Homeowner's Insurance Information

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FREE    FREE    FREE information to help you become a better more aware and more knowledgeable consumer when it comes to purchasing homeowners insurance.

Insurance fraud, actually numerous insurance frauds, are being perpetrated on an unsuspecting public many thousands of times each day in the United States.

Homeowners insurance is big business with many different insurance carriers writing homeowners insurance in each state. The only thing that they all seem to have in common is that they very often under insure us all on purpose.

I am giving you this free information to help you avoid these frauds. This information is badly needed and since I have not seen any such information available, free or paid, I have decided to set up this web site to help educate you about this horrendous and destructive fraud. You think you have good coverage? I doubt it. Find out before its too late. It is simple and can save you many hundreds of thousands of dollars if you ever lose your home and need to collect insurance in order to rebuild it.

I am not selling anything, my information is all free.
This web site has no shopping cart since all the information is free.
You do not have to give me your email address (I don’t even want it) so I won’t be selling it to anyone and I will not be sending you anything.
When I say FREE I Mean FREE. I have been told that the word FREE helps ratings of web sites so I apologize for how often I have used it.

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Let me explain the homeowners insurance problem which has bankrupted many families, caused an incalculable amount of grief, and most likely impoverished people who thought they were properly insured.

Let me educate you (for free) about an insurance industry fraud which causes its greatest damage to homeowners during disasters such as floods, wildfires, tornados, etc., due to how many families are affected all at once. The first disaster is from nature, but the second is caused by the insurance companies to protect their profits and their shareholders.

The fraud is very simple, but sadly, even though we have experienced many natural disasters in the U.S. during the past decade, this insurance travesty is still not being covered by the media. It is also not being addressed by any legislation designed to prevent it from continuing.

What exactly is this fraud? It is the intentional under insurance of our homes as well as all the written legalese wording which protects the insurance companies from law suits regarding their intentional under insurance, and makes sure that they will win if you decide to sue them anyway.

Here is how it works:
Your agent (wrong, he or she is the company’s employee and NOT “your” agent), either asks you a number of questions about your home while you are sitting in their office, or else they actually come to your home in person to sell/write you the policy.

They generally get the square footage measurements for your home from the city or county records and very often they DO NOT actually check the measurements themselves, which I believe they should be required by law or regulations to do.

This means that if for ANY REASON the measurements they used in issuing your policy are not accurate, this is yet an additional reason that your coverage will not be sufficient.

FOR THOSE READERS WHO ARE THINKING “I HAVE REPLACEMENT COST COVERAGE SO THIS DOES NOT APPLY TO ME” YOU HAD BETTER KEEP READING.

The agent or broker may (should) ask you if you want additional coverage for special items such as precious metals, antiques or expensive jewelry, artwork, watches, firearms, etc., since these WILL NOT be covered unless you have a separate “rider” for them as well as full descriptions and appraisals and you should get photographs into their company’s file (and keep additional records in at least two other locations off site.)

If you have your computer connected to a GOOD off site back-up system such as MOZY, SOS, Carbonite, etc., than this will be a good place to keep back up copies of documents, appraisals, recordings and photographs. If you do not currently have off site computer back ups which are updated daily, I highly recommend you purchase this very inexpensive and worthwhile protection.

You should ask the agent to explain just how much coverage the policy will give you for loss of use while you are rebuilding your home if it is destroyed, miscellaneous items such as buying clothing and necessities while you are in a rental, and the actual rent you will need to be paying during the months to years before your home is rebuilt and ready to move in to.

Make sure this REALLY seems adequate since the additional cost to increase this coverage is VERY CHEAP compared to the possibly tens of thousands you will pay out of pocket if these are not adequately covered. Personally, I recommend that at the time you will be discussing the insurance policy you are looking to purchase with the agent, you turn on a tape recorder and while it is recording, say the following.

In order to be sure I do not misunderstand anything you tell me about my proposed insurance coverage, and so that I can go back and review our discussion later to see if possibly I want to change something or increase my coverage or add one of the additional riders that we will discuss, I will be recording our conversation and my recorder is now recording.

Let me assure you that after speaking to a number of attorneys during and after the 2003 and 2007 wildfire disasters in Southern California, it is well accepted (by the attorneys) that the insurance companies are under insuring homeowners deliberately.

Very possibly, your agent does not know this and truly believes that the formulas and figures that he is being provided by his company are in fact accurate to cover your home. Let me assure you however, that they most likely ARE NOT.

Here is an EXTREMELY important question.
Would you ask an accountant for an estimate to repair your car? How about asking a carpenter for an estimate to do your landscaping? Would you ask your plumber to help you figure out which stocks to invest your money in? OF COURSE NOT. The reason should be obvious. You must always ask the professional or trades person who has the skills you need and who actually does this kind of work. Of course you also need to locate an honest and ethical one for the estimate, but it MUST be an expert in the correct field.

So here is the problem.
Neither your agents nor the companies they represent are in the building, contracting or construction business. They actually have no experience in how to accurately estimate the cost to rebuild your home, nor do they keep up with monthly changes in material costs or yearly changes in building code updates. It simply IS NOT THEIR JOB (although maybe it should be) to have the expertise to give any type of reasonably accurately rebuilding costs.

You must ask a reputable building contractor to give you a rough approximation of what they feel it might cost to rebuild your home to current required codes with similar quality and materials and finishes and appliances.
My experience after having MANY of my patients and students do this, is that almost every one found out that they were many hundreds of thousands of dollars UNDER INSURED. To make matters worse, each of their insurance agents outright refused to increase their policy limits claiming that they were in fact adequate. They had to threaten to cancel their policies and go to a different company before the agent was willing to increase their coverage limits to where they should have been in the first place!

How about “replacement cost” coverage?
It most often IS NOT WHAT YOU THINK!
Although this may seem strange, there are actually many different types of replacement cost insurance riders. Each one is VERY SPECIFIC and if you do not understand what yours actually means, you had better find out. There is only one type of replacement cost coverage which really means that you do indeed have a policy which will cover your full replacement cost. If the wording is not as follows, then you do not really have replacement cost coverage. It needs to say that you have:

 This, and only this, means that the company is supposedly assuring you that they will replace your home no matter what it costs and no matter what your policy insurance limit may be.

Every other replacement cost rider that I have seen simply means (if you read the fine print) that they will pay a bit over your listed limits. It could be 10%, 20% etc., but if your rebuilding costs end up being 40, 50, or even more than 100% above what they list in your policy (which happens quite often) then you are basically screwed and will not have the funds to rebuild.

When you sign your policy, the insurance company put in an important little statement to protect themselves against any possible future law suit from you. This statement, below which you generally sign your name, may have slightly different wording from various companies but in essence it says that you have read or reviewed the policy and that you accept and agree with the coverage or possibly it says that you yourself chose the coverage limits. This effectively removes any liability from the agent and company since you are swearing that it was either YOU who decided on and chose the coverage limits, or that you reviewed the policy and accept that they are adequate.

Because of this sentence, I have been told by a major law firm, that no one has successfully won a lawsuit against any of the major insurance companies for not properly insuring a homeowner.

The best way to be certain you have adequate coverage is:

1. Find an ethical honest general building contractor who has done some good work for you or a neighbor in the past and who is in the business of building new homes.
2. Pay him/her to measure your house, look at its construction, examine the type of appliances and upgrades you have such as granite counter tops, marble bathroom enclosures, custom cabinets, solar power, etc
3. Have them give you an honest estimate of what it might cost to rebuild your house if it was completely destroyed in a fire or other disaster.
4. Ask what the current range of building costs per square foot is in your area. As I write this in June of 2010 in San Diego County California, the contractors I respect have told me this runs from a low of $200 to a high of $350.00 per square foot. (Many insurance companies here are using a ridiculous $150 figure)
5. Multiply the figure the builder gives you, by the ACCURATE square footage that they measured for your home. As an example, a 2000 square foot home in an area with $250/Sq foot rebuilding costs would come to a base of $500,000 to which you must add the cost (if you have one) to rebuild your garage which is NOT included in standard house measurements. Usually, it is WAY less expensive to build a garage so here that would add about 400 square feet times a much less expensive $125 per square foot for an additional $60,000.
6. Don’t forget to have them add for any deck or landscaping you may have.
7. Now have this be listed as your actual policy limits and I would still pay the extra for the replacement cost feature I explained previously.

In California, we have yet another problem

Since I live in California, I found yet another important issue which also needs to be addressed.

• Earthquake insurance IS NOT OFFERED by any insurance company except the state’s CEA (California Earthquake Authority).
• CEA does not offer any special coverage or replacement cost provisions.
• They will only take into account the limits stated on your homeowners insurance policy. This is yet another reason to be sure that this figure will in fact be adequate to rebuild your home.

Copyright 2024 David Getoff.
I, the copyright holder of this work, release this work into the public domain. This applies worldwide.