Real Estate - An Information Website

Homeowners Insurance for a New Home Purchase

Selecting a home insurance policy is a requirement for closing escrow on a new purchase of a home when a loan is used as part of the purchase price. The lender requires insurance as part of their terms of the loan and must cover up to the replacement value of the dwelling in case of damage. The quote for insurance must be turned over to the title company during the escrow period and paid out of the closing costs at the time of the closing.

Homeowners Insurance is a policy that covers the repair or replacement of the house, the contents of the house, living expenses, liability claims, and medical payments. The policy holder pays an annual payment dependant on the amounts of each of these coverages and the amount of the deductable limit of the policy.

Insurance Decisions

Selecting the insurance company and the type of policy is the result of a complex series of decisions:

1. On-line Insurance versus Agent Insurance: Some insurance companies are transacted completely on-line and can be researched, quoted, and enacted all on-line without having to speak to a representative of the insurance company. Most of these companies still try to connect the buyer with an agent to help cross-sell their products. Most insurance companies represented by an agent can use online systems also, but prefer to meet face to face to help the buyer select a product. An exact quote of exact policy coverage by these different types of agencies reveals that the prices are remarkably similar even though the on-line agencies claim to be lower cost. The decision by the buyer should really be about which type of policy is best for their particular needs and time constraints and what they expect from the policy. If the buyer has little knowledge about their needs and how they fit into a policy, it is best to select an agent from a reliable referral source.
2. Insurance Company: The buyer should select an insurance company that has a good rating with a neutral rating company such as:
   1. JD Powers:  www.jdpowers.com “J.D. Power and Associates is a global marketing information services company operating in key business sectors across a variety of industries, providing customer satisfaction research, market research, automotive forecasting, social media research, and performance improvement programs.”
   2. AM Best: www.ambest.com “Best's Credit Ratings are independent opinions regarding the creditworthiness of an issuer or debt obligation. Best's Credit Ratings are based on a comprehensive quantitative and qualitative evaluation of a company's balance sheet strength, operating performance and business profile, or, where appropriate, the specific nature and details of a debt security.”
   3. State Department of Insurance:  http://www.insurance.ca.gov/0100-consumers/0010-buying-insurance/0020-resident-insurance/  “The California Department of Insurance (CDI) provides several tools to help consumers who are shopping for residential insurance. In addition to consumer information guides, you can use the Homeowners Premium Survey, the Consumer Complaint Study, and Insurance Company Profiles to gather valuable information on residential insurance companies”
3. Coverage: The coverage amounts need to be determined and then fit into the category levels for the different insurance companies. The following is a list of a typical coverage selection for a home in Los Altos, California:

Decsions on the actual policy that affect the premium amount:

1. Deductable: The choice of the deductable amount can cause the rate to fluctuate by 255 or more. Most people these days are choosing the highest deductable available to keep the annual rates lower. Most insurance companies offer a $2,500 maximum deductable.
2. Multiple Policy Discounts: Most insurance companies cover numerous types of policies and will offer a 15% discount if the policy holder carries automobile, life, or blanket liability policies also.
3. Dwelling/ Replacement Value: The coverage for repair and/or replacement of the house in case of fire or damage.
4. Separate Structures: The coverage for repair and/or replacement of detached garages, arbors, storage sheds, or tool sheds.
5. Personal Property: The coverage for personal belongings such as artwork, clothing, silverware, dishes, antiques, jewelry, collectibles, firearms, and money. This amount is often approximately 50% of the dwelling coverage.
6. Loss of Use: Coverage for housing, meals, and storage while the house is unavailable.
7. Medical Payments: Coverage for medical expenses for accidents on the property.
8. Personal Liability: Coverage amount if the policy holder is found legally responsible for injury to others.
9. Escalators: Annual increases in the coverage for each line item.
10. Blanket Liability Coverage: Many policy holders will also add a blanket liability policy to increase the personal liability coverage above all of their other policies.
11. Earthquake Insurance: Although not required, the addition of an earthquake policy is often a good idea. http://www.earthquakeauthority.com/ is a good location to find out about these policies. They offer dwelling coverage up to the replacement value of the house, personal property coverage, and additional living expenses. The deductable amount is often 15% with rates in the $1,500 to $2,500 range annually.
12. Flood insurance: The national Flood Insurance Program offer insurance for those properties in flood areas as shown on the flood maps provided by FEMA. http://www.fema.gov/plan/prevent/floodins/infocon.shtm is a good location to find out about these programs. Check the JCP report in the disclosure packet to see if the property is included in the type of flood zone that requires this additional policy. The rates are often in the $1,000 to $2,000 range annually and may be required as part of the loan process.

1. Fire and smoke
2. Wind and storms
3. Explosions and fire
4. Aircraft or vehicle damage to the home
5. Vandalism
6. Water damage

Typical damage excluded in most homeowner insurance policies:

1. Floods
2. Earthquakes
3. Ground settling or upheaval
4. Termites
5. Insects and rodents
6. Mold and mildew
7. Neglect and vacancy issues

Insurance Questionnaire for Most Policies

1. Do you rent or own this property? Own
2. Property Address: 823 S. Knickerbocker Drive
3. Property city and state: Sunnyvale, CA
4. Property zip code: 94086
5. This home is your: Primary
6. Number of adults in the household: 2
7. How many property losses have you had in the last 3 years?: 0
8. How would you characterize your home? Standard
9. What year was your home originally built? 1955
10. Square Footage: 1156
11. Number of Separate Living Units: 1 single family
12. Home Exterior Wall type: Stucco on frame
13. Dwelling style: 1 story,
14. Number of full baths: 1
15. Number of half baths: 0
16. Type of roof: Asphalt shingles,
17. How old is your roof? 6 Years
18. Type of garage: 1 car attached
19. Does your home have any decks? No
20. Does your home have a pool? No
21. Does your home have a basement? No
22. What type of heating system is being currently used at your home? Gas
23. Estimated reconstruction cost (if known): $175000

 List of Insurance Companies by Market Share in California:

1. STATE FARM GENERAL INSURANCE COMPANY

2. FIRE INSURANCE EXCHANGE

3. ALLSTATE INSURANCE COMPANY

4. MID-CENTURY INSURANCE COMPANY

5. AAA NORTHERN CALIFORNIA, NEVADA & UTAH INSURANCE EXCHANGE

6. INTERINSURANCE EXCHANGE OF THE AUTOMOBILE CLUB

7. MERCURY CASUALTY COMPANY

8. UNITED SERVICES AUTOMOBILE ASSOCIATION

9. AMCO INSURANCE COMPANY

10. LIBERTY MUTUAL FIRE INSURANCE COMPANY

11. FIREMAN'S FUND INSURANCE COMPANY

12. USAA CASUALTY INSURANCE COMPANY

13. TRAVELERS COMMERCIAL INSURANCE COMPANY

14. PACIFIC SPECIALTY INSURANCE COMPANY

15. TRAVELERS PROPERTY CASUALTY INSURANCE COMPANY

16. FEDERAL INSURANCE COMPANY

17. FOREMOST INSURANCE COMPANY GRAND RAPIDS, MICHIGAN

18. SAFECO INSURANCE COMPANY OF AMERICA

19. ALLIED PROPERTY AND CASUALTY INSURANCE COMPANY

20. 21ST CENTURY SUPERIOR INSURANCE COMPANY

21. SAFECO INSURANCE COMPANY OF ILLINOIS

22. HARTFORD UNDERWRITERS INSURANCE COMPANY

23. CENTURY-NATIONAL INSURANCE COMPANY

24. FIRST NATIONAL INSURANCE COMPANY OF AMERICA

25. FIRST AMERICAN SPECIALTY INSURANCE COMPANY

26. KEMPER INDEPENDENCE INSURANCE COMPANY

27. CALIFORNIA CAPITAL INSURANCE COMPANY

28. HARTFORD CASUALTY INSURANCE COMPANY

29. CALIFORNIA CASUALTY INDEMNITY EXCHANGE

30. CHARTIS PROPERTY CASUALTY COMPANY

31. ENCOMPASS INSURANCE COMPANY

32. RESIDENCE MUTUAL INSURANCE COMPANY

33. TOWER INSURANCE COMPANY OF NEW YORK

34. NEWPORT INSURANCE COMPANY

35. AMERICAN MODERN HOME INSURANCE COMPANY

36. IDS PROPERTY CASUALTY INSURANCE COMPANY

37. CIVIL SERVICE EMPLOYEES INSURANCE COMPANY

38. AMICA MUTUAL INSURANCE COMPANY

39. HOMESITE INSURANCE COMPANY OF CALIFORNIA

40. FIDELITY NATIONAL INSURANCE COMPANY

41. WAWANESA GENERAL INSURANCE COMPANY

42. MERITPLAN INSURANCE COMPANY

43. NATIONWIDE INSURANCE COMPANY OF AMERICA

44. BALBOA INSURANCE COMPANY

45. FARMERS INSURANCE EXCHANGE

46. AMERICAN RELIABLE INSURANCE COMPANY

47. CSE SAFEGUARD INSURANCE COMPANY

48. EMPIRE FIRE AND MARINE INSURANCE COMPANY

49. AMERICAN SECURITY INSURANCE COMPANY

50. FIRST AMERICAN PROPERTY & CASUALTY INSURANCE COMPANY