How to look for hazard insurance

Obtaining hazard insurance on property has gotten more difficult, so please get started immediately on securing hazard insurance on your property.  This is because of the extraordinary losses that insurance companies have paid out from disasters and mold claims.  Obtaining insurance for properties that are older, have brick foundations, are mixed use or commercial buildings, or multiple unit buildings can be even more challenging. 
Since lenders require hazard insurance to be in place prior to close of escrow; unknown claims discovered prior to close and after you are in a purchase contract could be frustrating and expensive should you not be able to close escrow until insurance is secured.  While you are in contract, the sellers through their agent, should disclose (or be asked to disclose) any claims on the property and if possible, order a CLUE report from their insurance carrier to disclose any claims that may have been made.  The seller can order one from, or their insurance agent can provide one; we cannot get one on their behalf.

If you are purchasing a condominium, there is a master insurance policy on the complex and this is an issue of which you should not have the same concern as when you are buying the entire property.  You should still consider getting a condominium contents policy, however, to cover the contents in the case of fire, theft, or other disaster.  Be sure to note that you may need an ‘HO-6’ policy that would cover appliances, kitchen cabinets, fixtures and finishes.

When shopping for insurance, make sure you talk to several insurers.  Generally, you will have a better grasp on what are important features in policies by talking to multiple people because you’ll know what features and exclusions each policy have.  Here are some things to consider:

  1. Look for exclusions in coverage.  For example, rental property coverage is much more limited; you will need a specific landlord policy and perhaps a separate liability or umbrella policy.
  2. Earthquake insurance is extra if available.  It is offered by the California Earthquake Authority 30 days after you close escrow.
  3. Look for dollar limitations on claims.  Even if a policy claims to be guaranteed replacement, there are caps on the policy-find out what they are to avoid being under-insured.
  4. Special items of value might have to be scheduled separately; things like antiques, jewelry, computers, or firearms in order to be covered.
  5. If an insurer offers actual cash value, make sure you ask what this means.
  6. Understand the liability portion of your policy and what it covers and does not.  You may need a separate umbrella policy if it is not sufficient.
  7. Look at the deductible on your policy.  By raising it, you may be able to reduce your premiums.
  8. Discounts are generally given when multiple policies (i.e. house and auto) are issued by the same company-check into whether this is possible.
  9. Discounts are also sometimes given when you have smoke detectors, alarm systems, dead-bolt locks, etc…  Also see if group discounts are given.
  10. Many insurers may not insure properties that are not bolted to their foundations, do not have circuit breaking electrical systems, or are on brick foundations; this will limit the available insurers for your property, which may also be more expensive coverage.  For tough to insure properties, this may be a government sponsored plan, such as the California Fair Plan.
  11. Be sure to review your policy limits annually to stay up to date.  Insurance might have some sort of cost of living rider, but it is usually not sufficient to maintain adequate insurance coverage.
  12. Make your home safer and keep up maintenance.  Keep roofs in good repair, take care of items which could lead to a claim such as cracked and heaving sidewalk tripping hazards, consider seismic retrofitting.
  13. Be careful in the claims you make.  Insignificant work may be better taken care of out of your own pocket, rather than risk being canceled by your carrier, or making your property difficult to sell when a new buyer has to get insurance.
  14. For personal property, it would be unusual to have an insurer offer replacement value-be sure and ask.

Items in list above inspired by Realtor Online Magazine, reprinted with permission of the NAR, copyright 2003.  All rights reserved.