. In fact, in 2015 there were over 3.1 Trillion miles driven and the numbers for 2016 and 2017 project to be even larger. If half the drivers are distracted then we are looking at over 1.5 Trillion miles of potentially distracted driving! Let that sink in for a moment…

Auto Lawsuit Severity Increase

To put a cherry on top of the above reasons for increased auto insurance in Atlanta and around the country, the cost of bodily injury claims is increasing as well. From 2014-2016 the average bodily injury claim increased 7%. However, different regulations and market dynamics in larger cities such as Atlanta create an environment where the claim cost increase is even larger.

With these four factors working together, it is likely that we will experience a couple more years of auto insurance rate increases especially in Atlanta and the surrounding areas. What can you do to keep your premium down during this rather challenging time in Atlanta auto insurance?

  • Take a state approved defensive driving course such as the one provided by the National Safety Council, www.nsc.org. This could provide you with up to a 10% discount.
  • Increase your collision deductible as turning in a small claim would likely harm you in the long run anyways.
  • Bundle your auto and home insurance together to receive a package discount.
  • DRIVE DEFENSIVELY! As discussed, no one can escape the increased auto insurance rates in Atlanta, Georgia and all around the country. Therefore, the best way to mitigate the increase is to not add fuel to the fire with an at fault accident. Be alert and don’t text and drive!

Insurance: The invisible product…until it isn’t.

It is easy for someone to spend six dollars on a cup coffee.  Many people don’t bat an eye at the purchase of a forty thousand dollar car.  Others might feel exhilarated after buying a new million dollar home!  However, if you ask someone if they are happy spending even a fraction of that amount on the insurance needed to protect it, the answer is almost always an emphatic NO.

Why the lack of fulfillment when purchasing insurance products?  Unlike the examples above, you can’t see, feel or touch the insurance product and therefore gratification is hard to achieve.  In fact, not only do people not have fulfillment after purchasing insurance, most feel as though they are wasting money on something they are never going to use anyways.  To make matters worse, the insurance industry has focused their immense marketing dollars to convince everyone that all insurance is the same and saving money is the primary goal of the purchase.  It is an invisible product so you might as well save money where you can, right?!  Well, it is an invisible product…until it isn’t.

After a loss, the insurance becomes VERY visible.  A few examples of how this vision takes shape include,

  • Finding out that you can only replace a portion of your hardwood floors even though it will not match the flooring in the room next to it.
  • Explaining to your spouse that you don’t have any coverage to pay for your recently finished basement flooded by a sewer backup.
  • Getting a check for your totaled car that is $7,500 less than you paid for it 12 months ago.

The scenarios above are just a few of an almost infinite amount of details that could surprise you after a loss.  Unfortunately, most people who place a stronger value on the insurance purchase up front already discovered the dark side of these details first hand in the past.  For some, it was simply an annoyance while for others an uncovered loss may have caused a significant financial issue.  So how can you learn from the lessons of others?  Below are a few questions you should ask yourself and your insurance provider,

  • Do I even know what my policy coverages mean?  If you don’t, then how can you know what you are buying?!
  • Are there any significant limitations or exclusions in the policy that I need to be aware of?
  • I am still insured with the same carrier I was when I had an old car and lived in an apartment…does this coverage program still fit me now that I have a family and have moved into a larger home with newer cars?
  • Is my advisor tied to one company and product or are they able to represent my interests objectively with a variety of options?

While these are just a few of the questions you could be asking, at least they will help to start the conversation….and that could be worth much more than your cup of coffee.