#56 About Insurance

The decision to buy a home of your own, includes both the consideration of, the added expense of and the mandate to carry the appropriate insurance coverage for the property you are considering.  It’s a “given” that qualifying for your Mortgage Loan means your new property must be insured to protect the property you do not actually own until your Mortgage loan is fully paid.

Many factors drive the amount and the kind of insurance you must carry for your specific property.  The recent factors of repeated (and repeated!) wildfires and floods have inspired many new insurance considerations and changes that directly relate to both of those “natural” disasters.   It is not that floods and fires did not exist in the past.  However, the more recent phenomenon, of wildfires originating miles away then sweeping across densely populated areas some distance from their point of origin, is seriously impacting fire insurance availability and limits.   Newer, current insurance coverage must take into consideration more than just a property’s immediate and adjacent factors that previously had more localized criteria.

Your local insurance agent is subject to their parent company’s decisions concerning fluxuations in coverage offered in specific areas; and, of course, also concerning resulting changes in cost.  Some changes are tough to understand and accept.

The drastic conditions cited above have caused the industry to broaden the circumstances that they must consider when considering insuring your home property.  For instance, is that property in an elongated, potential wildfire path?  Under the right conditions – and based on recent patterns -- could it sweep towards you?   That once might have seemed like a farfetched rationale!  But, times have changed, and your future insurer has had to accommodate the realities of recent events as well as today’s more sophisticated prediction technologies.

(Some insurance carriers have become cautious in light of the recent, radical unpredictability in weather fluxuations, resultant floods and wildfires and have simply stopped covering some areas.) 

On a more positive track, many insurers have built industry connections with fire-fighting experts and other related entities in order to apply the most relevant and realistic criteria into their current decisions and coverage offerings.

An important factor that influences flood insurance is a property’s elevation as well as its proximity to flood plain geography.  In that consideration, it is important to know your insurance agent’s credentials where contemporary guidelines are concerned.  (As Buyer, it’s your responsibility to explore the value of acquiring an “Elevation Certificate” which can be provided by a Land Surveyor.)

For your new home’s protection it is very important to have Liability insurance.  You could say it’s critical!  Ask questions!  You may be able to acquire “umbrella” coverage, which is just a good way to visualize all the property’s insurance needs written into one complete contract with your insurer.  It might also be a way to cut down the cost by bundling all the needs in one package.

All those points considered, where do you begin your search for the right insurance professional?   Connections are one way.  Sometimes there’s an insurance connection that has been in the family for years; sometimes friends, co-workers or an employer have recommended associations for referral.  If you have not already chosen an insurer, it’s smart to get advice and recommendations from your Mortgage loan officer.

Perhaps the most important point about insurance, when you acquire your loan and are buying your home, is learning exactly what coverage you need for your very specific property!    With the combined expertise of your Mortgage loan officer, your Realtor and your Insurance agent, all the relevant information and characteristics of the home itself, its grounds, location, geography and relation to flood and wildfire potential should be available and well documented.  

That will be the preparation that assures you that the insurance package you buy for your new home is exactly right.

Special thanks to John Ussery with Farmers Insurance for his valuable help in clarifying the details!