Monthly Archives: May 2013

How Much Insurance Do I Need?

calculatorAn interesting question and perhaps the most frequently asked when trying to determine the limit of insurance necessary to protect your property in case of loss. In insurance lingo, this concept is known as “insuring to value.” When trying to determine what this limit should be, most people immediately think of the market value of their property. However, market value has no bearing on the cost to rebuild or repair in case of loss. Frequently, clients insist that their property be insured for the selling price they believe they can get in today’s market, or for the price they paid when they purchased the property. This thinking can inflate the cost of the insurance, or worse yet, leave one improperly (underinsured) insured at the time of a loss. So what standard should be used to determine the correct limit of insurance?

Keep in mind that land doesn’t burn and, therefore, doesn’t need to be repaired or rebuilt. So it follows, that even if you paid separately for the land and the structure, you don’t need to include the value of the land in the limit of insurance you choose. Structures can, and do, burn including both the main structure as well as any “appurtenant structures” such as garages for example. When establishing the value of your property you want to choose a limit of insurance that reflects the cost to repair of rebuild in case of partial loss or total loss. When in doubt a good rule of thumb, used by insurance carriers, is $175 to $200 a square foot. (Keep in mind that this figure is only to be used as guide when trying to determine insurance to value.) Since inflation is often a factor in contracting costs, many insurers include automatic percentage increases in their policies which range from 2% to 8% a year to cover such contingencies.

There is also an 80% rule which is utilized by insurance carriers. This rule, called “Coinsurance,” requires that a homeowner or building owner have a limit of insurance that is equal to at least 80% of the total replacement cost of the structure. A breach of this requirement, results in a penalty that can leave the property owner a participant, or a “coinsurer,” at the time of loss. In short, the insurance company will only pay a loss based on the limit of insurance carried, to the limit which should have been carried to meet the 80% requirement. Often clients think that they can save money by choosing an arbitrary building limit, until they encounter this situation at the time of loss and then it is too late!

For example, I own a home with a replacement cost of $300,000. (Some of my neighbors have recently sold similar homes on my block for upwards of $450,000. Remember, however, that the price I can sell my home for has nothing to do with the limit of insurance I need. If I were to build an exact duplicate of my home on some exotic island it might sell for over $5 million, but the replacement cost is still that same $300,000.) 80% of $300,000 is $240,000 which is the limit of insurance I need to meet the 80% requirement. Any lesser amount will generate a penalty. As a consequence, I won’t be paid in full at the time of loss. Let’s say that I decide to insure my property for $200,000. Subsequently, I have a loss and the damages are approximately $100,000. Even though this is not a total loss, undoubtedly, I will suffer a coinsurance penalty. Here is how this works: $200,000/$240,000 = 91.67% and the carrier will only pay me 91.67% of the loss or $91,670. The remaining $8,330 is my portion of this loss, and on top of this, the carrier will further reduce my payment to reflect the deductible I chose when I took out my policy.

Remember, any renovations or major changes to structure such as adding a room or extending the property will change this requirement, so it is imperative that you review your policy limits with your agent on, at least, an annual basis!

– Karen Skoler, CPCU

Under What Conditions Would You Cancel Your Personal Auto Insurance?

cancelledRecently, one of our clients called to ask us if they could cancel their personal auto policy. The answer to this question is “yes” provided that they turn in their license plates to the motor vehicle department, obtain a receipt (an FS-6) and send it in to us, their insurance agent, to cancel their policy. Without this receipt, we can’t cancel the policy. That is the law!

This prompted me to think about what conditions might lead someone to want to cancel their auto insurance policy. Here is a list of some possible reasons:

Getting rid of your automobile via sale, gift to another, making a decision to stop driving;

Receiving a suspension or revocation of your license in the State of NY. It is against the law to drive a motor vehicle in New York State with a suspended or a revoked license punishable by jail time, probation, loss of your vehicle as well as fines the imposition of fines which can be levied up to $5,000. As for driving in states other than New York, with a suspended/revoked license, most states participate in the National Driver Register (NDR) which has a database that includes and shares driver info regarding suspensions and revocations in most states. This protects other DMV’s from issuing licenses to such drivers who are at risk or whose records have been tagged with an alert. In addition, there is also a Driver’s License Compact (DLC) between most states which helps each state monitor suspension and revocations while their resident drivers are out of state. This measure helps the “home state” as well as the “guest state” put their own terms on whether or not someone is allowed to drive with a suspended or revoked license regardless if they are a resident or non-resident;

Your car is stolen and you have no intention of replacing it;

You have too many accidents and/or tickets on your record making the cost of your insurance prohibitively expensive.

Interestingly enough, having to turn in your license plates is an excellent requirement and one that absolves you of any financial responsibility once the plates are turned in. The motor vehicle department actually destroys the plates so that they can no longer be used by anyone else. This protects you from any ongoing financial responsibility.

So should you decide that you no longer have a need for your automobile, remember that without the FS-6 we can not cancel your policy. And, please, we implore that you do not let your automobile policy cancel for non-payment of premium as the insurance company, by law, must notify the Motor Vehicle Department. This can result in major fines and/or suspension of your driver’s license. If you have any other questions, we suggest you notify your insurance immediately.

– Karen Skoler, CPCU

Does My Homeowner’s Policy Cover Earthquake Damage?

AskSherriEarthquakeDear Sherri,

I thought I felt my house shake the other day and the first thing I thought of was earthquake!!!!! Now, my question is, does my homeowner’s insurance policy cover my home for earthquake?– Shakin in Brookyn,

Dear Shakin in Brooklyn,

Well, I don’t know why your house was shaking the other day, because New York hasn’t had an earthquake of any magnitude in over a year, but I’ll have whatever she was having!
On most Homeowner’s policies, earthquake coverage is not automatically included. The good news is that earthquake coverage can be added to most Homeowner policies for an additional premium (or is that just good news for me, the insurance agent?). Most people think it is ridiculous to get earthquake coverage in New York. However, did you know that New York is situated on a major earthquake fault and those seismologists are predicting a major earthquake in the near future? Many might scoff, but they also scoffed about Hurricanes before Hurricane Sandy! Contact your agent to discuss the earthquake endorsement for your Homeowner’s policy.

Do I Need Renter’s Insurance or Am I Covered By My Moms Homeowner’s Policy?

Two Family HouseDear Sherri, My mom owns a two-family house. She lives on the first floor and I live on the second floor. If there were a fire or if there were a theft in my apartment, would my belongings be covered under my mom’s homeowner’s insurance policy?

Thanks, Donna

Hi Donna,

This is such a great question because due to the economy, so many young people are going back to live either with their parents or in property that their parents own. If you are living in the same unit with your parents, the answer would be yes, your belongings are covered by your parents’ policy since the definition of an insured is as follows: “You (the person named on the policy), Your Spouse (must be a resident at the same household) Resident Relatives and any other person under the age of 21 who is under the custody of the person named on the policy.” But don’t get too excited. In your case, the answer is no, you will NOT be covered under your mom’s policy as you are not living in the same unit or household. Living in the same building does not qualify you for free insurance. Therefore, you need to purchase a Renter’s Policy whether you are paying rent or not (if you are not paying rent, I am going to be so jealous that I might have to slap you!). A Renter’s Policy will protect your personal contents in your apartment and your personal liability. Always check with your agent to be sure your policy is providing you with the coverage you need.

On Mother’s Day – A Time for Personal Reflection

Another Mother’s Day is here and I find myself once again reflecting and feeling very lucky.
mom and me school signFirst, I like to wish all moms out there a very Happy Mother’s Day. Secondly, I’d like to acknowledge that I have an amazing mom, Ingrid Petschauer. She has this incredible gift to make you feel so loved and cherished while saying very few words and not needing or wanting to be noticed. In fact, it is her silent presence that gives me the strength from within to just go be the best person I can be! Every time I think of my mom, I remember a famous saying that was so popular when I was growing up: “Behind Every Successful Man is a Great Woman”. The reason our founder and my dad was able to succeed and grow Petschauer Insurance is because he had a wife and partner, Ingrid, who supported his efforts and let him go be the best insurance person he could be. All she wants is for those that she loves to be happy and healthy, inside and out. The reason we have a strong sense of love, family and respect is because my mom is behind the scenes sharing her love, strength and knowledge with us every day. And for that I’m truly grateful and wish her a wonderful Mother’s Day.

Chris and me photo

For myself, I chose not to have my own children; however, when I married 10 years ago, I had no idea that I would be blessed with such a special step-son, Chris. He has shown me so much about the meaning of life, love, happiness and courage. Every year he wishes me “Happy Mother’s Day” and that is very special to me.

For those of you with mother’s that are “angels in heaven”, I hope those thoughts of your mom will bring you happy memories and joy on this special day !

Heidi Fox, CIC
President, Petschauer Insurance

Does a Homeowner’s Policy Cover a Flood started by a leaking pipe?

A leaking copper pipeQ: Dear Sherri, A pipe im my upstairs bathroom wall is leaking and has flooded my first floor living room and kitchen. Do I have coverage on my homeowner’s policy or do I need a flood policy?

A: Dear Swimming in Queens, Great question and one that I am often asked. Technically, what you had was NOT a flood. Therefore, your Homeowner’s policy will cover this loss as this loss would be considered “water damage.” What’s the difference? A flood is defined as “rising and overflowing body of water.” If your toilet becomes an overflowing body of water, I suggest the culprit visit a doctor. Anyway, here are a few examples of flood damage and water damage:

Water Damage

  • A broken water pipe floods your home.
  • A heavy rain soaks through the roof allowing water to damage your attic, ceiling, ect.

  • Flood Damage

  • A nearby river, bay, ocean or even a stream overflows
  • Due to heavy rain the soil can’t absorb the water quickly enough
  • The city’s water mains burst on your street

  • So if you ever have any type of water damaging your home, call your agent to find out if it is “water damage or a “flood”. Better yet, just get flood insurance and be protected either way. Wishing you and your home stays nice and dry.

    7 Ways To Get The Most Out of Your Homeowners Insurance Dollars

    dollar-house2In 1968 I took out my first Homeowners & Auto policies. No way was I going to move any of those gorgeous engagement presents into a new apartment without making sure that they were protected from fire and theft. I found the service my agent provided, and the way everything was handled, so satisfactory that I didn’t even think of switching carriers until many years later.

    We now live in the age of “consumerism” where, price shopping is not only encouraged, but if you don’t do it, your friends will invariably tell you that you are being “ripped off.” What used to be called loyalty is now termed as ignorance. Doesn’t anyone value the relationship between insured and agent any longer? Such a relationship guarantees that your insurance is being routinely reviewed and that your agent has your best interests in mind. Without such a relationship how can you be assured that you are really being given the best “bang for your buck” in the insurance marketplace?

    Keep in mind that money really isn’t everything. However, having it always helps to pay the bills! In an effort to stay within the confines of your budget, there are certain items you should routinely check with your agent. This helps to ensure that you are getting the best pricing and coverages your agent can offer, a good carrier that will be with you through good times and bad, through storms, thefts, fires, flood and liability claims– one of which is sure to occur in the lifetime of us all.

    How many of these points have you discussed with your agent recently?

    • When considering a quote to replace existing insurance, make sure that all the coverages and deductibles are the same as those in your current insurance program;

    • Making sure that carriers are A rated and licensed to do business in the State of New York;

    • Asking about the need for new appraisals for jewelry items and/or furs as jewelry often appreciates while furs tend to depreciate over time;

    • Asking questions about the differences between scheduled items and non–scheduled items, in-vault and out-of-vault coverage, guaranteed replacement cost vs. replacement cost and actual cash value coverage;

    • Making sure that you are receiving adequate credit for alarm systems, fire, smoke and carbon dioxide detectors;

    • Making sure that your agent knows if you are a non-smoking household (less chance of setting the bed on fire and did you know that some carriers even offer a discount for non-smoking households?);

    • Making sure to advise your agent when you remodel kitchens and bathrooms, or add an extension of any kind, as these add value to the house and higher costs to replace if damaged by a loss.

    Your agent is there to educate as well as to insure you. A savvy agent consults with you, the client, to save you time, money, and stress. I have been loyal to my agent for many years because I am confident that I am well taken care of and in the hands of a group of professionals for whom no task is too much. They work diligently to ensure the loyalty of their clients over time! Can you say the same?

    – Karen Skoler, CPCU