Thursday, March 31, 2016

Home Inspections

Home Inspection:

This is a must for new and old homes alike. An inspection will determine the condition of the plumbing, heating, cooling and electrical systems. The structure should also be examined to assure it is sound and to determine the condition of the roof, siding, windows and doors as well as the safety features of the home. The lot should be graded away from the house so that water does not drain toward the house and into the basement. Most buyers prefer to pay for these inspections so that the inspector is working for them, not the seller. Don’t let minor deferred maintenance issues or non major discrepancies ruin the deal for your dream home.
Keep in mind that no house is perfect and anything & everything can be fixed. The question is – at what cost? You & your Real Estate Agent should discuss discrepancies found and decide if you want or need further negotiations. Your Real Estate Agent is obligated to look out for your best interests.
What is a Wind Mitigation:
As a homeowner with windstorm insurance, state law entitles you to certain premium reductions, but without an inspection, you can’t get them! If you haven’t had a windstorm insurance inspection at your current home, you are PROBABLY PAYING TOO MUCH FOR YOUR WINDSTORM INSURANCE!

During a wind mitigation inspection, a certified inspector reports on the key features that may decrease the amount of damage your home suffers during a hurricane or strong windstorm. These features fall into several categories, such as exterior construction type, roof shape and construction methods, age of roof covering, door and window opening protection as well as the actual year the home was built. Another factor may be the elevation of a property and how it relates to wind speed.

What Is a Four Point Home Inspection?

A four point home inspection generally includes but is not limited to a skilled inspection of the roof, the electrical system, plumbing system and the heating, ventilation and air conditioning (HVAC) system. The different systems on your home have a varying but somewhat predictable life span. Most of the information gathered for a four point inspection pertains to just that. However, the information is not limited to the life expectancy of the systems. Also, considered are issues such as type of wiring used in the home and even the manufacturers of the equipment. Also look for signs of equipment or system failures. The report will help the homeowner know what areas need to be rectified in order to gain the coverage they need.

What Is a Roof Certification?

A Roof Certification Inspection is usually done at the request of the insurance carrier. They will typically request it due to the information they have on file is indicating that the roof covering is approaching the end of it’s expected life. The inspection is used to document the most recent dated of complete replacement. Therefore, it is extremely important for the homeowner to have a copy of the permit and/or contract of the most recent work completed.

The inspection can take up to 1 hour to complete and is comprised of the report with permit documents and photos of your roof.  If no documents of a recent re-roof are available, the inspector will estimate the useful life remaining.

Tuesday, September 8, 2015

Actual Cash Value (vs) Replacement Cost

Frequently Asked Questions: Actual Cash Value (vs) Replacement Cost

Learn the distinction between 'Actual Cash Value' (ACV) and 'Replacement Cost' when it comes to homeowners insurance policies. The difference may surprise you!
Actual Cash Value vs. Replacement Cost of home The distinction between 'Actual Cash Value' (ACV) and 'Replacement Cost' is one of the most important concepts in homeowners insurance. Do you know what the difference is? If you have home insurance, you should. Let us break it down for you.

What “Replacement Cost” Means

Replacement cost is the amount it would cost to replace your destroyed, damaged or stolen items with the exact same item, or similar ones, after a loss. The replacement cost is often calculated as the initial amount you paid for the item. If the item you bought is no longer available, replacement cost policies will pay you initial price of the item you bought in order to find one similar. If the item you purchased is still available but at a reduced price, your claim may reflect this change in value.
A replacement cost claim may sometimes be paid out in two installments. Often, the insurer will send one payment for the ACV of the item/component or half of its total replacement cost. Once you have performed repairs or bought a replacement, you can send the documentation to your insurer to recover the remaining reimbursement.

Actual Cash Value (ACV) Explained

Actual cash value (ACV) refers to a policy that covers your home and possessions for market value at the time they are lost or stolen. Since your items are used, “market value” means that depreciation will be factored in when your insurance company pays you for your claim.

How Insurers Calculate Depreciation

Different insurance carriers will have different ways of calculating depreciation. One of the most common methods is to calculate the item’s value as a portion of its life expectancy.
For instance, a roof predicted to last 30 years will be assumed to have zero value at the end of that timespan. So, if the roof is somehow destroyed 15 years after installation, the ACV will be half of the original cost of the roof.
Another way to look at the “lifespan” model is to divide one by the life expectancy of your item to find the annual depreciation rate. An item with a 10 year lifespan will depreciate by 10 percent or .1 a year. Use this figure multiplied by the years you used your item to calculate its depreciation.
Aside from life expectancy, your insurer may use market data to determine the replacement cost. For example, if your twenty year old bay window assembly was destroyed by a storm, your carrier may try to find a wholesaler who offers twenty year old bay window assemblies and ask how they would price them.
This method requires more effort, but insurers may have access to a pricing network or depreciation estimation software that accomplishes the same task. Either way, you are able to take into account the condition of the item rather than assuming that all of your belongings have the same useful life.

Replacement Cost Trumps ACV

For almost every home owner, a replacement cost policy would be preferable. Coverage like this will pay the true retail cost of replacing lost, ruined or stolen possessions. With expensive electronics, actual cash value usually just will not suffice when you are trying to replace what you have lost. For example, a laptop purchased for $2,000 three or four years ago would actually be worth far less than that now. An insurer will likely write you a check for $700 or so to cover the actual cash value of the item. Finding another comparable laptop at that price would prove challenging, if not impossible.
The truth is that after a disaster or major loss, you are looking to replace your items. Since you are almost never likely to find a store or market that sells the exact same TV and couch that you used to own, in the exact same condition at the ACV price, replacement cost coverage just makes more sense.
One reason that many people opt for ACV policies over replacement cost policies is that the price of the policy will reflect this coverage difference. In most situations, the better coverage of replacement cost policies can make homeowners much happier with their policy after a loss occurs. Depending on how many valuables you have, paying a little extra to get the upgrade might be worth the money. You could also usually offset the extra cost by raising your deductible. After all, home insurance is there for most people to protect them from major catastrophes, not everyday accidents.

Valuable, Antique or Collectible Items

Even with a replacement cost policy, your most valuable belongings will only be covered for a portion of their value. Items like jewelry or electronics typically have a $1,000 cap on per-item claims. With art, antiques or collectibles, this amount could be as little as $2,500 for your whole collection.
Another problem is that with certain rare items, the true replacement cost may have actually gone up since your initial purchase. Insurers will rarely accommodate this appreciation in value, instead opting to pay for your initial purchase value. Thus, an autographed jersey by an athlete who recently died may only be worth the $50-$100 you paid for the jersey itself and the person to sign it at after meeting them. In actuality, this item could be worth thousands of dollars and be nearly impossible to replace.
For items like these, you can purchase special “floaters” or riders to cover your most valuable or irreplaceable possessions. Other times, you can purchase a separate policy especially made to cover rare and valuable collections.

Why an ACV Policy May Be a Bad Idea: An Illustrative Example

Joe and Flo Smith live in a home with their two children. The home was recently appraised at $200,000, and it was built 30 years ago without any major upgrades or renovations since that time. An ACV insurance policy covers the home and their belongings.
One night, a frayed wire in the master bedroom wall sends a spark that catches the insulation and wall stud on fire. The fire spreads quickly through the walls up to the ceiling of both the master bedroom and the adjacent guest room.
Fortunately, the smoke alarm goes off and the family evacuates safely. A local fire station responds quickly and puts out the fire before it can spread to the roof or other rooms. While the house is still very much intact, there is a large region damaged by fire, smoke and water from the fire department.
When the Smith family files a claim, an insurance claims adjuster comes out and estimates that the damage will take $25,000 to fully repair, which represents the replacement cost. However, since the estimated structural lifespan of the home in its pre-fire condition was 60 years, the depreciation has a big impact on the ACV claim offer. After the calculations are performed, the adjuster can only write a check for $12,500. Joe and Flo will now have to pay directly out of pocket for the remaining half before they are able to restore their home to a livable condition.
Worse, when calculating all of the various possessions damaged, the family is faced with an even bigger deficit. The adjuster estimates that the destroyed items like the beds in both rooms, a large TV, a couch and some other furniture have a replacement cost of $10,000. Once they factor in all of the various depreciation calculations, the Smith family may end up with as little as $3,000 to $5,000 to cover all of these ruined “big ticket” items.
A vivid example like this illustrates why after a disastrous situation, ACV insurance can do too little to reduce the financial burden of recovering.

Making Sure Your Insurance Coverage Works For You

When speaking to an agent, you must be absolutely clear about the kind of policy they are offering you. Make sure that you get every cent of coverage you need to prepare for common and likely catastrophes.
Obviously, the most important thing home insurance covers is your actual home. In many cases, opting for limited coverage of your possessions paired with complete coverage of your dwelling could possibly make the most sense. Take an inventory of your possessions and decide what is right for you and your family.
Whatever coverage you pick, always be sure to speak with multiple agents and verify that you are receiving the best rates for your coverage, and that your coverage is adequate.

Frequently Asked Questions:


A hurricane is a tropical storm that has rotating winds of at least 73 mph, but rarely exceeding 150 mph. Hurricanes are usually accompanied by rain, thunder and lightning. These severe storms, which are spawned by low-pressure depressions moving over warm, tropical waters, originate in the Atlantic Ocean from June to October. In an average year, approximately six Atlantic tropical storms mature into hurricanes. (Hurricanes that originate in the Pacific Ocean are referred to as typhoons.)

Once a hurricane hits land, it loses contact with its primary source of energy, the warm ocean waters, and begins to slow down. As the hurricane passes over land, increased friction contributes to the break-up of the storm.  The greatest threat posed from a hurricane is from the heavy rainfall and from flooding caused by the storm surge. However, hurricane-force winds and flying debris can cause extensive damage until they dissipate. Hurricanes can also spawn tornadoes that are extremely dangerous and that contribute to the overall damage.
Hurricanes can cause catastrophic damage and potentially large losses of life. In recent years, the death toll from hurricanes has been greatly diminished by timely warnings of approaching storms and by improved programs of public awareness. At the same time, losses from hurricane-related property damage in the United States continue to climb; this is primarily due to an increase in population  and construction.

At the beginning of the hurricane season:
• Establish a preparedness plan that takes prevention, emergencies and communication into consideration.
• Inspect all battery powered equipment and backup power.
• Be sure trees and shrubs around your home are well trimmed so they are more wind resistant.
• Clear loose and clogged rain gutters and downspouts.
• Inspect sewers and drains.
• Check all drainage pumps.
• Inspect the roof and flashing for serviceability.
• Check the landscaping; prune dead branches.
• Have a supply of plastic or tarpaulins on hand to cover water-sensitive equipment.

AT THE APPROACH OF A HURRICANE• Inspect roof drains and piping; are they clear of debris and fully functional?
• Check floor drains and sump-pump; are they clear of debris and fully functional?
• Check all storm water catch basins and grates to be sure they are clear of debris.
• Top off fuel in the emergency generator; test run.
• Move supplies stored outside to inside storage.
• Protect vital records against flooding.

• Listen to the radio or TV for information.
• Turn off propane tanks.
• Avoid using the phone, except for serious emergencies.
• Stay indoors during the hurricane and away from windows and glass doors.
• Close all interior doors – secure and brace external doors.
• Take refuge in a small interior room, closet or hallway on the lowest level.
• Lie on floor under a table or another sturdy object.
• Avoid elevators.

• Assess the damage.
• Check for safety hazards (downed trees, branches, downed power wires, leaking gas, blocked roof drains, displaced reptiles).
• Make temporary repairs to protect the structure and supplies.
• Photograph and document any damage.
• Drive only if necessary and avoid flooded roads and washed out bridges. Stay off the streets.