How much should my home be insured for?

⅔ of American homes are under insured!  That means that 2 out of 3 homeowners reading this is in a financial peril.

So, how do you make sure you are not a part of this frightening statistic?  Easy: you insure your home for 100% replacement cost value.  

How do you know if you are insured to 100% replacement cost value?

Only think about three things:

• debris removal
• cost of labor
• cost of material

Forget about market price of your home. How much you bought the home for and how much is worth now means absolutely nothing.

Ask yourself: If my house burns down, how much would debris removal, a contractor, and new material cost?

You might or might not know the answer.  If you don’t know ask an agent to provide you with a replacement cost estimator for your home, or you can go online do one yourself.

Use this as a general guide: most homes should be insured for $150 per square foot (finished space).  Unfinished space is less, maybe $80 per square foot.  $150 is used for standard building materials; for custom/luxury materials and intricate designs used a detailed replacement cost estimator done by a trusted insurance professional.

***This blog post is meant only as a simple guide for general public and because of that I have skipped the scary part of the story which is: what happens if your home is not insured to a full 100% replacement cost?

Short answer is that you are left with a BIG bill to pay, even if you only have a partial loss.

If you need examples or more information feel free to call at 802-505-1054 or e-mail at Irfan@green-insurance-agency.com.

Insurance score- what is it?

Insurance score is one of the most important factors used by insurance company when determining your rate for home and auto insurance.  You should know about it because a great insurance score will save you hundreds on your auto and home insurance.  

Insurance score is a numeric system similar to a credit score.  Some variables used to calculate insurance score are: credit score, paying history, # of open accounts, your financial habits and choices.

Why does the home and auto insurance company care for the above mentioned factors?  Insurance companies have found direct correlation between high insurance scores and probability of future claims.   High insurance score=low probability of future claims.  Low probability of future claims=low insurance premium.

I have seen cases where clients have saved $700 a year for having an excellent insurance score.  Unfortunately, I have also seen cases where client was charged extra $700 a year for having a poor insurance score.  

What can you do to maximize your insurance score?  Having a high credit score helps, but people that regularly make conservative financial decisions always have the highest insurance score.  Also, always pay your insurance bill on time, and if you can, pay in full.  If you choose to pay in installments try to budget for the billing plan that has the least # of installments.

Let me place you on a brief hold.

A potential client with several auto insurance claims before signing the application says: Geico's rate was lower, and they promised it would go way down after six months. 

Me: They probably have not considered your claims history; you should call them, it's always good to know. 

So she calls.  After going through all the claims, Geico ended up not being able to provide coverage due to frequency of claims and second part of their conversation  (almost word for word) went something like this:

Geico representative:  Let me place you on a brief hold.

Potential client: OK.

(after a brief hold)

Geico representative: Yes, ma'am, sorry about that.  Yes, I am sorry, but at this time we are unable to provide you with a quote.

Potential client: But I have an MBA, great credit, almost none of the claims are my fault.  I can increase my deductibles; I didn't know that frequent small not-at-fault claims would create such a problem, if I knew I would of paid this out of my pocket.  I have never missed a payment, and I am def. done with claims.  I haven't had a claim in the past 16 months.

Geico representative:  Yes I understand.  Unfortunately there is nothing I can do.  I would suggest you call a local insurance agent.  They work with many different insurance companies, I only work for Geico.  Local agent has access to many different options and they will be able to shop for the best possible rate and will be able to find a company that can insure you.  Again, sorry we can't help you.

My client: OK, thank you.

How is auto insurance rate calculated?

Your kid starts dating, and it looks like it might be serious.  But you don't know this person.  You trust your kid, but you are curious so you ask: where do you go to school, what do you do, what do you want to do, where are you from, where are your parents from, what do your folks do for work, do you have any brothers and sisters, how did you two meet...?  You do this because you worry and you want the best for your kid, and you think that more information and more historical data the better, because this will help you know the person and it will help you predict their future actions/choices.  And while most of this information and historical data will not affect the relationship between your kid and this person, you ask anyway, because you feel that more information= an educated guess instead of just a guess.

Well, insurance companies go through the similar process when determining your auto insurance rate, and there are two major things  insurance companies really care for: probability of future losses, and paying behavior.  Many factors are taken into consideration, some obvious but some might surprise you.

•           Age
•           Sex-female drivers receive more favorable rate compare to male drivers
•           Marital Status-married drivers receive lower rate
•           Driving violations
•           Whether you rent or own-if you own you will get a better rate
•           Accidents
•           Severity of accidents
•           Frequency of accidents- having ten small accidents that amount to total insurance payout of $10,000 is worse than having one $10,000 accident
•           Education- higher education=lower rate
•           Occupation
•           Type of vehicle you drive- new car vs. old car, expensive car vs. what I drive
•           Physical location- insurance companies divide states into many territories and they use statistical data, like crime rate, traffic info, etc. to determine the risk levels associated with your physical location.  So, even if you stay in the same zip, and only move a mile down the road, your premium can and probably will change
•           Type of coverage
•           Amount of coverage
•           Prior insurance
•           Prior limits
•           Gaps in coverage
•           Insurance score