Getting Your Edge: How to Downsize Your Home.
Life Happens to Everyone! These events can force changes in how and where you live. How you react and manage those events is what matters.
Join Judy Gratton and Dennis Day, two agents with over 30 years combined experience in real estate, as they provide you insights into managing the twists and turns life throws at you, so you can land on your feet and in the right place.
Whether you need to downsize from your forever home, upsize to handle a growing family, or moving an aging parent into a safer setting, the “Downsize" Podcast will share the information you need to be ready.
Using their personal experiences and interviews with experts in a variety of fields, like: financial planning, estate sales, or living abroad, our hosts will dish out the information and advice that will help you take on life’s challenges informed and prepared. For more information about the Edge Group Real Estate Team:
www.EdgeGroupTeam.com
Getting Your Edge: How to Downsize Your Home.
Your Insurance Policy Isn't What You Think It Is- Part 2
What You Don't Know About Your Insurance Policy Can Hurt You-Part 2
In this enlightening episode of 'Getting Your Edge: How to Downsize Your Home,' hosts Dennis Day and Judy Gratton dive into the complex world of insurance with expert Douglas Olson from USI Insurance Services. Olson breaks down the intricacies of insurance policies, the impact of recent natural disasters on the industry, and why your insurance policy might not cover as much as you think. The episode covers the challenges faced by insurance companies, including the reasons behind rising premiums and policy non-renewals, as well as the legalities and contractual obligations that come with insurance. Whether you're a homeowner, real estate professional, or simply an insurance consumer, this episode offers invaluable insights into what you need to know about your insurance coverage.
00:00 Introduction and Greetings
00:34 Meet Douglas Olson: Insurance Expert
01:10 Understanding Independent Insurance Agencies
02:49 The State of the Insurance Industry
04:00 Consumer Expectations and Insurance Realities
05:22 Challenges in the Insurance Market
10:48 Impact of Environmental Factors on Insurance
22:03 Insurance Companies' Financial Struggles
34:18 Concluding Thoughts and Contact Information
This is episode two of our interview with Douglas Olson of USI, an independent insurance advisor. Hello, all this is Dennis Day, with Getting your Edge, how to Downsize your Home, and we have a fantastic show for you. Thanks for showing up. I'm here with my co-host, judy Gratton. Welcome, judy.
Judy Gratton:Good morning on this wonderful spring morning. The last time I heard Douglas, I was like, oh my God. One of the things that I heard you say at the last go-around was that to help protect your insurance, I guess would be a good way to say it. You need to consider that it is there for what? Did you say catastrophes? I had a flood in my kitchen and it went under the flooring and I didn't even know it went under the flooring and it ruined the flooring and so we had insurance cover the replacement of the flooring. That's not really a catastrophe. I probably either could have lived with it or done it a different way. But what you're saying to help prevent this from happening your insurance policy is not there for every little thing that goes wrong should not be considered for that. Is that right?
Douglas Olson:Yes, and remember, I'm offering food for thought. I'm not providing direction to say this is what you should or shouldn't do, but, as an accredited advisor of insurance, that is the advice I'm offering to those willing to hear that conversation and ask questions why. While we're not going to dig into it here because it'd be a four-hour conversation, what I will say is the following If you think about, let's just say, you bought a home in early 2000 and it cost you $180,000. That same home today, if you went to sell it is probably in our area anyways an honest half a million dollar house. Can we agree on that? Judy, I'm being kind. What's happened is, in those 25 years that we've had that insurance policy, we still have that exact same $1,000 deductible. Why, if we were willing to have a $1,000 deductible when the reconstruction cost of that home was $180,000, and now it's $500,000, we're not allowing ourselves to do the math to go, hey, that's probably not appropriate anymore. And if we're willing to pay $1,000 when it was $180, we probably should be looking at $2,500 or $5,000 today, because that's how much risk we were absorbing inside that $180,000.
Douglas Olson:I'm answering you in the. We also have to be honest with ourselves and just go gosh. Why would I make that claim? And to answer your question specifically, please know that there are multiple different levels of insurance. And what do I mean by different levels? There are levels of I've had a lot of losses and now I have to pay extremely high expenses, so I'm going to push the coverages down as much as possible, to push down that premium until I no longer have those losses showing on my record. Or, if we're talking home, it's claims.
Douglas Olson:And then there's what we like to call the middle market, which is your all states, your USAAs your state farms. They were built on 1200 square foot homes with a nice, beautiful car in the front yard, and now those homes may be worth a million or $2 million, and we're getting to the end of their rope on what they feel is okay for them to not have to either go into the reinsurance market and spend even more money to offer coverage that you're going to end up as a consumer paying for. And then you have what we call the private client level of coverage and what that basically means. If you think of folks that are in a million dollar or greater valued home and we're talking reconstruction costs here, not just the perceived value of its view and location, that are designing and critiquing their policies to make sure that client is taken care of the way they think they're going to be taken care of on claim day. The middle market insurance companies are going to take very good care of us for the majority of what's going on, but they're not going to have any nuances, they're not going to have any additional protections. There's other things that those carriers are limited to because that's how they're keeping their insurance rates down and acceptable, because they don't have those coverages.
Douglas Olson:And then the other thing I want to bring to everybody's attention is there's more than one insurance policy that you can get for a home and there's more than one you can get for an auto with nearly every single insurance carrier. Every single insurance carrier. This is why it's important to work with someone that has you in their best interest and you're going to be having an advocate work on your behalf, because if you do that, you're going to have someone say would you like the basic policy that has thousands of exclusions? Would you like a policy in the middle that maybe only has 500 exclusions and we'll talk through those, of course, when we're having that conversation or are you the kind of person that says give me all the coverage you can with the kitchen sink, believe it or not? Most people think they have that coverage, but they're paying for the other one, and then that's why they get mad on claim day when they find out the insurance contract isn't covering them. So, as we're talking about deductibles here, it's smarter to be having a holistic conversation at this point to say what coverages do you really have? What are your risk tolerances Meaning? What do you want to pay for on your own? All this comes back to insurance. Right now should be used as a catastrophic policy, because we should be absorbing those inconveniences we should be taking on.
Douglas Olson:I like using the example of if there's someone new in the household that thought they put it in reverse, but they put it in forward gear and took out the bottom of your garage door, please don't call the insurance company, please call the garage repair folks and pay for that out of pocket.
Douglas Olson:And I know this is laboring a little bit, but this is important to also understand. As we talk about these different insurance carriers, they all now have limitations that they may not have had just six months ago or two years ago or five years ago, you know, not during the contract period, but you do get this thing called a renewal offer every year. If you're not reading that renewal offer and those pages that come with it and you're just going, what's the premium? And then your brain goes, oh my goodness. I mean I asked that you turn the first page and put it over there first and look at the other pages and go what language in the contract have we changed? What are we proposing for your consideration? If you pay that premium, you have accepted those changes. Every single renewal. If there has been an adjustment or a change in how their policy will react to you on claim day, you've accepted it because you paid it.
Dennis Day:Can I ask Douglas though and I've said this myself I've paid into that insurance for 15 years and never had a claim. And I get one claim and they raise my rates. Yeah, I hear it all the time. I said it myself. What do you say to folks?
Douglas Olson:First I give them a hug and I say remember, I'm a consumer and I work for you. I'm not the insurance company, so please don't hit me. Sometimes I do, by the way, I'm not joking. Hey, I'm a consumer too. I get it. I understand. I've made claims and a little bucket of money somewhere for those unknown things because I'm not going to use the insurance.
Douglas Olson:So here's the deal what a lot of people have forgotten for whatever reason, because they haven't done an insurance review in a while or it just wasn't. There's only so much room in our brains for what's important and we want to keep the knowledge right. We don't all need to be insurance experts. That's why it's important to talk to an expert when you're having this conversation. Here's the deal when we talk about if you make a claim and you haven't made a claim in five years or more, you're immediately getting a 10% no claim discount on every policy within reason that you already are buying. So immediately if there's a 20% rate increase or a 10% rate increase just normally because of the cost of materials and labor and what the insurance commissioner approved for that insurance company and you were going to have that raise happen, and then you lose the 10% no claim discount, you're adding another 10% to that rate increase. You're thinking, gosh, I never used my insurance before. But there's one more element we haven't even discussed yet and that is, depending upon the severity of that loss, you could see another 10 to 40% rate increase when you activate your insurance, and that's why consumers start getting frustrated. That's why I'm saying to you please think of it as catastrophic.
Douglas Olson:And if we're going to have this honest conversation about catastrophic and let's say you're going to say I want a five or a $10,000 deductible, you need to know that you're going to absorb that first five or $10,000 deductible on your home. But let's do the math. If you're spending $2,000 a year on your insurance and let's go worst case scenario and you lose your 10% discount and you get a 40% surcharge, we're just going to look at the 40% number that we were just talking about here for a second Excuse me 50%, 10 and 40. So now your insurance is going to go from $2,000 to $3,000 for three years. If you do the math, that means they're going to get $3,000 out of your back pocket over the next three years, but you got $1,000 deductible. So you also paid the $1 thousand bucks for the insurance company to help you. So you're out $4,000 in three years.
Douglas Olson:So why not have a $5,000 deductible? And instead of paying the insurance company, permission to have a low deductible? This drives your insurance rate down by three five hundred dollars a year. So now, instead of being two thousand dollars, maybe it's sixteen hundred dollars and you start adding all this money up. It totally makes sense to have a five thousand dollar deductible and look at your insurance policy for the 20, 30, 40, 50, 100 total loss, whatever that value might be on your insurance policy, you really do need to build a strategy around your own risk tolerance and what you're willing to pay out of pocket, and sometimes affordability for people go up and down.
Dennis Day:Douglas, you've said that the insurance companies are. They bring in a dollar, they pay out dollar five. Why is that happening right now?
Douglas Olson:For pretty much everything we discussed earlier. Trust me, if they did, I'd be living there. They don't have a crystal ball, so they can't project. Are we going to have the Palisades lose 500 houses in January 2025? They don, so to speak, and this is why insurance companies are leaving forestry type areas, because if we don't have the responding fire departments and we don't have the resources to knock the fires down, all these elements come into this. The insurance companies have a contractual obligation to write those checks. That's the advantage that we have, because we do have these insurance contracts. They are writing those checks. That doesn't mean, on claim day, that they're not looking at that contract and make sure that they're squeezing every last possibility to not add to that check. That's their job, that's what they're supposed to do and that's why it's important to know the catastrophic policies you've chosen to put in place are going to take care of you on claim day, if and when that ever happened.
Dennis Day:Are there things in the world we've talked about? Florida seems like the insurance companies are fleeing California because of the fires. Are there other areas and other reasons that insurance companies are leaving?
Douglas Olson:Yes, and I'll get this to Judy as well, if I have not already. Judy, I mentioned earlier in this podcast the Senate had actually brought this information together and it's probably going to be rather eye opening for the majority of folks that look at that Understand. This is not something I created. Just want to be clear. It's not something the insurance industry created, but the Senate did and they pulled this together and you'll see these colors going across the entire country.
Douglas Olson:I don't remember there being a state that is not seeing companies non-renew policies. Now, as we say that, I want to be clear. Just because a company has chosen to not renew doesn't mean that they've left the industry. It just means multiple things that the quality of that home Remember, we're talking about maintenance. If they do a satellite view and they see that the trees are not maintained or the gutters have weeds growing in them, or there's moss on the roof, or there's a car in the front yard on blocks, or the lawn doesn't look maintained, it doesn't look right, those are higher risks for insurance companies A slip and falls when they order an Amazon item Think of the weaving and dodging and all these things or because the rain gutters are not clean, that water is now wicking back up in the roof and now we're going to have a water damage claim. So, insurance companies I think this is probably a good place to say this and I apologize for not saying it earlier there is a relationship responsibility that we have as consumers and that is to understand that insurance companies are a transfer of risk for an agreed cost to us as consumers for them to take on that risk.
Douglas Olson:Insurance companies are designed to take on risk. They're not designed to take on. We know what's going to happen and we're going to have to write a check. We have to be careful and understand that While we may want to buy something because we love the view, doesn't mean insurance companies by law have to cover you. They're a business and if that risk is too great for their algorithms and how much, they're going to be able to charge you.
Douglas Olson:Because remember, as consumers, if they say $20,000, but somebody else wants to give you that same policy for $2,000, are you going to write the check for 20?
Douglas Olson:Are you going to write the check for 2000? But when that carrier that was offering it for 2000 leaves the market because they were not getting enough premium, they were buying the market, or they were trying to get it going so they felt they could get enough premium to make up for it, and then they find out, like in today's environment, that they can't, so they're leaving the market. This is where consumers get upset, because that same carrier that was offering the $20,000 policy is still there and they're still offering it for that same $20,000, or there might be some adjustments. So we do have to be careful and that's why we say look at this as a catastrophic. Make sure you're building a strategy. Let's make sure you're putting something in place that's going to react the way you want it to on that claim day. Not just how much am I paying every month out of my pocket or every year for the policies?
Judy Gratton:So, douglas, I don't know if you remember, but a few years back in the state of Washington there was an addendum that was added to cot purchases, sale contracts that was strictly around the buyer being able to verify that they could get reasonably priced insurance and at that time it was considered 1% of the purchase price. It had to be under 1% of the purchase price and it was tied to something and there was an acronym for it. Now I've forgotten what it was, but it had to do with the fact that people made claims that were turned down or not. No, that's not covered. If I call and say my tree fell in the front yard and they say no, that's not covered.
Judy Gratton:And we were because mortgage, if you're getting a mortgage, they require that you have insurance and if you don't get it, they'll get it for you and it's generally more expensive. So this addendum came into play to protect the buyer from getting stuck with outrageous insurance so they could go away from the property if that was going to be the case. Do you see that coming into play again now around in our area at all?
Douglas Olson:I want to be careful how I answer that and just say that insurance has to collect the correct amount of premium for the risk. And I could also say to you it's not unusual for a mortgage broker to send me an email to say your insurance is too expensive. I've been in this business for a while and it should only be $800. Oh, that's nice. Thank you for your email and I respectfully the cost is the cost. Even with all of my expertise, I cannot go to an insurance company and say push your pricing down, it's controlled, it is what it is. So an insurance side is a report that shows and demonstrates claims that have been made. So it's a gathering of insurance information, no matter what insurance carrier.
Judy Gratton:Is that recorded both against the person and the house?
Douglas Olson:Yes.
Judy Gratton:A house by itself, even though the sellers are selling it, the new buyer is going to. They're looking at that house and seeing that a lot of claims had been made against the house. But also if the buyer made a lot of claims right on something else, if someone's working with you and they have a question about their policy, can they call you and not end up with one of those dings on their history?
Douglas Olson:It's a really valuable question for you to ask, judy, and my advice is always, if, whenever possible, if you do have a relationship with your insurance agent, whether they have acronyms behind their name or not the agent, not the supporting person, not the front desk person, the agent we have an advantage and the advantage is we get to be human. So if you call and say, hey, I have a question, can we unofficially have a conversation? Yeah, we need to pro and con these things Absolutely, but if you call someone that's paid to record conversations, you call the insurance company directly.
Judy Gratton:Do they record those conversations?
Douglas Olson:Oh, the insurance carriers absolutely do yeah.
Douglas Olson:They don't disclose that you know I don't want to get into that, but they I am, I'm calling, I'm hearing them say we're recording for training purposes and blah, blah, blah. So I do think that they are letting us know when those recordings are happening and it's not to be against us, it's also to keep them honest. So if someone is giving them misinformation, that client can be provided the coverage that they were told that they had, that they don't have as an example. So it really is for training purposes and making sure things are accurate. If you're communicating with someone at the insurance company, they do have rules, regulations and requirements that say we're going to open this claim, even though you're saying I'm not going to have a claim because you want to have a dialogue with me as an insurance company. And let's look at this as us, don't? We want to know how their production is, so we make sure that they're doing their job. So now you may lose your 10 percent no claim discount because you reached out to that insurance company.
Judy Gratton:Even though you don't end up actually A hundred percent.
Douglas Olson:That's why you'll see zero paid out so often on these reports. And again, we had that conversation a moment ago You're already going to have your insurance go up anyways. Now you lost 10% discount, so it's adding another 10% to it and that's normally for three years. That's the legal. I think it's the minimum I hope I'm using the right word and for some states that's also the maximum. That's it. And there are some carriers, while they may not be able to charge you when I say some, just think of it like 50-50, as I say the word some. So some insurance companies might only charge you for three years, but then they underwrite it for five or six years. So you have to understand underwriting also means are you eligible? Are we going to renew you? Are you a higher risk than someone else?
Judy Gratton:Well, yeah, hey, we really could, because I can't stress enough how important it is for people and we. This podcast is mostly geared for downsizers. They're looking to buy a different type of home, or a second home maybe, or who knows. This is information that I think everyone needs, and we really need to make sure that we put Douglas's contact information in here, because I and see here's one more question. I can't stand it. It could go on all day. I have also heard that if you leave your insurance company, then you risk ending up with much higher rates anywhere else. So if someone is settled with a company but they want to work with you, what happens?
Douglas Olson:That is also a very good question and I hope I answered the last question fully there. But this is a very good question for you to ask, judy, and here's the easiest way for me to explain it when you have a conversation with me it's having zero impact on your current insurance. There's no charge for what we do. This is zero impact on your current insurance. There's no charge for what we do. This is how we choose to conduct business. There's no hidden fee, and I like saying it this way.
Douglas Olson:Just let's use Progressive as an example, or State Farm, whoever we'll use Progressive. Let's say you call Progressive and get a quote, and then you call and you work with me. If I'm producing the exact same quote, meaning the coverages, the discounts, the whole nine yards the exact cost is going to be the same. It is not going to be that we added a little percentage or a buffer or a filing fee or a paper fee. Why and how does that work that way? I'm paid a salary and so that's a huge advantage.
Douglas Olson:That's why I can say I'm an advocate for someone. No-transcript insurance contract, so you don't think I'm just saying something to say something, and then we do a side-by-side to show you if it was me and you've asked me to do this on your behalf. This is where we recommend that you consider making adjustments, even if it's you stay with your current carrier. These are recommendations that we have, so you don't even have to call your insurance carrier. You don't have to call your current insurance agent. We can have this entire dialogue and get to the end result free of charge.
Judy Gratton:I would recommend and I intend to take you up on that personally, because I wasn't even aware that a service like yours was out there and the fact, like you said, so many of us just take paperwork and sign it because the amount that you're paying was acceptable at the time. I don't know what's in my policy. My husband still thinks we have complete coverage. I'm pretty sure we don't now. But you take the time to make sure the people understand what they're getting, and that is so incredibly important. And I don't think people realize it let's put it that way until they meet it and then everybody's unhappy because they didn't really understand what they got in the first place.
Douglas Olson:And to answer the other side of your story is we want to be careful about moving you. We do. That is an important dance. But I'll also say this to you, judy If your coverage isn't right and what we're proposing is far more attractive and possibly in fact I'll tell you 91% of the time, I actually am able to offer a better price than what somebody currently has, it's a high percentage. That doesn't mean tomorrow it won't be 14%, because everything changes. I just want to say, historically, it's 10 years worth of me doing this, collecting all that, even though I've been doing it for almost 21 years now. I've just been keeping track, so literally I can tell how I've done for each client. In fact, it's 91.17% of the time I've actually helped them save money and put them in a better position.
Judy Gratton:You know that if you call your own insurance company back, the rate is going to probably do what Go up.
Douglas Olson:So most of the time this is a good, safe landing spot for them to say we're going to go ahead and move forward. Most insurance companies will not offer you any kind of discount for what they call longevity credits or discounts if you haven't been with your prior insurance company at least three years. So we do recommend please don't make changes.
Judy Gratton:I think people jump quickly because they think they're going to get a bad. I just saw a new one a company that is claiming that they can cut your insurance rates in half by taking out the middleman.
Douglas Olson:And I was like I've seen one that's even worse than that. Dennis, I don't know if you've seen this one, but I showed it to my wife and she just laughed and walked out of the room, because, of course, she's heard insurance conversations when you've been doing it for 20 years, so she understands how this works. I would love it if I, the agent, was getting 80% of the premiums you pay. Think how. So what I'm saying to you is marketing, and if we can just stop listening to marketing, because it is doing exactly what we're asking them to do, which is make us feel good, make us feel like we're in good hands, or what's nationwide, is on your side, whatever it to decide what's best. You're not hawking a bunch of taglines for them to buy from you. You're feeding them facts, you're articulating a strategy for them, you're helping them get to a solution that works best for their situation, and the very next client you help. It's not going to be the same situation. Would that be fair?
Judy Gratton:Everyone is different.
Douglas Olson:Absolutely so. I hope I'm giving you that answer on saying the marketing isn't going to win you any court case, it's not going to make you whole, it's not going to make you not be upset. What is a better advantage is giving yourself the leverage and the advantage to know what you're actually paying for and update that. So what do I mean by that? If you're not reaching back out to your insurance agent or your insurance advisor once every three years, that I would consider to be on the side of dangerous. I do recommend the rates do change every year your policy renews. There's new changes to that policy. Do you still agree to those changes? So there's things that are important for you to know. What are you actually paying for. And we talked about the deductible earlier.
Douglas Olson:I'm going to rewind to just say this a little bit, because there are more than one home policy that you can get from most insurance companies. Most people just zero in on the cheap one. I like saying it this way there's a $1,700 one, there's a $2,000 one and there's a $2,300 one. Most consumers are going to go to that $1,700 one because they think that $2,300 one is ripping them off and they're just trying to make money off of me. Guess what? There's a huge difference. The person that paid for $2,300 for the insurance policy while they're going through a loss and that part sucks, they probably have coverage and that $1,700 policy, that person now has the added frustration of getting a denial letter in the mail, potentially not saying excuse me, 100%, but potentially that is the case. So what we do is we help them understand how. About if we look at the middle policy and this other policy, see which one makes sense for you, and now let's talk about a deductible, and lo and behold, we might be pretty close to that premium. That other policy had thousands of exclusions in it, or hundreds of exclusions or whatever the coverage you didn't need.
Douglas Olson:And now you're paying the same premium, or close, but now you have coverage that you know is going to take care of you the way you want it to, as it's designed on claim day. And that's also why we say let's talk every three years. I don't want to talk in five years, that's too late. Let's talk every three years. I don't want to talk in five years, it's too late. Let's talk every three years. And in our agency, depending upon the client, what do I mean by that If you only have one policy with us, this is not going to happen.
Douglas Olson:If you have several policies with us home, auto, umbrella, so on and so forth we're automatically checking the market for you in the background, whether you like it or not, we're making sure you're still landing in the same space. But if you haven't maintained your policy you haven't told us that you remodeled the kitchen, you haven't told us about the addition to the house. You haven't told us you put a new roof on. You haven't told us you added air conditioning. We're still basing our analysis off of the original information you provided us. So the onus is on you, the owner of said contract, to let us know that there's been changes, because there is a maintenance cost inside. Your insurance policy says.
Dennis Day:ultimately it's your problem, not the insurance company I have to say that has been something I opened my eyes last fall is that I talked to my insurance company. I was trying to save money. My original policy for many years was a home that was at cover said its value was $300,000. It's not worth 300, it's much, much more and therefore if I had a catastrophic event, I would have covered up to $300,000, not the replacement cost or even close to what the value really was, and I did not understand that.
Judy Gratton:I said a lot of people don't. They don't even think about it.
Dennis Day:So there had been an addition to the house, there had been a kitchen remodel and now there's a bathroom remodel, and in the open market it's selling quite a bit over that three hundred thousand dollars, hopefully. But what critical things do I need to know and what kind of information would the average consumer do to help them understand?
Douglas Olson:this is very important issue so this is probably going to make a few people have the hair rise on the back of their neck. This is very important. I'm going to try and articulate this in a methodical yet non-scary environment. And it's only because now we're actually talking about contract language. Now we're talking about the maintenance clauses that are inside insurance contracts. Now we're getting into the nitty gritty that are inside insurance contracts. Now we're getting into the nitty gritty.
Douglas Olson:And all of us, every time we've got an insurance policy from a company where we've had a property, all of us have this information. So this isn't like new. We all have this information. But I am a consumer too, and even though I am pretty knee deep into this stuff, I still don't read my insurance policies in total detail because I know what I'm purchasing, just to be clear. And I do read the renewals because I've been in this industry. But I'm not going to sit there and read 192 pages every time, no, but I am going to be concerned about what is important. So you mentioned the house was being insured for $300,000.
Douglas Olson:Let's make this simple Insurance for the majority. There's isoforms, which is a term of everybody starts with the same document, with the same language, and you can endorse that policy to get rid of some restrictions or add coverages in that have been eliminated by the base policy. Sometimes they're called endorsements or changing of an insurance policy, going from basic to broad to special. That also brings in a lot of coverages and basic language inside the policy. That changes, however, every single one of those that I just mentioned your basic, your broad and your special there is language inside there. The easiest way to coin it is co-insurance. And without giving you a long example and giving you court case numbers and things along those lines, how about if we just say in general, it works like this you have a home, you're enjoying your home, you're living in your home. The insurance company keeps sending you a bill and says, would you like this insurance policy to renew? And you just continue to write to check and now we're 10 years down the road.
Douglas Olson:If that home was a total loss and let's say it was a million dollars, let's just we're talking reconstruction costs. I want to be clear. We're not talking it's close to the highway, so that adds $100,000 in value. We're not talking it's close to the highway, so that adds $100,000 in value. We're not talking. It's overlooking the beautiful water and the sun sets perfect every evening and that adds a half million dollars. We're not talking about any of those values we're talking about.
Douglas Olson:If an insurance company has to react on claim day, they're having to pay a premium for contractors to be pulled off of current job sites to work on your house. That was not a planned construction. Let's be real. They're not going down and getting this great discount and then they're. You know, ultimately you're the one that's the general contractor anyways to find, or a project manager at least to get that project done. But as we're looking at this insurance and it's a million dollar coverage requirement there's language in these insurance contracts that say it is your, you, the owner of said property. Whether it's in an LLC, whether it's privately owned, doesn't matter. It's your responsibility to make sure that the reconstruction cost coverage you are being offered by the insurance company fits your needs. It is not the insurance company's responsibility, it is not the insurance agent's responsibility, it's not the tax assessor, it's not the real estate agent. The onus is on the owner of that property to make sure that it makes sense.
Douglas Olson:You mentioned that you added a space and you've done some remodeling in the insurance contract. One of their outs is you're required to notify them of significant changes. Not I cleaned the window, I put on a new curtain. That's not what we're talking about. We're talking about if you change the floor, you put a new roof on, you did an addition, you remodel the space, have a conversation with your insurance advisor and make sure the insurance policy meets your needs. Here's where the rubber meets the road. We're still talking about the $300,000 covers that you've purchased In this topic.
Douglas Olson:That's very excessive. If we're talking about a million, what I mean by excessive is that's very unusual for there to be that wide of a spread, but I'm just using that as an example. To be that wide of a spread, but I'm just using that as an example the contract says if it's not insured for at least 80% of what it would cost to totally rebuild that structure the day of that loss and this is contractual, this is not negotiable and the reason that they put that in place is a great example would be if I've been spending a dollar amount each year for that renewal and I've only had $300,000 in coverage and I keep paying that bill, how can we ask the insurance company, where the risk is really a million dollars, to write a check for a million dollar loss and expect that to be appropriate. You have to look at it both ways. So they're being kind and saying since you are only insured for 300,000 and you at minimum should have been insured for 800,000, whatever the loss is, you're responsible.
Douglas Olson:Now again, 40,000 foot elevation. There's fine print. There's a bunch of different things that occur. I'm just trying to help people understand the critical importance that you need to know what it costs to rebuild your home. Otherwise, what would you? Here's the alternative. Every day, an insurance company is going to call you and ask you what you did to change to your home.
Douglas Olson:Now think about that.
Judy Gratton:First. That brings up another question what about the personal property inside the home? I'll give you a perfect example. My husband is a musician, Sure, and if there was a fire he would take his Martin D35 out before me. But he also has eight other guitars. Now, when we first, I'm sure the Martin was listed because he had it when we did the insurance, but the other guitars we'd never said anything about. So what about the personal property? If you? What about that? All right, In a fire it's destroyed Like pouches.
Douglas Olson:I'm going to answer that, but I'm going to go back to the other topic real quickly. Okay, depending upon the insurance policy you put in place, there may be extended replacement costs that get added to the dollar amount that you have for your dwelling, and that is a part of the calculation. You might even be with a carrier that has removed that co-insurance and now they're on the hook. But the point is, the point really, basically, is you need to know what you've got. Do you want to be at the mercy of the insurance company on claim day or do you want to be an informed consumer? You know exactly how that policy is going to react for you on claim day, and I can tell you that the last I heard is what? 67% of every home in the United States in the United States is currently not insured appropriately, and that's the federal government making that statement. That's not me making that statement. That's me regurgitating their information. But that means the majority of the folks that you're having this video as reviewed by, even if it's 51%, they're probably not insured to the value that they really think they should be. And let's be honest, what did lumber do in 2022? It went up 400%. Now it's come back down, but what are houses built out of? Okay, so I just want to be careful that this isn't everyone. That's why I don't want fire alarms going on. We just need to know what you're paying for and be an informed consumer.
Douglas Olson:Now we're talking about your personal property. This is also an important topic because, depending upon what your dwelling value limit is and let's use the same 300,000 number there for just a moment, dennis Normally insurance companies are going to cover 50% to 70% of that dwelling. Reconstruction cost is automatically extended to you for your personal property. That includes your silverware, certain limits of jewelry, artifacts, antiques, art. They're very low limits, but if you think about your furniture and your dishes and your clothing and stuff like that's what that limits really for. When we talk about your husband's guitar specifically, I can replace the name guitar with guns, art collections. And when I are collectibles, what do I mean by that? You can't see it because it's not this wall, but my wife and I have a lounge in our home and there might be one or two different spirits in there and some of them might be worth a few dollars. Ok, so those items fall outside the personal property coverage, beyond the limit that insurance companies providing to you. And when we talk about basic, broad and special, those limits are very low, so it really doesn't usually cover what most people do inside their space and some people might go. If I lose it all, I won't replace them anyways, I'm tired of them.
Douglas Olson:So if you do have items that value to you or you've made an investment or it's part of your legacy, you're going to give them to family members or friends or a museum after you go to wherever you go and when we're not here on planet earth anymore. A museum after you go to wherever you go and when we're not here on planet Earth anymore, and when we deal with that, you are going to want to make sure that is a separate policy, away from your home policy. I want to be clear about that and that you are listing the items that you want on there and many insurance companies are going to ask for current appraisals. So sometimes there's some labor involved. But if you're going to want them protected, to be able to be replaced or at least get the value that you feel they're worth and put it in your pocket, you need to go through that exercise.
Douglas Olson:And why am I saying make it a separate policy. Here's why, if you have that guitar and shirt on your homeowner policy, you're losing your 10% no claim discount and you're probably going to see the minimum 20% rate increase. Because it's a low end loss, you're going to see a 20%, potentially, everything's potential potential 20%. So now you're going to see your insurance rates go up 30% for the next three years. Wouldn't you rather have that on its own, what we call it a PAF policy? Personal article floater.
Judy Gratton:We call it floaters too.
Douglas Olson:Yep, yep. Personal article floater and that is its own policy. So if you're paying two or three hundred dollars on that a year and you have a theft, that same 30 percent impact is a little bit smaller than if you're paying two thousand dollars for your home insurance policy and seeing that kind of an impact Wow.
Dennis Day:The whole thing about insurance is risk. How can homeowners minimize the risk so that they don't have catastrophic claims?
Douglas Olson:That is a great question.
Judy Gratton:Maybe at least understand that they've got to understand so they make a better informed choice on the insurance. I think that is really important to consider.
Douglas Olson:So this is probably not the answer you're looking for. I apologize in advance, but it's an honest answer, and that is to become engaged in the insurance conversation with your insurance agent. It can no longer be an inconvenient 15, 20, 30 minute darn it. You need to make an investment in your time because you're protecting all of the hard work you have been doing. I help a lot of people that come straight from financial advisors. The financial advisor scares the daylights out of them. I call them a soft landing spot. Say okay, I understand where your financial advisor is coming from. That individual is very smart. Here's ways we can reduce those risks and here's ways we can protect those risks so you're not as exposed as you feel you are today.
Douglas Olson:The bottom line is they need to actually engage and have that conversation. They need to be willing to answer 30, 40, 50 questions, not five. That is the kind of client that I want to engage with. Otherwise, how can I be an advocate If all you want is churn and burn, give me cheap? That's the wrong path and in fact I'll say to you that's probably a self-destructive path in today's environment. You really have to honestly make that investment and if you look at it this way you may have purchased an item on Amazon that you did more research on before you bought that on Amazon than you've done on your insurance in the last year. Absolutely an offer on a property. The next phone call needs to be with your insurance agent, not the painter, not the plumber, not the designer, not lows for a new credit rate increase because you're going to do a massive remodel.
Judy Gratton:And there's a reason behind it.
Douglas Olson:We are seeing more often than not, unfortunately, we'll get a request from a mortgage. Here's what people don't understand you may not be currently getting a non-renewal notice, but that doesn't mean that if you are buying a property, you, as the owner of the property, you may not be getting a non-renewal notice, but that doesn't mean when your consumer or that person at the buyer is looking at the market, that the insurance companies are going to say no, thank you, because when you're already with an insurance company they're on the hook, right. We just talked about that contractually to a certain point until the next renewal, right. So it's important to have that conversation in advance and I'm highly advising that it be the next phone call after the acceptance has happened and you high five and yell at each other and you're all excited when you breathe in and breathe out. The next phone call needs to be to get and I want everyone to key in on what I'm going to say here an underwritten and approved quote.
Douglas Olson:I can go get quotes right now at progressive for landlord policies, investment properties. Just because I can get a quote doesn't mean that when I go through the underwriting process that the premium won't change or the underwriting guideline questions I'm answering no longer fit and no longer qualify. So instead of running at the last minute just buying any insurance policy you can get on it, why not be on the front end of that? Why not minimize that stress and have an honest conversation and make sure that everything makes sense? You might want to move from one carrier to another because of the location that you've moved to or your situation's changed. You have 12 cars going down to two cars, or two cars going to 12, whatever. So I hope that's taken. I'm advising they do that.
Judy Gratton:Thank you.
Dennis Day:Yeah, this happened to my son actually, actually, because he just bought a home and he was looking for insurance and it's a 1955 home. The car insurance company wouldn't insure the home because it was too old. Yeah, okay, we gotta wrap this up. Thanks, douglas, so good and it's been such.
Judy Gratton:I, douglas, I'm so grateful that you joined us and spent this time with us, and thank you.
Dennis Day:Thank you.
Judy Gratton:Thank you, I'm sorry, it went long. Don't be sorry. Like I said, we could do this all day on this subject.
Dennis Day:So if someone wanted to find you, Douglas, what would they do? Phone call, email.
Douglas Olson:Whatever is their preference. I'm on LinkedIn, like most of us are. I'm assuming Judy will provide all my information Information. Yeah, okay, thank you both.
Dennis Day:Douglas Olson, thank you so much from USI.
Douglas Olson:This has been fantastic. Nobody has an insurance. Headache now need Advil. I'm getting there. It's a headache, now I need Advil.
Dennis Day:I'm getting there. Thank you for watching and or listening. Hope to see you soon. Take care, bye.
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