The most important things to know about insuring your new home

Raziel Ungar

Raziel Ungar

January 6th, 2023 - 27 min read

In this video

What homeowners insurance covers
The biggest piece of homeowners insurance: dwelling coverage.
How reconstruction cost is calculated
Other structure coverage: ADU's, detached garage, fences, and more
Personal property coverage: the stuff in your house
Cataloging the personal property contents in your home
Loss of use (if you have to move out), plus personal liability coverage
Examples of personal liability coverage
Umbrella coverage additional liability protection above the policy limits on the homeowner's policy
Extended replacement coverage: built-in for the unforeseen increased cost of construction inflation
The importance of umbrella policy, and bundling in home, auto, jewelry, and fine arts
What is covered by homeowner's insurance
What a home insurance policy does not cover
Cost of earthquake insurance and what it covers
Earthquake insurance: how percentage deductibles work
Increasing insurance rates in San Mateo County; zoning and potential risk for not qualifying
Insurance coverage in a high-risk area; grandfather clauses, non-renewal, solutions for different scenarios
Benefits of working with an insurance broker
Benefits of working with a captive insurance company like Farmers versus an insurance broker
Compensation for insurance brokers and the overall compensation model
Bundled home and auto insurance discounts
Insurance coverage for remodels: different types of insurance that should be put in place when vacated for construction
What is a builder's risk policy and why you may not think you want it, but you still need it
Calculating insurance premiums for builder's risk: how long you'll need the policy and other determining factors
Seller occupancy post-closing - renter's insurance coverage and the risks that should be considered
When to consider flood insurance
High-risk flood areas in San Mateo County
When to engage a home insurance broker and what to expect

Having the right insurance coverage in place sounds pretty straightforward, though there's actually more to it than just working with the quote your broker or carrier works up for you.

In this video, I interview Gino Benedetti, an insurance expert who has been working with homebuyers for close to 20 years. My hope is you'll get some answers to the most frequently asked questions that I get from my clients while they are in contract to buy a home, and that this video will help you save time too. For a deeper dive into everything insurance related, please visit my comprehensive article here. If you're thinking about buying or selling real estate in San Mateo County, or need a referral, I'd love to connect.

Raziel Ungar: Hi, everyone, I'm Raziel Ungar, and with me today is Gino Benedetti of Calender-Robinson Insurance. And Gino's been in the insurance business for about 20 years. And thanks for being here today.

Gino Benedetti: Raziel, thanks for having me. Looking forward to talking a little bit about insurance.

Raziel Ungar: Obviously, we can go in a lot of directions, which we will, talking about homeowner's coverage, earthquake insurance, things that people should look out for. Obviously, you have a wealth of information. Maybe you can start by just telling everyone a little bit about homeowner's insurance. What does it cover? What does it not cover? What should people think about when they're buying a home?

Gino Benedetti: Absolutely. Yeah, so homeowner's insurance covers the structure of the property along with liability, other structures, and personal property. The goal here of homeowner's insurance is just to protect the asset that you just purchased and that you own and to properly cover the liabilities that come along with owning a home and properly insuring not only the structure but your contents.

Raziel Ungar: And tell us about some... there's dwelling coverage, other structure coverage. Walk us through some of those and what that covers exactly.

Gino Benedetti: Yeah, absolutely. Dwelling coverage is the biggest piece when deciding about homeowner's insurance. It's important to properly protect your dwelling based on today's construction costs, inflation, and really the cost of construction. We use a model, replacement cost estimator, that we use in-house to determine a proper replacement value for your dwelling. And it does depend... based on the square footage of your home, the quality of construction, and the area you live in.

Raziel Ungar: And how does that calculator determine what the actual reconstruction cost is? Does it just have an algorithm that says, "Okay, in San Mateo County, it costs $500 a square foot," and we base it on that? Or there could be a site visit where the appraiser is like, "Oh my gosh, this is really high-quality home." How does that work?

Gino Benedetti: Yeah, a lot of that is facilitated in our office. We use the web to look at pictures of the home to see the quality. We will request copies of appraisals to determine the exact square footage, what the estimators... the appraisal list is coming up with as far as price per square feet. And at the end of the day, we have a program that really in the Bay Area has an average of where the home should be insured at. And right now, we're seeing anywhere between $450 a square foot all the way up to $850 a square foot, and really depends on the type of construction.

Raziel Ungar: Then, Gino, tell me a little bit about what is other structure coverage.

Gino Benedetti: So, other structure coverage comes with your homeowner's package. All your coverages are really based on the dwelling coverage amount. And then, there's a percentage that is given for other structures to protect any ADUs, detached garage, fences. So, any other detached structures on your property would be covered under the other structures coverage. And typically, you'll see 20% or 30% of your dwelling amount as your other structures coverage.

Raziel Ungar: Got it. Okay. And then, how about personal property? So, furniture in the house, how's that calculated? Do people get that?

Gino Benedetti: Absolutely. Again, as part of the package policy with homeowners, and there is a percentage that is calculated for contents. And typically, it's 50% of the dwelling amount. So, if you have $1 million dwelling coverage on your home, you're going to get $500,000 at no additional cost for your contents to cover your personal property, electronics, and appliances.

Gino Benedetti: And the analogy I'd like to use is if you were to turn your home upside down, everything that remains attached to your structure, flooring, fixtures, cabinets, that would be all covered under your dwelling. Whereas, everything that's detached from your structure would be covered under the contents amount.

Raziel Ungar: And then, in the event of a claim though, obviously if it's a million for dwelling and 500 for personal, it's not like you get 500,000. You would need to demonstrate, "I have this value of these items." Do they need to be cataloged? How does that work?

Gino Benedetti: Yeah, great question. I always recommend every homeowner, take a video of their home and walk around and save it in a cloud somewhere so that if you sustain a total loss, we had something to go back to you to say, "Okay, here's where the house looked like prior to the loss." And then, you can go through and itemize based on that video of what actually was lost. Because in the time of a fire or a law, a major loss, it is a stressful time for homeowners and owners of properties. So, it's important to have that extra layer of material to be able to come up with what was lost in a fire per se.

Raziel Ungar: Got it. Okay. So, if you've just bought your home and you're going to get this coverage, then you should go with your iPhone or camera throughout the house and take a 20, 30-minute video of literally everything in her house, obviously not your socks, but pretty much almost that level of detail.

Gino Benedetti: Absolutely.

Raziel Ungar: Okay. And then, would you need to be so proactive to have receipts and put all this into a Google Doc, or is that not really necessary at that?

Gino Benedetti: That's not really necessary. A lot of times, the carriers are going to work with you and let's say you had 500,000 in contents coverage, they're going to give you 50,000, say, "Here's some money to get back on your feet, start replacing some of your clothing items. When you run out of funds of that first distribution of money, please send us back receipts, what you paid for and what you purchased." And then, they'll distribute another large chunk of money.

Gino Benedetti: And that's pretty much how it's handled even through the reconstruction phase as well, dealing with contractors, different phases of construction. They're looking to get you back on your feet as soon as possible.

Raziel Ungar: That makes sense. And then, obviously, if you have a loss and you move out for a period of time, the insurance would cover your stay in a hotel or rental as well?

Gino Benedetti: Yes. So, part of the homeowner's package that I referenced is the dwelling coverage, the other structures coverage, the contents, and personal property coverage, but there's also two other major pieces of items that are covered as well. The loss of use. So, if you're dispersed from your home, they're going to pay for the cost to have temporary housing, whether it's a couple of days or a year. Most policies will pay up to 12 months for loss of use coverage.

Gino Benedetti: And then, the last piece is liability coverage. The personal liability coverage to protect you, your spouse, and your kids from many liabilities within the confinement of your home.

Raziel Ungar: And what would be some examples? A personal liability, you have a birthday party for your kid, someone comes over, someone slips and falls in the backyard and they break their leg. Something like that?

Gino Benedetti: Absolutely. So, if there's an injury on the property that sees you liable for those injuries, that would be covered under the-

Raziel Ungar: Right. And by sees you liable, right? Normally, if everything was just normal, I guess they would just go to the hospital and their health insurance would take care of it. But if they felt that the homeowner was negligent, then they'd come after this part of the policy?

Gino Benedetti: That's correct.

Raziel Ungar: Got it.

Gino Benedetti: But we've also seen it as if you're a golfer and you hit a golf ball into somebody's house or window, and not a lot of the people know about this, but your personal liability would also protect you from any property damage that's outside your home as well.

Raziel Ungar: Interesting. I'm sure you've seen some claims with that.

Gino Benedetti: I have.

Raziel Ungar: And then, tell me a little bit more about, so the personal coverage, and then what is umbrella coverage and how do those ties in together and why might someone consider getting that?

Gino Benedetti: Yeah. Umbrella coverage is, in my opinion, a necessary form of coverage anytime that you're purchasing a home, especially in the Bay Area because it's providing additional liability protection above the policy limits on the homeowner's policy. So, most homeowner's policies will offer either 500,000 or $1 million in personal liability coverage, and the umbrella is there to basically blanket and add additional protection above the primary limits, but not just for the home, but also for the auto as well.

Gino Benedetti: So, in my opinion, everybody's biggest exposure is on the road. So, God forbid, if you rear-end a family and they all sustain injuries, your auto limits may be exhausted fairly easily due to damages. Without an umbrella policy, those auto limits, once exhausted, there's no additional coverage provided. So, if you have the umbrella policy, it's going to provide and pick up additional coverage above and beyond the primary limits up to the umbrella amount.

Raziel Ungar: Got it. Okay. And in terms of cost for umbrella coverage, I remember when I reviewed it in the past, it didn't seem unreasonable for the amount of coverage. So, if someone had $1 million in umbrella coverage versus $2 million, what would the rough cost be, and how does that?

Gino Benedetti: Yeah, roughly, I say for the first million, it's about $350 for the first million in umbrella coverage, and then from there... per year. And then, from here, as you layer an additional million dollars in umbrella, it's probably another $150 to $200 each layer on top of the umbrella limit.

Raziel Ungar: So, Gino, tell me a little bit about extended coverage and what that is.

Gino Benedetti: Yeah, so extended replacement coverage is an enhancement built onto your homeowner's policy, and most of my carriers offer 200% extended replacement. So, if you have a home insured for $1 million in dwelling coverage, in actuality, you're going to get double that. That's with 200% extended replacement coverage. So, in actuality, you're getting $2 million in coverage. And that's built-in for unforeseen increased cost of construction inflation.

Gino Benedetti: And with demand being so high in construction nowadays, a lot of times, replacement costs are driven upwards, sometimes above the policy limits. So, that enhancement is built into the policy to make sure that you're never underinsured.

Raziel Ungar: And is that like an optional premium, or that's just included in that policy?

Gino Benedetti: It's definitely an optional premium, and I always include it on every one of the homeowner's policies I quote for my client.

Raziel Ungar: I mean, it seems like a no-brainer to buy that, right?

Gino Benedetti: Absolutely. And really the costs are minimal, 35, 40 bucks additional a year to have these extended replacement enhancements built into the policy.

Raziel Ungar: And then, from the carrier's perspective, they offer this policy obviously for that reason, but they hopefully don't want to see it to be 200%. That's not what they want either.

Gino Benedetti: Absolutely. We're not using that extended replacement enhancement to factor the true replacement costs on the dwelling coverage. We're only using that as a bridge for the unforeseen increased cost of construction down the road.

Raziel Ungar: Got it. It's a really worst-case scenario. So, most of the time, I'm sure when you had clients who lost their homes during the Santa Rosa fires, were you seeing that come into play or not as much?

Gino Benedetti: Absolutely.

Raziel Ungar: Oh, you were?

Gino Benedetti: Yeah, a lot of times with the Santa Rosa fires, we saw cost of construction and lumber increase drastically...

Raziel Ungar: Because of the demand.

Gino Benedetti: ... because the demand was so high. So, with that demand being so high and cost of construction increasing so quickly, those enhancements did come into play greatly.

Raziel Ungar: Going back to umbrella coverage, what percent of people take that out, I'm assuming most do?

Gino Benedetti: Yeah. So, I will always quote an umbrella policy with our bundle. We try to bundle our home, our auto, our collections, jewelry, fine arts, and maximize discounts by doing the bundle and then offering an umbrella. I'm always going to quote an umbrella coverage every time for my client. And I'm really advising them to purchase that as much as they can. Now, I'd say 80% of my clients do purchase the umbrella and some of them don't feel it's necessary.

Raziel Ungar: Got it. And going back to dwelling coverage, what are things that are typically covered within that? You move into your new house, you have fire sprinkler, and it goes off accidentally, or you have a pipe that breaks and you have a flood in the house, or you have an issue with your radiant heat, or a tree falls from the neighbor onto your house. Are all those things that are for sure covered? Maybe you talked a little bit about that.

Gino Benedetti: Yeah, those are all great questions and great scenarios. Each carrier is going to handle the situation differently. If there is an event that causes property damage and that event is covered, then we're going to be able to pursue coverage from your insurance policy. So, as you mentioned, a tree in your backyard falling onto your home, that's a covered event.

Raziel Ungar: Regardless if it's your tree or your neighbor's tree?

Gino Benedetti: That's correct.

Raziel Ungar: Got it.

Gino Benedetti: That's correct. If you had a backup in a drain and because wind-driven rain caused leaves to cover the drain and you had pooling, let's just say on a deck or on top of your house, on a roof, and that caused water damage to your home, that would be a covered event. But if it was a maintenance issue, if the roof was really old and it's been patched several times, and the roof just happened to leak on a really bad rainstorm, that would not be covered.

Raziel Ungar: Got it. What are other things that you typically see since you represent hundreds of clients that might not be covered? Just so folks watching this can get a sense, "Okay, I better be on my A game for that."

Gino Benedetti: Yeah, that's a great question. So, a lot of things that have not been covered under the homeowner's policy are earthquake and flood. And flood is defined by exterior water causing property damage from the outside inwards. Now, I brought up this scenario of a drain being clogged due to wind-driven rain and leaves causing the drain. And if you had pooling that came into your home, that's a covered event under your homeowner's policy.

Gino Benedetti: But if it was just a massive amount of rain that backed up from the streets or from, let's say, a creek that runs alongside your home and that creek overflew and caused damage in your home, that's considered flood. So, you would need a flood policy to cover that type of scenario.

Raziel Ungar: Gino, you brought up earthquake insurance. Talk to me a little bit about that. What does that cost? What does that cover? Obviously, an earthquake is an inevitable bullet sometimes, so it seems like a rational thing to get.

Gino Benedetti: Yeah. So, the two biggest pieces of coverage that are not covered under homeowner's policy flood, which we've touched on, and now earthquake. So, if earthquake causes a fire, a fire following an earthquake, your homeowner's fire policy would cover that.

Gino Benedetti: If an earthquake causes structural damage to your home and you lost contents because of that, or you had structural damage because of an earthquake, unfortunately, without an earthquake policy, you would not have coverage. So, earthquake policies are there to help provide our clients coverage for an event like an earthquake that could potentially displace you from your home, possibly cause cracks in your foundation, cracks in the structure or loose nice pieces of contents, personal property that you have on your wall or on a cabinet or anywhere in your home.

Gino Benedetti: So, the earthquake policy is designed to offer coverage for that event. And like a homeowner's policy, we will insure the structure, we'll insure loss of use, we can insure other structures, and we can insure the contents as well.

Raziel Ungar: Talk to me about cost too, because I know earthquake is significantly more than homeowners too.

Gino Benedetti: Yes. So, especially here in California and in the Bay Area, depending on where you live.

Raziel Ungar: Let's just say San Mateo County, for example.

Gino Benedetti: San Mateo County, right on the fault line. So, an earthquake-

Raziel Ungar: Thanks for the reminder. Yeah.

Gino Benedetti: Earthquake premiums tend to be three to four times of what your normal homeowner's costs would be. But we are seeing a lot more people purchase earthquake insurance.

Raziel Ungar: And it makes sense from what I've observed, especially if you're a cash buyer and you have a ton of equity in the home, it's almost a no-brainer to be purchasing an earthquake policy. Right?

Gino Benedetti: Absolutely. Yeah, absolutely. So, whereas lenders require you to purchase fire insurance if you own a home and have a loan with that lender, they do not require you to purchase earthquake insurance.

Raziel Ungar: I mean, I'm assuming... I think California law requires when you give a quote that you provide a quote for earthquake too.

Gino Benedetti: That's correct. Every one of our carriers that we issue a homeowner's policy for a client will offer an earthquake policy.

Raziel Ungar: Talk to me about the deductibles too. For earthquakes, I think they might be different from dwelling coverage or fire coverage, right?

Gino Benedetti: Yeah. So, standard homeowner's policies come with a dollar amount deductible, 500 a 1,000, sometimes 5,000, sometimes 10,000, whereas earthquake policies come with a percentage deductible. So, if you're ensuring $1 million home and you have a 15% earthquake deductible, you are essentially having and being responsible for the first $150,000 damage because that's your deductible amount based on the percentage.

Raziel Ungar: Got it. So, if I have a $1 million house and let's just say $2 million, because $1 million is a low number, right? So, if you have $2 million and your homeowner's insurance policy could be $2,000 or $2,500 a year, is that fair to say?

Gino Benedetti: Yeah.

Raziel Ungar: So, then your earthquake policy could be 6,000 to 10,000 a year?

Gino Benedetti: That's correct.

Raziel Ungar: Got it. Accurate. And then, if I have a $2 million house with a 15% deductible, that means in the event of a total loss, it'd be $300,000, I would either write a check in the amount, and then the $1.7 million, the insurance company would pay for?

Gino Benedetti: Not necessarily. So, that $2 million limit does not include your cost for the deductible. So, basically, the way you want to understand it is that you're responsible for the first $300,000 in damage on a $2 million policy.

Raziel Ungar: Got it.

Gino Benedetti: And then, anything above that coverage will be triggered and the policy would pay out to the limits.

Raziel Ungar: What would the limit be or what would be paid out then if on the $2 million house, if I paid the first $300,000 in damage, would the insurance company take care of the rest?

Gino Benedetti: The additional up to $2 million.

Raziel Ungar: So, obviously, with global warming and climate change and fires becoming sadly much more common, in San Mateo County, specifically, if you're a home buyer, should you be concerned, could your rates go up? What are you seeing there for your clients here?

Gino Benedetti: Yeah. So, the biggest challenge right now is every carrier's mapping and zoning their own fire risk areas up and down California. And if you find yourself backed up against a brush area or in San Mateo County, maybe off of 280 somewhere or in Emerald Hills, there could be a potential risk for not qualifying or not being able to get quotes based on the fire score that these insurance carriers are calculating.

Gino Benedetti: So, what's happening is that due to the national disasters nationwide, the fires in California, global warming, the high risk for fire in California, carriers are getting very strict on their appetite and the areas that they want to insure in.

Raziel Ungar: And what are you seeing, obviously since you work throughout California, I'm assuming you're seeing some areas where carriers have pulled out, or it's just harder to get coverage perhaps?

Gino Benedetti: Absolutely. So, in some instances, carriers will not even offer quotes in certain areas. Some carriers, if you've been grandfathered in, they'll stay on. And some carriers are making the business decision to non-renew you as well. But as a broker, we represent numerous different insurance companies and we have different solutions for every type of scenario. So, my goal is to never be able to say no to my client. I'll be able to always find a product, one, that has properly covered you and then finding you the most competitively priced policy out there.

Raziel Ungar: And Gino, now that you mentioned how you're a broker, can you highlight what's the role of the broker versus if someone went to a direct carrier like State Farm? What are the pros, cons, and differences that the client might experience perhaps?

Gino Benedetti: As a broker, I represent numerous different insurance companies. So, what we do is we take the information on a new homeowner, and we shop it through 15, 20 different carriers that we have access to. And we'll take those... we'll get different quotes. Some quotes will be better than others, some carriers may have declined or not offered quotes.

Gino Benedetti: And then, we put together our recommendation based on our findings to our clients. The key here as a broker to understand is that I work for my clients, I just represent the insurance company. So, I'm on the side of the homeowner, the client, and the person buying the insurance. So, I'm an added layer of protection for them when dealing with an insurance carrier in the event of a claim or a billing dispute. I'm here to help guide them through that process to make sure that they seek coverage, and that the insurance carrier is doing their due diligence to respond and provide the adequate coverage and service that is needed.

Raziel Ungar: So, for example, during the Santa Rosa fires or if your client has a loss, what's your role in that process if any?

Gino Benedetti: The role is really just having boots on the ground for my client. Most of my clients are not in insurance, and they don't know much about it. So, through the process of purchasing insurance, I'm trying to educate them as much as they can so they can have educated decisions when they need to. But also, in the event of a claim, to be able to represent them to make sure that they seek replacement of whatever's lost as quickly as possible.

Raziel Ungar: And then, what would be the other option for someone not working with a broker, working with a direct carrier? Are there benefits? What would be the differences, if any?

Gino Benedetti: Really the main difference is captive insurance companies like Farmers or AAA or USAA, they have one product and they sell one product. And they are agents for their company. So, if you have a large increase in price or if you have trouble finding insurability in a certain area, they're just selling that one product. Whereas for me, if I have an issue with insurability on one carrier, I can always look to find another carrier that can either help reduce price or, more importantly, coverage to improve coverage but also keep costs down.

Raziel Ungar: Got it. So, Gino, tell me a little bit about brokers, how brokers are paid, or just the overall compensation model, so that way, for someone watching this, who's buying a home for the first time, they have an idea of how everyone is compensated.

Gino Benedetti: Yeah. So, brokers are compensated by the carrier. There's no additional cost, you're not going to see an increase in price from a quote from a broker because we are again paid on the overrides with the carriers on the backend. So, some brokers do charge broker fees, we don't do that. I don't do that. So, there's no additional cost to working with me. So, I'm really just an added value for my clients to basically be the contact person between the client and the insurance carrier.

Raziel Ungar: And then, do different carriers pay similar amounts, or how does the client know that you have their best interest in mind? Obviously, you do because you're a good person and your clients trust you. How does that work behind the scenes?

Gino Benedetti: So, most carriers are offering 10% to 15% commission based on the annual premium costs. So, there's nothing that we do to push one carrier or another based on that. It really just comes down to coverage. I always tell my clients, I'm never going to be the cheapest guy on the block, nor do I want to be because my value is coverage over price. My number one goal is to make sure you're properly covered and protected, and then find you the most competitively priced policy once we determine the coverage is needed."

Raziel Ungar: That makes sense. And if someone comes to you as a broker or they go to the AAA or State Farm or Farmers, it sounds like the cost would be the same. Obviously, each coverage or each policy might be a little bit different. But from a compensation perspective, the person at the captive carrier, they'll be paid by their company. It's the same thing, right?

Gino Benedetti: Very similar. Exactly similar. But the products that they sell are different from the products I sell. Some of their carriers may only offer 150% extended replacement, whereas most of my carriers offer 200%. Some of the carriers with the captive insurance companies make half a certain coverage limit or cap the liability coverage on the homeowner's policy to 300,000, 500,000 whereas the carriers that we represent and that we quote are always offering $1 million on the home and liability coverage.

Raziel Ungar: So, Gino, obviously when you're quoting someone buying a new house, you might bring up quoting with auto because there could be some bundling discounts. Talk to us a little bit about that.

Gino Benedetti: Yes. So, I always recommend bundling your homeowners with an auto, with the collections. So, I'm trying to capture as much information from their first conversation, especially when there's a referral in place. Because again, my best interest is to make sure my clients are properly covered. And when you bundle a home with an auto, with collections and then added an umbrella, you really are maximizing discounts on each line of coverage that you purchased.

Raziel Ungar: And that's usually with the same carrier for that bundle, right?

Gino Benedetti: 99% of the time is always with the same carrier. Absolutely.

Raziel Ungar: Got it. And what benefit might there be bundling, discount-wise, that someone could expect to see if they're like, "Gino, help me with the home. Oh, by the way, I have an auto policy." And then, they come to you and you quote both. What could someone expect to see?

Gino Benedetti: Anywhere between 15% and 20% discounts. So, the discounts are substantial. And so, if I'm quoting just a standalone home and comparing that to a bundle with Geico, I'll never be able to compete with that. But if you allow me to look at the entire picture to offer a product that I can stand behind that I value and then bundle the home with the auto and add the umbrella, I think there's a lot of value behind that. And you'll see that there's a lot of cost savings behind that as well.

Raziel Ungar. So, now I bought my home a few years ago, and I'm thinking about doing a remodel. Talk to me about the risk there. Are there additional coverages that I should have? I trust your contractor, but things can go wrong. I had a friend once whose contractor passed away in the middle of the project. Anything can happen. So, talk to me about what you typically see and recommend.

Gino Benedetti: Yeah, that's another great question, Raziel, because the key here when doing anything to your home is communication. And you'd be surprised how many clients of mine have started a remodel project, vacated home and didn't tell me that their home was vacant and under construction. And there is a transition and a different type of insurance that needs to be put in place for your home when it's vacated and construction starts.

Gino Benedetti: And that's called a builder's risk, also known as a course of construction policy. And really, that's a type of product to insure the home during the phases of construction. So, insurance carriers always have a vacancy clause on their policy.

Raziel Ungar: Interesting.

Gino Benedetti: So, you vacate your home for a period of time, and this-

Raziel Ungar: This is obviously not a vacation. This means you've moved out of your house for construction to start.

Gino Benedetti: That's correct. I'm talking about primary homes. Obviously, secondary homes or vocational properties are structured differently. But as the primary home, if you're looking to do a remodel, it's important that you communicate that to your broker so that we can work together on developing the proper type of insurance products to properly insure you through that process.

Raziel Ungar: So, Gino, talk to me about the builder's risk policy. My understanding is it's basically if you're doing remodel and you've completely vacated the house, you obviously need to have a separate type of policy for that.

Gino Benedetti: Anytime that you do anything to your home that may affect you vacating it or a kitchen or bathroom remodel or a full gut remodel, it's important that you communicate that to your broker so that we can ensure that you have the proper coverage in place. You'd be surprised how many clients I have that have vacated their homes, started a full gut remodel, and didn't tell me about it until the final stages where they were asked to update their insurance.

Gino Benedetti: The problem here is that normal homeowners' policies have a vacancy construction clause built into their policy. So, if you sustain a loss in the homes to be found vacant and under construction, you give the insurance carrier an out to deny coverage. So, builders' risk policies, also known as course construction policies are built to supplement the homeowner's policy, similarly structured, but to offer the coverage needed for and when your home is vacated and under construction.

Raziel Ungar: And how is that premium calculated? Is it based on the value of the work being done? Length of time? How does that work?

Gino Benedetti: Yeah. Both scenarios help drive the rates, but typically it's time, and how long you need the policy. And then, we ask for hard costs from your contractor and soft cost so that we can determine how much do we need to insure that builder's risk requires a construction policy for the new construction. Is there going to be a shell that is remaining that we still need to cover?

Gino Benedetti: So, a lot of times, the builder's risk policies will come with either an existing structure or a limited amount, which is if it's just bare bones, it's going to be minimal and then a new construction amount. And if you're just remodeling a kitchen or bath and still living here, a lot of times if less than 50% of your home is under construction and you are still living in that home, you can get away with the homeowner's policy.

Gino Benedetti: So, if it's just a bathroom or a small kitchen remodel, there's not necessarily a need for builder's risk, but it's always important to communicate that to your broker.

Raziel Ungar: So, a couple of examples that I remember hearing about when we're doing our home project was, let's say someone comes in at 11:00 PM, they don't work for the contractor, they smoke a cigarette in my backyard and then it causes a fire. Would something like that be covered by builder's risk?

Gino Benedetti: Yes, it would. And it's important that one, you always hire a licensed bonded contractor and insured, right? And so, you hire a contractor, you vacate your home, construction starts. The first thing is, please get a certificate of insurance from your contractor naming you as additional insured. That's going to cover you for reliability purposes while the home is under construction.

Gino Benedetti: And if that contractor's work does any property damage to your home, then his policy would cover it through his work. Such as, if he forgets to turn off a gas pipe or water pipe and looks to test the sink and it causes flooding. Well, his insurance policy should cover any property damage done by his work.

Gino Benedetti: But what about after hours? Once that contractor leaves the premise for the day or the weekend, how are we going to insure the home for vandalism or potential fire? And that's when the builder's risk really comes into place, to insure the new construction that's going on here while the home is being built.

Raziel Ungar: Gino, what is the cost to get a builder's risk policy, give me some context.

Gino Benedetti: So, the policies are really built off of the construction costs of your home. So, a lot of times, we'll ask for a copy of the construction budget that defines the hard cost versus soft costs, and we're going to structure that policy around what the hard costs are, for any new construction that's going into your home. If it's a full gut remodel, we're going to keep some existing structure coverage for the shell. That tends to be a lot less than what the new construction limit would be.

Raziel Ungar: So, I'd love to shift gears and talk a little bit about renter's insurance. Because a lot of my transactions, if I'm representing the buyer, as part of the negotiation and the purchase contract, the buyer may agree to allow the seller to occupy the home for two weeks after closing. Obviously, there's some additional risk with that. Talk to me about that risk and what type of coverage would be appropriate to put in place at that time.

Gino Benedetti: Yeah, absolutely. So, you're a homeowner, you sell your home, and now you no longer own it, but you're going to now become a renter in your prior home. So, it's important that there's a transition and policy. Now, the new buyer of that home is going to be responsible for ensuring the new home as their primary. And now as a renter in your home, it's important that again, communicate with your broker to make sure that there's a proper policy put in place to insure you now as a renter of the home, not the owner.

Raziel Ungar: I've run into some issues over time just communicating with the other side of like, "Hey, this is super important. I'm representing my buyer. This is important for your seller they have this coverage in place because let's say, your seller leads the stove on, that's not good. Obviously, it leads to a fire. And something bad happens, then the buyer's homeowner's insurance would be responsible. But if the seller had their own renter's insurance policy, that would first be responsible and they would also list my buyer as the additional I insured, and then my buyer's homeowner's insurance would be secondary." Is that correct?

Gino Benedetti: That's correct. So, the renter's policy is really there to cover that seller's property while in someone else's home. And also, the liability. So, the liability, that scenario that you described of causing a fire would fall under the liability portion of the renter's policy and be primary up to the policy limits. Typically, $1 million in liability coverage is the minimum I would even recommend for a renter in that scenario. And then, the new buyer's homeowner's policy being secondary.

Raziel Ungar: Are there any other words of wisdom you would have for a buyer or seller in these situations? Like, how to protect yourself? Because obviously, if someone's going to buy a $2, $3, $4 million house, it's naturally a nerve-wracking feeling to say, "Oh my God, I just spent a huge amount of money. Someone I don't know is living in my house, and I just paid them a big number." Any other thoughts, things that you would say for that?

Gino Benedetti: Well, you addressed it. I think the biggest thing is making sure that they purchase a proper policy in place and name the new owner as additional insured.

Raziel Ungar: And is additional insured the same as additional interest, or those are different?

Gino Benedetti: Those are different.

Raziel Ungar: Can you talk to me a little bit about that? Because I've sometimes had other agents send me policies... so I'm again representing the buyer. The listing agent will send me proof from their seller's insurance coverage and that'll say additional interest and it'll list my buyer's, my understanding is it should say additional insured, but talk to me about what the difference is and why.

Gino Benedetti: Yeah. So, the additional insured is more so of, "I'm hiring you to remodel my kitchen. I still own this property. I'm just bringing you into my home to do the work. I want to be named as additional insured on your construction policy." Whereas, if the interest changes, then it needs to be an additional interest coverage, not an additional insured because I'm no longer the owner of the home. So, I need to now name the owner of the home as an additional interest because I'm purchasing a policy that should be protecting them.

Raziel Ungar: Gino, talk to me a little bit about flood insurance. Obviously, you probably have two categories. You have one where someone's like, they're not required to have flood insurance, but they just want to be over cautious and get it. And the other could be the lender requires the flood insurance before they'll even loan on the property. Right?

Gino Benedetti: Right.

Raziel Ungar: So, walk me through both of those scenarios and what that would involve.

Gino Benedetti: Yeah, absolutely. So, if you're not in the flood zone but you're still worried about flood of your home, then we can purchase a policy that's fairly inexpensive. And when you're not in the flood zone, the policies are structured similar to a homeowner's policy where you're going to get dwelling coverage, you can have the option to purchase contents coverage for your property, option to purchase loss of use coverage as well.

Gino Benedetti: And those policies run anywhere between 500 and 1,000 bucks a year. Whereas, if you're in a flood zone and now being required to purchase a flood by your lender, then it all comes down to the zoning and rating of the flood score. And some of the higher-risk flood areas will cost more than the lower-risk flood areas.

Raziel Ungar: And who's assessing the risk? Is this FEMA? Is this other insurance groups? Talk to me about that.

Gino Benedetti: Yeah. So, every time I've seen a flood requirement from the lender, it's always been through FEMA's mapping.

Raziel Ungar: And that can change over time, or how does that work?

Gino Benedetti: Absolutely. There's an elevation certificate. A lot of times, we can dispute a flood determination based on an elevation of the property. So, if you sit maybe in a flood zone, but your house is actually built up on a higher-than-average foundation, that technically may be able to put you outside the flood zone and get you a better rating or better premium as well.

Raziel Ungar: And in your experience, what parts of San Mateo County would be considered higher flood risk? Obviously, Foster City, Redwood Shores, probably parts of San Mateo, east of 101, maybe some other low-lying areas, even west of 101.

Gino Benedetti: Absolutely. Those little cities that you mentioned absolutely are some of the more common flood areas. But also, there's neighborhoods up and down the peninsula that have creeks that run through them. And depending on how deep the creek is or the depth of the creek and water, there could be a flood hazard as well.

Raziel Ungar: And obviously, so the question is, if you're a buyer, how do you know that the lender requires it? So, the seller would disclose if they have flood insurance, because that'd be material information for the buyer to know. Let's say the seller forgot. Obviously, that's a whole other issue. Is there a website or how can a buyer just learn this information on their own? What might be in a flood zone or not?

Gino Benedetti: Yeah. You can go onto FEMA's website and type in your address, and it will show you their mapping. But most of the time, it's caught what going through the loan process, the pre-approval process, and then the loan process once you actually find the home and you now are in contract and you've expressed your lender, "Okay, we're in contract. Here's the address of the home. And that time is discovered."

Raziel Ungar: Anything else that buyers should be aware of around flood insurance?

Gino Benedetti: Not really. No. I mean, it's really a personal preference. I have clients that trust the product, trust the value of insurance, and they want to buy homeowners, earthquake, flood and to make sure that they can have that peace of mind. And some of my clients are very price-conscious. And so, maybe if they don't need it, they don't purchase it.

Raziel Ungar: Got it.

Gino Benedetti: But I'm always in the position to offer everything and then have conversations to educate people about the risk, and so that they can make educated decisions.

Raziel Ungar: Gino, when are you typically brought into the picture when someone's buying a new home? And what does that process look like to get insurance?

Gino Benedetti: Yeah, absolutely. So, my goal is to make the insurance on a new purchase as easy as possible. The home buyer has a lot going on. They've gone through the approval process with their lender, they've finally got their offer accepted and they're in contract. And then, now they need to start searching for insurance. Typically, I'm brought in when they're in contract and we start the [00:39:00] process of lining up and quoting coverages for close of escrow.

Gino Benedetti: And a lot of times, there'll be a referral that we can have a quick conversation. I can talk to them about how I operate and how things work on my end. And then, typically I'll send a small punch list email to help capture the information needed. And some of that information needed is going to be, what's the close date, what's the address, what's the square feet of the property, do you happen to know the year built? Do you know of any recent updates to the plumbing, the electrical? What type of roof do you have?

Gino Benedetti: So, gathering that information helps me take a full submission to my markets and my carriers to be able to go and get quality quotes to be able to present to my clients.

Raziel Ungar: And how long does it take typically for you to provide a quote? And I'm assuming people can get online quotes, which would probably be very different from what you provide.

Gino Benedetti: Absolutely. So, a lot of online writers are going to have very limited coverages and they may be cheap inexpensive policies, but inexpensive is not only quality. So, really what I'm trying to do is provide added value for my clients by taking a coverage-first approach and then finding them the most competitively priced product.

Raziel Ungar: Gino, this was awesome. Thanks a lot for sharing so much with us all today.

Gino Benedetti: Yeah. Well, thank you, Raziel, for having me. And hopefully, you and everybody that's watched us have learned a little bit about insurance. And I look forward to helping to educate your clients and other people down the road.

Raziel Ungar: Yeah. Thank you, Gino.

Gino Benedetti: Thank you.

Raziel Ungar: Thanks for watching my video. If you'd like to stay in the know about what's happening in the real estate market in San Mateo County, or just what's going on in your local neighborhood, please consider subscribing to my channel. If you have ideas for future content that you'd enjoy, also, I'd love to hear from you. Thanks.

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