Insurance

Avoid Gaps In Your Condo Insurance Policy

elieliresidentialcom Arlington, Home Owner , , , 0 Comment
Avoid Gaps In Your Condo Insurance Policy

Question: My condo association carries an expensive Master Insurance policy, but my lender is requiring that I purchase my own individual policy. What coverage do I gain from the individual policy that the master policy doesn’t include?

Answer: Every condo association has its own (expensive) Master Insurance policy to cover the common elements, but there are substantial gaps between the association’s policy and what you’re personally liable for without an individual HO-6 policy. Most people shop for the cheapest, fastest individual insurance policy and apply just enough coverage to meet the lender’s requirements, but that may put you at risk.

To explain common gaps between master policies and HO-6 (individual condo) policies, I’d like to re-introduce Andrew Schlaffer, Owner and President of ACO Insurance Group. Andrew is an expert in Master Insurance policies and has helped multiple local condo association’s reduce their cost and improve their coverage since writing a column on the topic last year. If you’d like to contact Andrew directly to review your association’s master policy, you can reach him at (703) 719-8008 or andrew@acoinsgrp.com.

Take it away Andrew…

Increasing Claims, Increasing Coverage Gaps

The condominium insurance marketplace is facing challenges that will impact homeowners in 2021. Water damage is leading this list of challenges—according to the Insurance Information Institute, about one-third of homeowner insurance losses are caused by water damage and freezing. The DMV is home to many aging condo buildings that struggle with mitigating water damage losses and their impact on insurance.

As water damage claims continue to rise and property damage costs increase, many insurance carriers are beginning to make changes to their coverage offerings that may increase your risk exposure.

Master Insurance vs Individual Insurance Policy

Nearly all master insurance policies in this area are written on a Single Entity basis which means coverage extends to general and limited common elements but also extends within individual units to fixtures, appliances, walls, floor coverings, and cabinetry, but only for like, kind, and quality to that conveyed by the developer to the original owner.

Items not covered by the master insurance policy and are generally not the association’s responsibility include:

  • Personal Property (clothes, electronics, furniture, money, artwork, jewelry)
  • Betterments and Improvements (demonstrable upgrades completed after the initial conveyance)
  • Additional Living Expenses (the cost to live at a temporary location, storage fees, loss of rents)
  • Personal Liability (provides protection for bodily injury or property damage claims arising from your unit)
  • Loss Assessment (triggered only if there is a covered cause of loss and the master insurance policy limits are exhausted; this assessment would apply collectively to all unit owners)
  • Medical Payments (no fault coverage available for injured guests within your unit)

Condo owners should purchase an individual condo insurance policy (HO-6), which is also required by lenders. This policy can provide coverage for the items listed above.

Review Your Dwelling Coverage

Dwelling Coverage should be included in every HO-6 policy to avoid significant out-of-pocket expenses. Many condo associations can hold you responsible for expenses that fall under the master policy deductible that are caused by the owner’s act, neglect, misuse, or carelessness. Due to the rise in water damage losses, many insurance carriers are increasing their deductibles, which in turn spurs the need for homeowners to adjust their dwelling insurance limit.

In a recent instance, a condo suffering from significant water damage losses was required by its insurance carrier to increase the master insurance policy deductible from $10,000 to $25,000. In this community, each homeowner should have at least $25,000 of dwelling coverage to indemnify them for the deductible expense in the event a claim arises from their unit. If coverage is not available, the homeowner would either pay this expense personally or the association can put a lien on their unit.

Dwelling coverage should also include a homeowner’s betterments and improvements (improvements made above what the builder originally delivered), including those completed by prior owners. Most lenders will require at least 20% of the unit’s market value insured under this coverage as well. 

What Information to Share with Your Insurance Provider

You should always review the condo association’s governing documents and understand the applicable statutory requirements (i.e. Virginia Condominium Act) and lender requirements to verify their individual responsibilities, including maintenance/repair and insurance. Along with sharing the association documents, homeowners should also provide their personal insurance agent with the following:

  • What is the master policy deductible? ($5,000, $10,000, $25,000)
  • What approach is used for the condominium insurance coverage? (Single Entity)

My Recommendation for HO-6/Other Individual Policies

Thank you, Andrew, hopefully this helps at least a handful of readers better protect themselves.

I find that most buyers go straight for the path of least resistance and cheapest premiums for their insurance coverage. Adding coverage to your existing auto policy in 5-10 minutes probably means that nobody actually reviewed your association’s Master Insurance policy and thus you’re at risk of coverage gaps. Personally, I’d rather pay a bit more to know that my policies have been designed with some personal attention and reviewed annually for gaps. Andrew and his team can handle this for you as well.

If you’d like to discuss buying, selling, investing, or renting, don’t hesitate to reach out to me at Eli@EliResidential.com.

If you’d like a question answered in my weekly column or to discuss buying, selling, renting, or investing, please send an email to Eli@EliResidential.com. To read any of my older posts, visit the blog section of my website at EliResidential.com. Call me directly at (703) 539-2529.

Video summaries of some articles can be found on YouTube on the Ask Eli, Live With Jean playlist.

It’s a Great Time to Remove Mortgage Insurance

elieliresidentialcom Arlington, Home Owner, Loan , , , , , 2 Comments
It’s a Great Time to Remove Mortgage Insurance

Question: Can you explain what Mortgage Insurance is and if there’s any way to get rid of it?

Answer:

What is Mortgage Insurance?

Mortgage insurance is an additional monthly or up-front fee added to a mortgage, usually set at .1%-1% of the loan amount, offered by either the government or private insurance companies to enable lenders to offer down payments below 20%. Mortgage insurance covers lenders for losses up to a certain amount if a borrower defaults on their mortgage.

Note: there are some sub-20% down payment products on the market for high-earning, high-credit borrowers that do not require Mortgage Insurance.

There are two types of mortgage insurance available:

  1. FHA mortgage insurance: FHA is a government program, which requires a down payment of as little as 3.5% of the sales price, and mortgage insurance is required on FHA mortgages, regardless of the amount of down payment.
  2. Conventional mortgage insurance: Conventional mortgages are home loans that are not insured or guaranteed by the government, as in the case of the FHA mortgage example. Many conventional loans are sold to Fannie Mae or Freddie Mac and thus follow these entities “conforming” guidelines.

Conventional or private mortgage insurance enables lenders to offer conventional loans with a minimum down payment as low as 3.0%-5.0%. Most 3.0% down conventional mortgages are restricted to low-to-moderate income borrowers.

How is the Fee Determined?

The cost of mortgage insurance will vary greatly, depending upon several factors:

  1. The amount of the down payment
  2. The qualifications of the borrower like credit score and debt-to-income ratio
  3. Whether the mortgage is an FHA or conventional loan
  4. The type of the mortgage such as a 30-year or 15-year loan

Mortgage Insurance Can Be Removed

If you have a Conventional Loan (not FHA), you can request that your Mortgage Insurance premium be removed from your payments once your equity reaches or exceeds 20% (loan-to-value/LTV is 80% or less). This can be a result of a natural equity increase through your monthly payments and/or through appreciating home value.

To qualify, you cannot have a late payment in the last two years and if you are making your case based on a higher market value of your home, the loan servicer will require a new appraisal (cost is usually around $500).

For Conventional Loans, your Mortgage Insurance is automatically removed once your LTV reaches 78% (equity reaches 22%) or you reach the midway point in your loan (15 years into a 30 year loan). Prior to hitting a 78% LTV, it is up to your loan servicer to decide whether to approve the removal of your Mortgage Insurance payment.

Key Takeaway

Given how much townhouse and single-family homes have appreciated recently, if you have Mortgage Insurance and have not made a late payment in the last two years, it’s a good idea to contact your loan servicer about having your home reappraised to see if you now have 22% or more equity and qualify for automatic removal or have 20%-21.99% equity and can apply for early removal.

If you’d like to discuss buying, selling, investing, or renting, don’t hesitate to reach out to me at Eli@EliResidential.com.

15 Minutes Not Enough For Homeowners Insurance

judson726 Buyer, Home Owner , 0 Comment
15 Minutes Not Enough For Homeowners Insurance

Question: How do I know that I have the right homeowner’s insurance coverage?

Answer: Most people will spend more time figuring out what movie to watch on Netflix than setting up homeowner’s insurance on their most valuable asset(s). Despite how fast and easy insurance companies make the process, you should be spending more time with a real person designing an insurance policy that fits your home and your risk tolerance.

Two weeks ago, ARLnow columnist Peter Rousselot wrote an article about a home flooded with sewage because of a back-up in the public sewer line that didn’t have proper Water & Sewer coverage and was denied coverage by the County, thus costing them almost $20,000 and a ton of headache. According to my insurance partners at Day, Deadrick, and Marshall (DDM Insurance), Water & Sewer Back-up Coverage is one of many things commonly missing from most homeowner’s insurance policies written by popular “fast and simple” insurance providers.

In addition to having the right coverage, a good insurance provider will also make sure you understand what is NOT covered that people often think is covered. Basement flooding from heavy rains is a good example of something that is often not covered, a lesson many locals have learned the hard way over the last few years. If you understand what isn’t covered, you may make different decisions on where and how you store valuables or where you invest in expensive renovations.

I asked the team at DDM Insurance what some of the most common mistakes are that they see in other homeowner’s insurance policies they review and outlined some of them below:

  1. Sewer Water Drain Backup (what was missing in the policy for the homeowner in Peter’s article): Applies to sump pumps, wells, toilets and piping within the structure.  Separate coverage applies to the breaking or freezing of pipes, but any other back-up or over run of these sewage systems within a home require this coverage and should be no less than $25,000.
  2. Additional Living Expenses:  It covers hotel bills, restaurant meals, and other living expenses incurred while your home is being rebuilt. Typically, most policies will cover 20% of the value of your home, but for those with lower valued homes, it may be appropriate to increase this limit.  In the event of a total loss, it is very reasonable for these expenses to be over and above that amount.
  3. Guaranteed Replacement Coverage on the Dwelling:  This provides additional coverage on the dwelling if there is a total loss, so the client gets a percentage over the dwelling coverage listed on the policy declarations.  Those percentage options are usually 25%, 50%, or 100%, so if you have $100K on the dwelling coverage, with this endorsement, you get up to $125K, $150K or even $200K.  This is a must because you never actually know what it will cost to rebuild until it has to be done.  The replacement cost estimators that insurance companies require to be done are only estimates so this endorsement gives people a cushion so they are not out of pocket in the event the house is totaled.
  4. Supply Line Coverage: This helps to defray the cost to replace the incoming/outgoing water and sewer lines from the street to the house.  This covers the cost to dig up the front yard, replace the busted pipe and then backfill/repair your yard. It often costs $5,000-$10,000+ for this type of work, depending how far your house is from the street and the amount of landscaping/hardscaping to dig-up/replace.

You should also consider who the actual insurer is because when a claim is filed, the quality of service and responsiveness of your insurer is critical. Like anything else you buy, the cheapest providers often render the cheapest service when called upon.

If your homeowner’s insurance was set-up online or without involvement by a real person with expertise in local insurance practices, I highly recommend getting another opinion from an insurance agency/provider who offers a more personalized review of your policies. I also don’t suggest taking those recommendations and sourcing the cheapest version of it elsewhere because oftentimes, the personalized service you get (or don’t get) building a policy is reflective of the quality of service you’ll get when a claim arises.

For a review of your current policies or help setting up a new policy, I highly recommend contacting Matt Deadrick (mdeadrick@ddminsurance.com or 301-937-1500 x13) at DDM Insurance, who I use personally and recommend to my clients.

Common Winter Damage Covered by Homeowner’s Insurance

judson726 Uncategorized , 0 Comment

Normal
0

false
false
false

EN-US
JA
X-NONE

/* Style Definitions */
table.MsoNormalTable
{mso-style-name:”Table Normal”;
mso-tstyle-rowband-size:0;
mso-tstyle-colband-size:0;
mso-style-noshow:yes;
mso-style-priority:99;
mso-style-parent:””;
mso-padding-alt:0in 5.4pt 0in 5.4pt;
mso-para-margin:0in;
mso-para-margin-bottom:.0001pt;
mso-pagination:widow-orphan;
font-size:12.0pt;
font-family:Cambria;
mso-ascii-font-family:Cambria;
mso-ascii-theme-font:minor-latin;
mso-hansi-font-family:Cambria;
mso-hansi-theme-font:minor-latin;
mso-fareast-language:EN-US;}

Question: If somebody slips and gets hurt on the icy sidewalk outside of my home, will my homeowner’s insurance cover medical bills?

After last week’s blizzard, I got a lot of questions related to homeowner’s insurance coverage, so I reached out to a reliable professional to address your questions. This week’s column is brought to you by Max Olson, a third generation insurance professional who owns the Olson Insurance Agency in Arlington VA. More information can be found at http://www.NationwideMax.com. Take it away Max…

Homeowners Insurance can cover most winter-related claims if the policy is set up properly. Considering the average home insurance claim is over $8,000, it’s important to know what is and isn’t covered. Lets look at the most common claims and how coverage can be extended from your home insurance policy. 

Trip & fall lawsuits

Make sure to properly clear your sidewalk area once safe to do so because ultimately you could be liable for someone tripping and falling on the sidewalk outside of your house. Your home insurance should provide some coverage for this (typically around $300,000) under the personal liability coverage. If you desire more coverage than this, you may want to talk to your insurance agent about getting an umbrella policy. 

Burst pipes due to freezing

The home insurance policy will cover the damage that the water causes but it generally won’t cover the damage to the pipe itself. If the pipe is damaged and a slow leak is found weeks later, generally most policies will exclude coverage saying that the damage is a maintenance issue. 

Wind damage

Whether wind directly damages your home or causes a tree to fall on your home, most policies cover the resulting damage. The deductible that you pay for this type of claim may be different than your normal deductible. Depending on your policy, this could be 2-5 times larger than your normal deductible. Some insurance companies have raised these deductibles across the board and unless people have actually read their declaration pages at renewal (not common) they aren’t aware of the changes. 

Water backup

Often, after the snow begins to thaw it can create a large amount of water around the house. If you have a sump-pump, make sure that your insurance policy covers “Water/Sewer Backup” or the damage caused if your sump pump fails might not be covered. This is one of the most common home insurance gaps that I see. 

Overall, homeowner’s insurance is a great way to protect yourself from the damage that Mother Nature can do to your home. Every few years just make sure to review your coverage and deductibles with your insurance agent so when something does happen, you won’t be surprised that the coverage is different than you expected.