Home Insurance 101

Home Insurance 101

Insurance Information Institute concluded in their “2016 Consumer Insurance Survey” “Homeowners Insurance: Understanding, Attitudes and Shopping Practices” (February 2017)

homeowners have gaps in their knowledge of their coverage. For example, many policyholders do not recognize that most flood damage is not covered by their basic homeowners insurance.

1,006 people were surveyed for the report.

I can certainly attest, with our headquarters in a coastal city, neighboring the city ranked 2nd behind New Orleans in terms of threat by coastal flooding, that many home buyers and home owner misunderstand flood insurance. Flood insurance is a separate policy from home insurance. Many people do not know that home insurance does not cover flood. (The same goes for earthquakes.)

The report also concluded that most home owners do have a basic understanding of their home insurance policy. That’s great! We’ve served over 2000 customers at COMPARITY. So I can also attest that everyone struggles to understand their home insurance – even if they think they understand or don’t want to admit otherwise.

There are definitely some who care about details much less than others. They figure that they don’t have much control. They don’t want to waste time thinking about insurance. They just want to that know the company issuing their policy is solid and not ripping them off. “I’m required to have this. Just make it easy.”

I get it. I also think, because home insurance is something most home buyers must have, they should gain the upper hand with a simple education.

I want to make it easy. Here’s my Home Insurance 101.

DISCLAIMER: THIS INFORMATION IS SHARED FOR GENERAL, EDUCATIONAL PURPOSES. ALWAYS CONSULT DIRECTLY WITH A LICENSED INSURANCE AGENT WHEN CONSIDERING THESE QUESTIONS AND ANSWERS IN YOUR OWN, UNIQUE SITUATION.

This is insurance for what is likely your most valuable financial asset. Risk is inherent for everyone involved. Again, consult a licensed insurance professional about this when you are at that point. If you don’t want to ask an agent providing a quote, you can ask us. Start with online chat on our website.

Basics

I’ll summarize a few fundamentals here, but I’m going to assume you know why insurance exists and how it works. This is the run down specifically on home insurance. A companion to the info below is our handy reference guide for insurance vocabulary on our web site.

Coverages

Coverages are the things protected by your insurance. If you experience loss of all or part of your home, or items in your home, or if people are injured on or by your property, then your home insurance coverage pays or otherwise compensates for the loss.

Typical home coverages are:

  • Dwelling Amount – for rebuilding or repairing all or part of your home
  • Loss of Use – for not being able to live in your home while it is rebuilt or repaired (Not for remodeling!)
  • Medical Payments – for paying some medical expenses when others are injured
  • Other Structures – for rebuilding other man-made structures on your property, ex., shed, separate garage, stone wall
  • Personal Property – for the items you own in your home, ex., wardrobe, furniture
  • Personal Liability – for protecting your estate against major loss due to your liability

There are also common, optional coverages called “Endorsements”. I think it’s probably simplest to think of them as coverages. Typical home endorsements are:

  • Ordinance & Law – for when a loss requires an update due to new building codes
  • Water-Sewer Backup – for when the connector line between your house and the main utility line causes water or sewage to back up into your home

Deductibles

Deductibles are the amount subtracted from the insurance company’s compensation as your responsibility. Deductibles offset insurance carriers’ risk of excessive claims for minor losses.

Rule of Thumb: If a loss recovery costs less than, equal to, or only slightly more than your deductible then you should not claim the loss and should pay for the repair yourself.

Typical home deductibles are:

  • All Peril – general damage to your home
  • Wind & Hail – damage caused by any type of wind and/or hail
  • Named Storm – damage caused during periods of government-issued storm warnings

What’s the difference between “wind and hail”, “hurricane”, “tropical cyclone”, and “named storm”?

This one is tricky because weather is tricky. To complicate matters, news media are beginning to name winter storms. However, the National Weather Service does not name winter storms.

“Named storm” in the context of home insurance refers to a non-winter, wind-related weather event as named by the National Weather Service. Named storm deductible is “activated” when the National Weather Service issues a storm warning. Named storm deductible applies until some period after NWS lifts final storm warning. All damage that occurs during the activation period is subject to the named storm deductible and not the all peril deductible. In most cases there is no difference between “named storm”, “hurricane”, and “tropical cyclone” as these are geographic distinctions.

“Wind and hail” is a broader distinction than “named storm”. “Wind and hail” typically covers all wind-related weather events, including named storms. If your policy or quote has a named storm deductible and no wind and hail deductible then all wind and hail events that are not named storms are treated as all peril.

Lowering Premiums

Yes, you can lower premiums by reducing coverage and/or increasing deductibles. Consider it carefully.

Will you be able to make up a difference in higher deductible if you are suddenly faced with it?

I just saw a comparison for one of our customers that compared a 1% and 2% hurricane deductible for a dwelling valued at $375,000. That’s a difference between a $3,750 and a $7,500 deductible. If a hurricane causes $7,400 in damage that home owner will pay 100% out of pocket for the repair.

Words to the Wise

There are few things with insurance that seem to trip up most everyone.

Percentage-based Deductibles

When you have a percentage based deductible the percentage applies to the amount of your dwelling, not the amount of your loss. So, if you have a 200,000 home and a 1% deductible then your deductible is 2,000.

Percentage-based Coverages

When you have percentage based coverage, the percentage also applies to the amount of your dwelling, not the amount of your loss.

Claims

Always call or write your agent before making a claim. Your agent will help you determine if a loss is covered and if it makes financial sense to report the loss. Don’t make small claims, especially if you can afford the recovery yourself.

Only claim losses when you need the insurance to help you recover. It’s not worth adding a small claim to the Claims Loss Underwriting Exchange (CLUE) Report on your property and personal housing record.

I’ll write more in the future about the CLUE report and how it affects you. (UPDATE)

We make it easy for you understand an insurance applicationAll of this information is embedded in our online application, which you can browse entirely without entering any information. We want it to be easy for you to understand an insurance application before you submit it. Check it out.

Is this information helpful? I want to know. If you have more questions about anything here, please ask. Hit me up in the comments. I’ll be happy to discuss more.

Scott Hunter

Founder/CEO

COMPARITY

3 ways home insurance can derail mortgage closings

image: www.geograph.org.uk

Many home buyers don’t start thinking about home insurance for their new homes until their lenders ask them about it during their closing process. Inexperienced lenders can be late to check on their clients’ insurance.  Too often, things come up that can have a negative impact on loan closing and even wreck deals. We’ve handled enough panicky phone calls and emails from mortgage lenders and home buyers to know. But home buyers and lenders don’t have to worry if they keep a few things in mind.

Environmental Conditions

We at Comparity live in an area where both hurricanes and flooding threaten homes on an annual or perhaps more frequent basis. But even areas not as infamous for damaging weather can face environmental conditions that force insurance carriers to adjust their underwriting criteria, increase rates, and restrict policy issuance. Regional restrictions vary by carrier over time and change frequently. Homebuyers often expect to go to their current insurance carrier for a new policy only to find the carrier has temporarily halted issuance of new policies in the area.

Excessive Claims

At some point during every closing process both home buyer and lender should be protected by a Claim Loss Underwriting Exchange (C.L.U.E.) Report. No home buyer or mortgage lender should do a deal without a C.L.U.E Report. The C.L.U.E. Report details the insurance claims history of a property. If there have been many claims on a property the cost of insurance on that property can increase, no matter what carrier. But again, all carriers have different appetites for risk so their policies will have different costs for excessive claims properties.

Debt-to-Income

For any number of reasons, including the two aforementioned, the cost of a home insurance premium can put a buyer over a legal limit on the amount of debt they can carry relative to their income. Hazard insurance policies often vary by thousands of dollars across carriers.

Shop and Compare

Anytime someone is buying a home they should shop and compare their options for home insurance. Mortgage lenders should encourage their clients to shop for home insurance well before closing. There are too many variables in every homebuyers situation to assume that they can find the right coverage for the best prices by going to only one seller, even if that seller represents multiple insurance carriers.

 

Announcing: Industry-First Integration Between Hazard Insurance and Loan Origination Software

FOR IMMEDIATE RELEASE

Contacts
Kevin Curry Angelo Jones
757-333-0712 678-781-7209
kevin.curry@comparityins.com angelo@williammills.com

Comparity, LendingQB Partner to Provide Industry-First Integration Between Hazard Insurance and Loan Origination Software

Virginia Beach, Va., Feb. 15, 2017 – Comparity, LLC, an insurance technology company whose mission is to simplify insurance shopping, has partnered with Costa Mesa, Calif.-based LendingQB to integrate its home insurance platform directly into LendingQB’s loan origination and loan processing software.

The industry-first integration imports mortgage loan application data directly into Comparity’s home insurance application. Home insurance applications require many of the same inputs as mortgage applications, and home insurance is required in order to close on typical home loans. The integration makes processing home insurance during the mortgage closing process more simple, transparent, and streamlined for both lenders and homebuyers.

“Everything in the mortgage industry is driving toward digital. It seems obvious for hazard insurance to be integrated but business and regulatory constraints have been obstacles,” said Scott Hunter, Managing Partner and Chief Executive Officer at Comparity. “We created a technical solution that enables homebuyers to shop privately with the most carriers using their mortgage application data. This integration also helps lenders track their clients’ hazard insurance requirement, validate estimates, and download evidence of insurance,” he added.

“To be competitive in today’s market, lenders need to remove as much waste from their workflow as possible,” said Tim Nguyen, President of LendingQB. “The partnership with Comparity eliminates hours of wasted time finalizing hazard insurance applications that can be leveraged through the existing data in the LOS.”

LendingQB’s LOS is completely web-based and designed to provide lenders a flexible, innovative workflow. Its open-architecture application protocol interface (API) enables lenders to select the tools, like Comparity, that best help their efficiency. Comparity’s technology and distribution platform is designed to fit specifically with the lender’s workflow and bridges the gap between a digital mortgage and hazard insurance.

About Comparity

Comparity is an insurance technology company whose mission is to simplify insurance shopping so everyone wins. Comparity connects buyers and sellers of personal insurance through an online, side-by-side comparison of multiple policy quotes from multiple companies using a single insurance application. Comparity reaches more insurance carriers than any other company, including carriers no other company can compare. Learn more at https://www.comparityins.com

About LendingQB

LendingQB is a provider of Lean Lending solutions. The Lean Lending solution consists of a 100 percent web browser-based, end-to-end loan residential mortgage origination system, best of breed integrations with key industry partners and ‘adoptimization’ services that result in faster cycle times and lower costs per loan. For more information, please call 888.285.3912 or visit www.lendingqb.com.

Licensed in 50 States

We reached another important milestone last Friday: Comparity is a licensed insurance producer in all 50 states.

Now our technology can be used by insurance shoppers to compare options and buy insurance from any agency in the country. Our technology gives both buyers and sellers the “shopping cart” and “buy button” they’ve always wanted but could never have until we came along.

Insurance agencies who join our network receive completed insurance applications to quote for free. We receive a fee only for each new policy acquired using our technology. Both independent and exclusive carrier agencies can participate.

We are actively seeking new agencies to join our network in all 50 states, and especially in California, Florida, Georgia, and Oregon.

If you are an insurance agency owner or principal and would like to download our presentation to learn more please click here.

Shopping for Insurance Matters

It may seem trite, but shopping for insurance is important. I might go as far as saying that shopping for insurance is vital to our economy, for reasons I’ll try to explain here.

First, some background. Right now people truly can’t shop for insurance. Sure, anyone can go online, check out familiar brands, maybe fill out a few quick forms. In the case of auto insurance you might even get back some instant estimates. But this is all just marketing and to truly get even a single accurate quote you must complete a multi-page application with a credit check and motor vehicle report.

confusedIn the current market, some lead generator sites attempt to fool insurance shoppers into thinking they are getting multiple quotes to compare, side-by-side. Truly these sites sell shoppers’ contact information to eight different agents who race to be the first to reach you. Whatever information is entered with the lead generator has to be re-entered with each company selling the insurance in order to provide an accurate quote. (We call it a “hard transfer”.) Buyers hate this situation and so do sellers.

Buyers (and sellers) are then left with two choices: 1) go all in with the first company they feel good about and hope it works out, or 2) fill out the same application over and over with multiple carriers. Unfortunately for buyers (and sellers) both options have further consequences.

Option 1 doesn’t always work out. Sometimes carriers will decline to insure properties based on their current risk exposure. It happened to me when my carrier – a company my parents had been with for 30 years – could not insure a new property because it was too close to the shore and the company had suffered too many hurricane losses in the area. It turns out that going with the company your parents have, which is exactly what most people do, isn’t reliable. Even when things do work out there’s no way of knowing you ended up with the right coverage for the best price because you didn’t compare.

Going to an independent agency that represents multiple carriers is one way to mitigate the main consequences of Option 1. But going with independents still leaves out comparing options from captive carriers that are household names, offer bundling discounts, and own > 50% of the market.

It may be obvious why Option 2, filling out the same application over and over, is no good

Comparing Homeowners Insurance Without COMPARITY

but there’s more to it. For each application you fill out you will get back a different result, probably as an attachment to an email. Maybe you’ll make a folder on your computer to save all the attachments. When you open them they’ll all look and feel different. Different companies use different terms to mean the same things. There’s no way to easily compare options. Maybe you’ll try to make your own spreadsheet and hope you understand everything. And because you still had to contact multiple companies to get this far, they are all calling and emailing you to sell their product.

You wish you could complete one application, send it off to every insurance company, and get back valid quotes that you can easily compare through a consistent format, all while staying in control of the shopping experience and not giving your contact information to multiple sales people.

Why is this so important? Why is it “vital to the economy”? I think it should be obvious by now why the status quo is terrible and that something should be done. What’s not so obvious is how this affects a very important segment of our economy: home buying.

Every year 5M people buy homes and home insurance is a required product on every home loan. Buying a home is a time when people should shop for insurance. We evaluate every other aspect of a home when applying for a mortgage; appraisal, title, flood elevation, and the like. Why would we not evaluate the home insurance? The only reason is because shopping for home insurance is so difficult.

As mortgage processing gets faster, more automated, and more consumer-driven the need for a fair way to shop for home insurance becomes greater.

The combination of required home insurance and no reasonable way to shop is a recipe for disaster. In addition to potential underwriting issues and lack of basic evaluation, the lack of a way to shop for home insurance creates costly inefficiencies in the best cases and leads to unethical and illegal business practices in the worst cases. As mortgage processing gets faster, more automated, and more consumer-driven the need for a fair way to shop for home insurance becomes greater. How else will we balance market demand with consumer protection?

We’ve already seen what negligence and fraud in the mortgage industry can do to our country’s economy. I don’t think there’s the same potential scale for wrongdoing when it comes to mortgages and home insurance but I do see legal entities forming that undermine consumer choice and trust while attempting to maximize corporate profit. In response new government regulations are written to attempt to counter new behavior. Everything becomes more convoluted and inefficient when it could easily become simpler and more efficient. The solution is clear: provide the insurance market with a fair and reasonable way to shop when none exists today.

So that’s what we’re doing at Comparity. If you’d like to find out more, connect with me on LinkedIn and send me a message.

 

Press Release: Comparity partners with Texas-based LendSmart

Dogs and Home Insurance

Chow Dog

Did you know that dogs can have an impact on your home insurance? Many carriers have policy restrictions based on whether or not you own a dog and the breed of your dog. Some carriers place restrictions on specific”aggressive breed” dogs, often to the dismay of owners who love those breeds. Search the web and you’ll find plenty of lists like “Top 5 most aggressive breeds” and “10 dog breeds that will raise your insurance rates”.

 

Google results for aggressive breed dogs
Danger is in the eye of the insurer

At Comparity we take a different approach to home insurance when it comes to dogs because, rest assured, there is an insurance carrier out there who will be glad to cover your home no matter what kind of dog you own. That’s why coming to Comparity for your home insurance option is the best decision. With access to more carriers than anyone in the business we can find the carrier who loves your dog breed just as much as you do!

Get a free audit of your home insurance now!