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All About Home Insurance

June 4th, 2020


INTERVIEW NOTES:

A brief overview of homeowners insurance. [1:27]
What is not included in a standard homeowner insurance policy? [2.27]
What factors should a homeowner consider to properly insure their home? [2:56] 
What is the average replacement cost per square footage? [4:32]
What other coverage comes with a homeowners insurance policy? [5:48]
Are there any areas on the peninsula where getting home insurance might be an issue? [7:42]
How does extended coverage for dwellings work? [9:50]
What is included in a homeowners package policy? [12:04]
What benefits does an umbrella policy offer? [12:53]
Are there discounts or bundling options to consider when purchasing home insurance? [14:05]
What is the difference working with an insurance broker directly versus an insurance carrier? [15:46]
What should a homeowner be aware of when planning a remodel? What is a builders risk policy? [18:14]
Why is earthquake insurance important? [21:24]
If your home catches fire due to an earthquake and you do not have earthquake insurance but have fire insurance, are you covered? [23:38]
What are the benefits of working with an insurance broker? [25:06]
How is an insurance broker paid? [26:15]
What was your experience as an insurance broker during the fires in the North Bay? [27:36]

TRANSCRIPT

Raziel Ungar: Hi, everyone. Really excited to do this webinar with you today. Gino, what's happening? Say, hello.

Gino Benedetti: Raziel, how are you doing?

Raziel Ungar: This is great. I'm super excited. Obviously you can introduce yourself, but Gino has been in insurance for many years, so we've known each other for a long time and he's one of the sharpest minds in insurance out there. So my hope is on the webinar, that any of you watching will get a real good sense about what is homeowners insurance, why it's important, what you should be aware of, cost, all that kind of thing. Gino, anything else?

Gino Benedetti: Yes, no, no. Happy to be able to do this with you, Raziel, and hopefully your clients get some good information from this. I'm a partner at Calender-Robinson, which is a boutique insurance brokerage in San Francisco. We represent numerous different clients and carriers and offer competitive rates with many different carriers and insurance solutions. So, I definitely think this is a great opportunity. So thank you.

Raziel Ungar: No, absolutely, Gino. Maybe you can give us just quick overview. Obviously, homeowners insurance is a no brainer. Everyone buys it when they buy their home. The bank requires you to buy it, just to make sure that their investment is insured as well. But just kind of give a brief overview of what's included.

Gino Benedetti: Yeah. I mean, homeowners insurance is made up of coverages that will help protect the homeowners from certain events that could cause either property damage or bodily injury. And there are four key parts of homeowners insurance, starting with the dwelling coverage. And then also, having other structures, personal property coverage, and then personal liability. Those four key coverages make up what homeowners insurance really is all about. And we can dive into what each of those coverages mean and how and how they may pertain to different homeowners.

Raziel Ungar: No, that's helpful. So obviously, you have those four different lines. What are additional types of coverage that one can get, in addition to those?

Gino Benedetti: Well, a standard homeowners insurance policy will never include earthquake or flood. So, you always have the option to purchase a separate insurance policy to supplement your homeowners for earthquake or flood potential disasters.

Raziel Ungar Okay. Going back to the four main types, can you talk about things that people should be aware of, why they're important, any red flags and just kind of generally speaking about those?

Gino Benedetti: Yeah. So I mean, the main thing is, is that properly ensuring your dwelling is probably the most key aspect of your homeowners insurance. Here in the Bay Area, we are seeing some of the most highest or most costly construction costs throughout California. And when we're talking to homeowners insurance, it's very important that each homeowner comes up with a value to properly insure their home. This piece of coverage is considered the dwelling replacement coverage.

Gino Benedetti: What we do is, we have different models that we use to help determine the proper replacement coverage needed. And typically it's a price per square foot model, but it really does have to ... there are other factors that determine that as well, and really based upon where the home is located and then certain features of the home. Whether it's been recently updated, are there hardwood floors throughout versus carpet? Is there granite, marble, tile or is it just paint on a wall? I mean, those certain factors really do increase the overall cost of construction and need to be factored into determining the proper replacement costs.

Raziel Ungar: That's actually good to know because I've looked at a lot of quotes from clients over the years, from a national carrier that might not have much of a presence on the peninsula. And I've seen replacement square foot costs of like two to $300. Normally, in my experience, it's at least four or five, $600 a square foot. Right?

Gino Benedetti: That's absolutely correct. The days of insuring your home at 250 to $300 a square foot or over unfortunately. When I first got in the business 15 years ago, I think that was what we were using back then, and you're right. I mean, anywhere from $450 all the way up to 650, $700 a square foot, depending on the quality of the home and where it's located.

Gino Benedetti: As I mentioned, the cost of construction is really what's created this. We want to insure the property to its full replacement value, not including the land. Because the land is the most expensive asset here in California, but we're not insuring the land we're insuring for replacement of the structure.

Gino Benedetti: We always insure for full replacement. God forbid if you ever sustained or a client or somebody ever sustained the total loss, we want to make sure there's enough coverage to fully replace your home.

Gino Benedetti: That is a good segue into what other coverages come along with homeowners insurance. Not only replacing your home, but also replacing your personal property, your belongings, your furnishings, your clothes, your furniture, your appliances. This is a separate coverage underneath your homeowners policy, that typically is about 70% of the building coverage limits.

Gino Benedetti: So for instance, if we were to insure your home for a million dollars, you would automatically, as part of the homeowners package, get 700,000 in contents replacement, personal property replacement coverage. And along with that comes other structures coverage as well.

Gino Benedetti: Other structures typically tends to be about 10% of the building limits. And the other structures could be used for repairing a fence if blown down from a windstorm or damage from a fire. It could be a detached garage or detached structure that's on the property. Typically, that's where we see most of the other structure coverages and claims come from, or just fences.

Gino Benedetti: Here in the Bay Area, we do have a period of time where the winter storms and high winds come and may blow down your fence. Having that other structure coverage there will help replace your fence if blown down.

Raziel Ungar: Gino, are there any areas ... Obviously since you know the peninsula super well ... that someone cannot get homeowners insurance? Should that be a concern for a buyer buying a home in Burlingame, Hillsborough, San Mateo, San Carlos, Redwood city? These are pretty suburban areas, not ... I mean, there's trees, but it's not a forest. Is there a concern or what are you seeing?

Gino Benedetti: Yes, there is a concern and this is somewhat recent, Raziel. Within the past year, we've seen every insurance carrier rezone and remap their fire risks. They've remapped all of California, and unfortunately we're seeing that some areas in the peninsula and all throughout California have had greater fire risk scores, more recently than ever. It does impact, one, potential pricing, but also the availability of the carrier pools in that area.

Gino Benedetti: Unfortunately, we're seeing a lot of areas along 280, along Woodside, where there is that brush along the hills and a lot of density of trees, that have caused these insurance companies to rezone, remap and unfortunately refuse to offer insurance in some areas.

Gino Benedetti: So, absolutely. It's definitely been a challenging time for finding the perfect fit for homeowners, finding the right policy, the right coverage, and then obviously the most competitive price policy out there, to ensure that, one, you're properly insuring your home, but two, you are getting the most competitive priced product that's out there.

Raziel Ungar: Yeah. That's interesting to know. I've also found it interesting how efficiently priced homeowners insurance is. So you could buy a $2 million house and your homeowners insurance cost could be 1,500 or $2,000 a year. To me, that doesn't sound like a lot, but as you mentioned, most of it is in the land and you're not really ensuring the land. It's a nice surprise I think that a lot of buyers aren't aware of.

Gino Benedetti: Absolutely. No question about it.

Raziel Ungar: Can you kind of chat about extended coverage as well for dwelling? I believe that's another coverage, where you can get up to 150 or 200%. How does that work?

Gino Benedetti: Yeah. So every carrier handles this differently and it's a case-by-case scenario, depending on what carriers we quote and recommend and see as a good fit for each homeowner, depending on where the home is located.

Gino Benedetti: For instance, the homeowners policies are package policies. So, within these package policies, there are enhancements that the carriers offer. One of these enhancements is called extended replacement coverage. And the extended replacement coverage can be anywhere from 125%, all the way up to 200%.

Gino Benedetti:
It's built into the policy and offers either a 25% additional coverage onto the building limit or all the way up to 200%, 100% of the building limit. So for instance, if we have you with a carrier that offers 200% extended replacement coverage, and the building coverage that we have on the home is a million dollars, that enhancement essentially gives you an additional million dollars in coverage. And it's built into the policy for unforeseen increased cost of construction, inflation, and just basically to ensure that you are never under-insured.

Gino Benedetti: So, yeah, I mean, that's a key point and a key coverage for when deciding on the best homeowners policy and which carrier to go with. I think that should definitely be considered, hands down.

Gino Benedetti:
We represent numerous different carriers, and the most common extended replacement coverage that we see is about 150%. And I think that 150% can go a long way to making sure that a homeowner, if a full loss is sustained, is not under-insured.

Raziel Ungar: Can you kind of talk briefly about other types of insurance, that if you're a home on the peninsula, you should be aware of? For example, having an umbrella policy. It's definitely not required, but can you talk about what that is and why that would be helpful?

Gino Benedetti: No, absolutely. Well, with the homeowners package policy, we identify the four different coverages, the dwelling, the other structures, their personal property, and then the last one would be the personal liability coverage. That's included in your policy. Standard limits of personal liability tend to be around 500,000. That will come with your homeowners package policy, but [crosstalk 00:12:29] may not be enough nowadays to protect your family.

Raziel Ungar: I mean, I think it could be. Yeah, having more, I think could ... A lot of people are like, "Oh my God. What if someone slips and falls in front of my house? They could sue me for a lot of money." So, I mean, I've seen clients who have had umbrella policies of one to $5 million. What kind of cost is associated with that and why is that a good thing to consider?

Gino Benedetti: Yeah, well, what's great about an umbrella policy is that it blankets not only your homeowners liability, but it also blankets above your auto liability as well. And truth be told, everybody's biggest exposure for liability is on the road. So, having an umbrella to supplement your auto liability limits, along with your personal liability limit from your home, really just gives you added protection. And as your assets grow and your home being your biggest asset, it's important to protect that biggest asset.

Gino Benedetti: The costs associated with a homeowners ... I mean, with an umbrella policy, we're talking maybe two to $300 additional a year for a million dollar umbrella. So the costs associated with an umbrella are minimal comparing to the actual coverages that are provided and the risk associated.

Raziel Ungar: Now that you mentioned auto, Gino, I always thought it's a good idea when home buyers are buying this big asset of a house, to consider bundling it with auto insurance. Are there discounts or bundling that one can get if you're providing a quote upfront or how does that work?

Gino Benedetti: Absolutely. I always look to try to bundle coverages anytime we can. There are 15 to 20% discounts by bundling your home with your auto, with your umbrella. The more lines of coverages a carrier can insure for a client, the more coverages we can max out on all types of policies.

Raziel Ungar: Okay. That makes sense. So, it's probably pretty common for someone to buy a homeowners insurance ... What percent of your clients who are getting homeowners insurance policies, are you kind of typically providing auto for? Is it a pretty high percentage?

Gino Benedetti: 90%.

Raziel Ungar: Okay. Interesting. Okay. That makes sense.

Gino Benedetti: Now, there is the 10% of the population that are my clients, that love Geico, want to stay with Geico and we work with that. It's a relationship business. My client is who I work for. I just represent the carriers as the insurance broker. So I try to do my best to make sure that my client is happy and comfortable with the carrier they have and obviously making sure they're properly protected, and then getting the most price conscious policies out there.

Raziel Ungar: It's actually a good point too. Talking about for what you do, I always thought it's pretty neat, working with someone like yourself as an insurance broker versus just working with say AAA only. But obviously, AAA is a great company. My parents had AAA insurance for decades, as many people. But can you highlight, what are the differences that a home buyer should be aware of between the two?

Gino Benedetti: Yeah. I mean, you have your household carriers, your Farmers, State Farms, AAAs. Those are great companies. Unfortunately as a broker, I don't represent those companies. The Farmers or State Farm agents of the world are the ones that represent those specific carriers and only offer that one product for their clients.

Gino Benedetti: We represent maybe over 10 different carriers and some of those are going to be household names. Your Travelers, your Nationwides, your Hartford, your Chubbs, your AIG, Berkshire Hathaway, all still very reputable companies.

Gino Benedetti: Maybe not as typical of a household name that were familiar to seeing on TV or hearing in the car or through an advertisement. But we work with only the most quality companies, to make sure that our clients are getting a reputable company and a carrier that will properly protect them and then step up to the plate when something does happen. And that's the key here. As a broker, I'm very involved and hands on with all my clients, through the claims process, to make sure that the claims process is being handled properly.

Raziel Ungar: It's actually really nice. I've had someone hit me in a car accident and I had to deal with everyone with the 800 number. So it is cool that I hadn't realized that you're pretty involved with the claims process too.

Gino Benedetti: Yeah, that's right. Yeah. I mean, we alleviate the 1-800 claim process. We will take care of that and get the details for you on our end. We kind of act as your liaison between you and the carrier, so that you have a professional that's working your behalf.

Raziel Ungar: Makes sense. Can you kind of talk, if we shift gears, if someone's thinking about building a new house or doing a remodel, what are some of the things to be aware of? I know that there's a builders risk policy. What are things that people should be aware of if they're going to be doing a significant project?

Gino Benedetti: Yeah, great point. There is a rider in every homeowners insurance policy, that if more than 50% of the home is under construction and the home is vacated by the homeowners, there's a clause in the homeowners policy that will not offer coverage while the home is being remodeled and under construction.

Gino Benedetti: Now this is completely different if you decide to just remodel a bathroom and you're still living in your home, and you have the option just to be able to live there, use another bathroom in the house while the other bathroom is being updated.

Gino Benedetti: That's not the situation here. The situation is when you really have a true gut remodel renovation of your home, there needs to be a process of converting your homeowners policy to what they call a builder's risk, also known as course of construction. Really, it acts as a homeowners policy, but offers the coverages you need while and during the renovation project.

Raziel Ungar: Obviously, if you're working with a licensed general contractor, which hopefully people are, they have their own insurance policy. So, they would have theirs, and then the homeowner would have their builder's risk policy.

Gino Benedetti:
Correct. Now you got to keep in mind, the general contractor that you hire has general liability insurance, or you hope. Obviously, you'd want to always work with somebody who does. That general liability policy is going to cover any property damage or bodily injuries caused by that contractor during the course of construction. But what happens if the contractor wasn't responsible for the property damage?

Raziel Ungar: What would be an example of that? Like someone coming into the backyard at 10:00 PM and hanging out?

Gino Benedetti: Correct. The home was vandalized after hours. Maybe there were some kids playing with some fireworks in the neighborhood and one ended up in the backyard at night and caused a fire.

Raziel Ungar: So that would be denied if you didn't have a builder's risk policy. That's not under the contractor's liability.

Gino Benedetti: That's correct. That's correct. So that's why the builder's risk policy is extremely important on any time that you're doing a renovation to your home, because really, it's going to offer the proper property protection for your home.

Raziel Ungar: Interesting. Let's shift gears. Can you kind of talk a little bit, Gino, about earthquake insurance? I know it used to be really expensive. I remember when we bought our first home seven years ago, it was like $500 per month, and it was just kind of out of reach of what we could do at the time. Then prices dropped, maybe because more people were buying into it. And then it was like two or $300 a month, and then we took advantage of it.

Raziel Ungar: I've always been surprised how many of my clients do not choose to buy it. However, some of my clients with engineering backgrounds or structural engineering, they 100% buy it. So can you comment on why it's a good thing, why it's expensive, what it covers and what the deductibles are like?

Gino Benedetti: Yeah, absolutely. Earthquake insurance, I feel like is extremely important because we live in the Bay Area. We've seen and lived through the 1989 earthquakes. We've learned about what the 1906 earthquakes have done to many parts of the Bay Area. And unfortunately, it's not about if, it's about when the next big earthquake comes. So, properly insuring your home means being responsible and trying to find ways to make sure that you're covered for any type of the loss that may occur.

Gino Benedetti: Now, again, the homeowners is going to cover your fire, wind damage, theft, but the earthquake policy is strictly going to cover damage to your property by an earthquake event. Earthquake policies are a little different and they can be structured differently, where you have, let's say a million dollars in coverage for your home. You're going to have a percentage deductible.

Gino Benedetti: So, whereas you're used to on a homeowners policy carrying maybe $1,000 or $5,000 deductible, earthquake policies carry percentage deductibles. A standard percentage deductible on an earthquake policy is about 15%. So your out-of-pocket costs, initially, on $1,000,000 in coverage could be $150,000 deductible.

Gino Benedetti: Which to a lot of people seems like a lot, but if there's an earthquake that causes major structural damage to your home and you don't have an earthquake policy, you could be looking at a lot more than just that 15% deductible to fix your home. So, I do think earthquake policies should be considered. They should be at least quoted. And if it's in your budget, should be discussed upon each homeowner.

Raziel Ungar: I had one client say to me once, Gino, and maybe it wasn't accurate, but they said, "Oh, well, if there's an earthquake, then my gas line's going to break and my home's going to burn down, and then my homeowners insurance would cover that." Is that true or just depends on what's going on?

Gino Benedetti: There is somewhat truth behind that. A fire that causes damage to your home, that followed an earthquake, would be covered under your homeowners policy. It would be considered fire damage and would be covered.

Gino Benedetti: However, nowadays, each city and county is coming up with regulations to make sure that fires don't happen after an earthquake, because we're worried about major losses and cities burning up because we've got multiple fires that spread.

Gino Benedetti: A lot of homes nowadays are equipped with automatic gas shut off valves. So when an earthquake happens, these valves are built into the home to automatically shut off the gas. These scenarios are becoming more and more unlikely of happening. So, there is some truth behind that statement Raziel, but I do feel-

Raziel Ungar: Obviously you don't want to go there and you wouldn't want to risk being denied coverage, so [crosstalk 00:24:43].

Gino Benedetti: Absolutely.

Raziel Ungar: Yeah.

Gino Benedetti: Absolutely.

Raziel Ungar: I kind of briefly dwelled on it or talked about it before, but if someone's working with an insurance broker, obviously I guess the benefit would be that you can quote many different carriers and you have more personal attention if there's a claim, versus kind of working with the other. And obviously, it just kind of depends on what people want. Right?

Gino Benedetti: Absolutely. Absolutely. The key here is, is that if we have a carrier that changes their guidelines, where they no longer want to write in a certain area, maybe their premiums have doubled because they've had to take a huge rate increase, as a broker, it allows me to then find an alternative solution for my client. Being able to look and shop other carriers and see if there's a better option out there for my clients.

Gino Benedetti: What's great is, I get to continue to work with my clients, even if we change carriers. And a lot of times, we like to establish a relationship between a carrier and a client and not have to switch year after year. But there are a lot of things changing right now in the insurance industry and there's nothing wrong with switching insurance carriers.

Raziel Ungar: Can you talk about how an insurance broker is paid and does it cost more or the same to work with an insurance broker like yourself, versus just by going to one of the insurance companies that represent directly that kind of stuff?

Gino Benedetti: Yeah. We don't charge any broker fee, so there's no additional cost for working with us. We absolutely, 100% get our commissions paid to us from the carrier. So it's typically a percentage that each carrier will pay us, based on the volume of business that we write with them.

Gino Benedetti: The price that we give you is the same price that you would get from any other broker or even going to direct, in some instances. A lot of the carriers that we represent as brokers don't allow the consumer to go direct. There are still a couple that allow, but that price that you would be paying directly, it'd be no different than the price that you'd get from going through me.

Gino Benedetti: As a broker, I'm just providing the added value to my client, to my customer. And that added value really just as truly shown during a claims experience, where you have somebody that's representing you, working on your behalf with the carrier, to make sure that you're properly being covered.

Raziel Ungar: That's actually a good point. I remember we were chatting a year or two ago, during the fires in the North Bay. Can you just briefly touch on what your involvement was, with working with those clients? I'm sure it was crazy and sad and difficult, but they would call you. What would that look like?

Gino Benedetti: Yeah, I mean, that was one of the most challenging times in my career. Not because there was an abundance of claims, but it was really because my clients had lost their homes. They had nothing.

Gino Benedetti: My goal was to be one of the first guys on the scene, with boots on the ground and to make sure that each carrier was going to go ahead and start the claims process to getting money in my client's hands. And that really is what it came down to. I wanted to make sure that my clients had a check in their hands within the first week or two of that disaster.

Gino Benedetti: Really, that money was being used to find temporary housing, whether it was staying up at a hotel or renting a house in a nearby neighborhood or city. Making sure that that financial burden was not being experienced from that family or on that family and that the insurance company was going to offer that money to help them throughout this tough time in a proper timeline.

Raziel Ungar: Thanks. Anything else that'd be helpful for people to know as they're watching this, Gino, or anything that we haven't covered?

Gino Benedetti: Yeah. I mean, if you haven't shopped your insurance in many years, I think it's a great opportunity to do so. There's so many different things changing. Auto rates are constantly changing. Homeowners rates are constantly changing.

Gino Benedetti: There's absolutely no costs associated with shopping your insurance and seeing that there's a better option out there. So I would just say, if you watched this video and you've learned a little something, I'm glad. I want to educate my clients on what they're purchasing, what it means to be covered through a homeowner's policy, and then hopefully that will allow us to have deeper conversations down the road.

Raziel Ungar: Thanks, Gino.

Gino Benedetti: Thank you, Raziel.