From: Jon & Gayle Hoxter

As an insurance agent and a homeowner on the mountain I will offer some advice to our fellow neighbors about homeowners insurance. Know that my contract forbids me (as most brokers or agents) from speaking on behalf of or representing an insurance company on these issues (no more than you could speak on behalf of Remax). I can tell you what I observe in the industry in general and hopefully offer some advice.

First after the recent wildfires October 2007, expect your insurance company or the California Fair Plan to inspect your property prior to renewal, usually 4-5 months ahead of the renewal date. Even if they haven't looked in several years, the company will probably start inspecting yearly now. With our changing weather patterns, the risk of fire is greater now than years past. Property inspectors generally do not work for the company they are inspecting, they are outside vendors. So don't think you are talking to a voice from the actual carrier. Their job is to take measurements of your home, look for recent renovations or unrepaired damage, street accessibility and brush or combustible risk near your home. Everyone has to make sure their home grounds are as cleared as possible to at least their property line. Brush is a big word with insurance companies these days so please make sure your combustibles such as firewood, paints or other chemicals are away from your home, trees are trimmed with no overhang on your roof, brush is weed wacked down and your grounds generally show pride of ownership. A good link to brush clearing and defensible space is here; and here

Know that many carriers are looking for more than 200' clearing. Some are up to 500' of clearing now (my personal home carrier's new requirement is 1100 feet of brush clearance -yes 1100'). Why? Well there's a good possibility that emergency crews may not be able to defend your home if the flames are too close. Ask your agent what your carriers rules are - they may have recently changed.

If your current carrier is non-renewing your policy, you should seek bids from other carriers. I am seeing homes being non renewed even in tract areas where the tract may be closer to a brush risk (such as a mountain or open field). 99.9% of carriers will notify you at least 30 days in advance usually via US mail if they are non-renewing. The agent may also call to notify you when they find out. My advice is to try to stay with main line carriers and don't fall victim to underinsuring your home to save money. Remember what your insurance declaration pages "dwelling amount" says is what you will get - not what your broker told you. Now-a-days many carriers are looking at revenue per household - not revenue per item. So if they can make say $2000 per year by insuring a family's home and autos, they will be more willing to cover you and offer greater discounts than just one home or auto. Be sure to look at the actual reconstruction cost per square foot and not your home's market value. Take your total home square footage and divide by the dwelling amount or main home coverage to get a reconstruction cost per square foot. I try to look for a reconstruction cost of at least $160 per foot this year, before any extended replacement endorsements (and that is for a very basic home). If a home's dwelling amount is $100,000 and the home is 1000 square feet: that equals $100 per foot which is too low. Remember it always cost more for an insurance company to repair or replace an item that you or I (as we have all witnessed when we go to an auto body shop for a repair estimate and the first thing they ask is if the insurance company will be paying for the repairs). Also look for an agent whom is in the area. Will 1-800 insurance agent be able to come to your home if you have a problem or concern? What ever you do - don't base your decision solely on premium as you may be disappointed if you have a claim. A higher deductible such as $1000 or even $2500 may also reduce your annual premium.

Finally I am going to say something that I hope won't get me a lot of hate-mail. Expect your homeowners premium rates to rise. Why - well for many years insurance companies have made good profits on little or sporadic claim activity and we have all gotten used to those rates. But building materials and labor rates have steadily risen over the past few years and our recent fire activity has been a wake-up call for the insurance companies. We live in a high fire risk area and we may have to pay for the right to live up here. As far as profits from the big insurance companies goes - remember profits are regulated by the state department of insurance and carriers cannot raise rates without approval (which typically does not happen during election years anyway). And finally review your policy annually with your agent, even if they don't. Your reconstruction rate may need to be adjusted for a previous estimate which is too low. Which part of your house would you not want to rebuild if you didn't have enough reconstruction funds?

I am sorry for the folks whom are being non-renewed. Carriers move in and out of markets based on their overall exposure. Be smart, study your policy, keep your grounds cleared, check your smoke detectors and fire extinguishers and be prepared in case you need to evacuate. Make sure your policy is as current as you can get it -regardless of the premium. I know that no amount of money will ever get you back to the day before a claim event but make sure your insurance company is obligated to rebuild your home as it sits today.

Jon & Gayle Hoxter

Back to Insurance