Warning: Some of the information in this post may offend some in the Insurance and Mortgage industry. 🙊

There are a number of mistakes/errors our team finds on a daily basis when reviewing homeowners insurance for new clients to TCS. On this post we will only touch on the top 3 and we hope the information provided will help you, the insurance consumer be better informed (regardless of who’s feeling we hurt).

•Mistake #1. Letting the mortgage company, builder, loan officer, mortgage broker or real estate agent dictate where your insurance should be placed at. This is now a very common thing, where individuals that are not certified or licensed in insurance, tell you where to cover your home! – Why is this happening??

We can only assume, based on our own experience, that many times the consumer is so overwhelmed with the entire purchase or refinance process that the insurance part or it all just seems easier to delegate over to someone else.

Other times we have found that the reason a certain insurance is being pushed on you is because that sale somehow benefits them and not you!

Then there are situations where the lending has tight margins because the loan isn’t packaged properly, and you may end up being nudged-pushed-or-shoved into a cheap policy in order to close the deal. – If you talk to any experienced professional mortgage broker, they will tell you that this only happens when you are working with someone inexperienced and it could cost a higher interest rate over the lifetime of your loan.

At TCS Insurance Brokers we don’t get involved in the lending or real estate process because we believe that each professional should stay in their own lane. To professionally practice what they are accredited and licensed to do. So, it concerns us tremendously when we see this type of situation occur.

We’ve actually seen it all and that’s why we are so candid and outspoken about it. – Let me ask you, how would you feel if your home went up in flames and you did not understand what your lender, RE agent or mortgage company put you into?

We have seen how consumers lose their entire life savings after a fire and then end up being accused of insurance fraud because the erroneous information entered into the policy application does not match facts.

Be a smart insurance consumer and let a professionally licensed insurance agent or broker handle your home insurance needs. Because if a mistake is made on the policy, and you are not paid, you will have back up coverage under that licensed professional’s E&O policy!!

•Mistake #2. Not taking the time to customize your homeowners insurance policy to fit your lifestyle, your wants and needs. Most consumers think that home insurance is a cookie cutter type of product but the fact is that ALL insurance for homes is fully customizable!

There are those that believe that insurance is a rip off and nothing matters except the cheapest price. – Why do consumers come to believe this?

In our experience we have found that there 2 types of consumers who believe this. One is a consumer who never had a loss and believes that they can outsmart insurance companies who have been around for hundreds of years. The other consumer is the one that went through a claim and it wasn’t until then that they took the time to review, and found out they were not covered. – Both of these consumers end up going through the sad reality that insurance is a legal contract where one party, the insurance company, has a team of legal experts and the other party, you, only have the person who set up the policy for you (so you better make sure that the people on your side know what the heck they are doing!!).

Now, back to the customization part. – All insurance policies can be customized to meet your specific needs. Some policies have coverage “bells and whistles” that make you feel warm and fuzzy, but at the end of the day you may never need those extras. What you should be looking at instead is the Limitations and Restrictions of your un-endorsed policy.

Sadly, because every other company is advertising cheap, the good insurance companies with solid insurance coverage contracts are now only a handful. So that leaves you with companies that get you in by putting you on entry level coverages on a very restrictive policy contract. Which then has to be properly endorsed by a knowledgeable insurance professional .

  • Here’s a list of the most commonly missed coverages and endorsements:
  • Service Line Coverage is what will help pay for repairing service lines coming into your home. Such as power and water lines that break and cause damage. The damage caused is already covered by the homeowners policy but the repairs of the lines are not covered, and so this Service Line Coverage would be needed to pay for those repairs to those lines.
  • Water Backup coverage is to pay for damage caused when a sewer line creates a backup to your home and damage is caused to floors, walls and ceiling by the backed up water and sewage. Without this coverage you would be limited to suing the City for that damage caused by water and sewer backups. 
  • Building Ordinance & Law coverage is to pay for increases in reconstruction cost due to new building codes. For example: if your home was being rebuilt today due to a major fire, the City would require that interior sprinkler systems or fire suppression systems be installed in certain areas of your home. That cost would have to be paid by you if you did not have this coverage. – With this coverage the insurance shares in the cost up to a certain percentage. Only a limited number of companies, like MetLife, offer 100% of this coverage at a minimal premium.
  • Animal Liability is to help protect you if a pet you own hurts someone outside the household.
  • Personal Injury coverage is an extension of Liability that protects you from Libel and Slander lawsuits.
  • Loss of Use is a coverage that all home policies have BUT far too many do not have enough of. This is used to pay for a temporary residence while your home is being rebuilt. Which could take upwards of 18 months to rebuild a property that is even at 20% in damage.
  • Named Perils or Open Perils is the policy forms/contracts that are currently available and one can be better suited than the other for your type of property (learn more about it on our post: HO3 vs. HO5)

As you can see, there are custom options available to you that you probably never heard of until now. – So go back and demand an insurance review! Then question your insurance pro if he or she never added or mentioned these options to you.

Mistake #3. Having a low deducible and falling into the claim trap. Your house insurance is meant to cover accidents that were sudden and accidental. Not something that happened over a long period of time or due to age or poor maintenance. So why have a low deductible, keep paying higher premiums on your insurance and then fall into the most common claims traps?!?

See, an insurance company is most likely to uprate your policy premiums or cancel you over a $3,000 theft or water claim then a $100,000+ fire claim. So why continue to keep a low deductible on your home policy and pay extra for it? Insuring a home is not like insuring your car, so why keep on treating it as such?

A home insurance company has upwards of $500,000 to lose on 1 claim. While an auto insurance company is limited to the value of the car when no one was hurt (actually $15,000 when you carry cheap-o-save-a-lot auto insurance). Therefore, preventable and low value petty claims are scrutinized and penalized higher than anything else when it comes to home insurance. – You might be wondering why, right? Well, insurance carriers believe that history will repeat itself and when it comes to insurance, that repeating history often comes in higher multiples. So your house insurance company will rather charge you more or cancel you to make sure they are keeping ahead of what is bound to happen.

Are we saying that you should not use your insurance for a claim? That is absolutely not what we are saying here. We want our clients to be well aware of how things will turn out when something happens. This way our client can make an informed decision.

Let me give you an example of the most common claim where consumers feel cheated and then burned when the rate later increases or the policy is cancelled at renewal. – A big wind storm rolls by your town, your fence fell over and your roof tiles came off. You put in a claim and you come to find out the following: 1) The insurance company expects you to be a responsible property owner and prevent further damage with out of pocket expenses. 2) The insurance company comes back to you with an Actual Cash Value estimate to solely replace the 10 missing tiles and the broken down part of the fence, not the entire thing. 3) You are given a check, minus your deductible, for a couple thousand dollars at most and now it’s too late to go back. <—– This example here is real life and it’s how your home insurance works, no matter what name brand it’s under!!!!

Like we mentioned above, home insurance is meant to cover Sudden and Accidental damage but some of the most common types of losses have coverage limitation. Such as your fence, roof, and outside trim on your house. – These are the most common claims that all insurance companies see from underinformed consumers. And this is the main reason why most consumers see a rate increase or a cancellation!

So why not save money with a higher deductible?

You might say that you can’t afford to come out of pocket with $3,000 – $5,000 when something happens to your house. However, when you put in a claim you will not be charged or asked to pay the deductible. Instead you will receive a check for the damage minus the deductible. Often, right on the spot the very next day the loss occurs (when dealing with quality home insurance). Which you can then use to repair the damage however you find it to be the best fit!

Our suggestion to our clients is to keep a deductible that is comfortable to them and that makes sense. We inform our clients on what to expect from each company and it all helps them save money on way better insurance than any other consumer out there!!

Closing thoughts from the post author. I truly hope that this information has gotten you to want to question and review your home insurance policy. Because far too many people worry way too much about their car insurance and never take the time to update the policy that will cover their biggest investment, a home. – If you feel that this information was useful, please share it. If you got insulted, it wasn’t my intention but I stand behind what I believe to be fact and I invite you to dialogue with me. In closing, my goal with this posts and all others is to be informative and provide real life value that you can use to stay ahead.

post written by: Domingo Ramos, Insurance Broker, proudly licensed to transact insurance in California, Oregon, Nevada and Texas – domingo@tcsib.com

What does TCS stand for?

Total Client Satisfaction Insurance Brokers is in our name and we believe in educating our clients to help them make an informed decision. Then backing up our promise by standing side by side with our clients during a claim. It’s insurance the way it’s meant to be!

Why choose TCS Insurance Brokers?!

We help insurance consumers uncover missing coverage while qualifying them for higher quality and lower priced insurance. We take time to understand each situation, then we match needs with a tailored solution that exceeds expectations.

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