What is Home Insurance ?

What is Home Insurance ?

hey guys it's mark Flockhart just come back with another tip for home insurance today's mortgage is the basics just to kind of go over the coverages and what they're what they are what you need and what they mean so when you're looking at that paper or you're talking with the insurance guy on the phone the first thing they're gonna mention is the dwelling that's coverage a that means the actual home the

cost that would to repair the house so coverage a is typically more than you think it is because let's say for example I'm buying a house and on Zillow which is almost never right but Zillow says it's a hundred and eighty thousand dollar house and that house is 1500 square feet okay so a 1500 square foot on Zillow in this location is 180 thousand one thing they're considering is the land value the location that's

a that's of actual value but when you're looking at insurance it doesn't matter because they don't insure the land you can never insure a piece of grass you can make it insured dirt at least not not in the u.s. anyway so you got to take that out of the consideration but then mark why is the insurance more than what Dilla was telling me why is it a hundred and eighty thousand on Zillow but they're saying two

hundred and twenty-five thousand well typically the the easiest way the easiest way is not like an exact science but the easiest way to figure that out is grab out a calculator I'll grab out my cell phone and what we're gonna do is we're going to calculate the cost of a house so if your house is 1500 square feet what I'm gonna do is I'm going to multiply that by the cost per square foot that a construction company

would charge it's that simple so right now I'm in Michigan that cost is roughly about a hundred to a hundred and forty five dollars depending on the quality of the house so we're gonna say one hundred and forty five so you should be insuring that house for roughly this is just the basic one but about two hundred and seventeen thousand five hundred dollars so that would typically be a good guy now

obviously if you have built-in shelves and three fireplaces and crown molding everywhere that's gonna add to the value if there's a pool in the backyard that's gonna add 30 40 50 60 thousand dollars or more if there's a fence around the pool how big is your deck so there's a lot of things to take into consideration so let's go back so we've got coverage egg which we're gonna say on our house there

1500 square foot house is two hundred and twenty thousand we're just gonna make it simple okay two hundred and twenty thousand you may have only paid one hundred and fifty thousand for the house but what the insurance company is looking at is if your house lit on fire today burn completely to the ground how much is it gonna cost them to build the entire house up okay so what they're gonna do is

they're gonna calculate based on the houses in this zip code of this area what is the cost of us to rebuild this house so one hundred and forty dollars hundred forty five dollars times fifteen hundred square feet is a good estimate now when you're looking at the square footage not to get too in-depth you don't want to count the basement at least in Michigan we don't count the basements because those are foundations

and so those are gonna be something separate so you've got 1500 square square feet above ground that's where you have to really look at some of these listings online because they don't show you always above ground only so you've got the dwelle name then you've got which is coverage a coverage B is separate structures anything not attached to the house that's your fence your shed your if you have a

heater outside in a separate area that's a that's another one like a gas stove not a gas stove but like a few wood-burning stove or something or a pellet stove anything that's not attached to the house a barn that would typically be covered in the case of a barn that might be a little bit more valuable so you'll probably have to add additional coverage for that but it's usually on the average ten percent of coverage

a that's the typical insurance policy so if our house coverage a is two hundred and twenty thousand we know that our coverage B the other structures anything not attached to the house is going to be about 22,000 typically they'll let you do more if you want but usually that covers it if your grounds is detached that counts as well that's a separate structure okay so then you've got covered C which is

personal contents that's anything you own that's your couch your TV your your shoes your anything that you have in the house this is a little bit tricky so this coverage is really huge to start off with and it comes that way it's cheap to have and they do it on purpose because it sounds great but you're gonna get on our two hundred twenty thousand dollar house we're probably gonna say one hundred and sixty

thousand dollars worth of stuff good luck fill in your house with that much stuff for TVs in every room you know super high-end couches the only thing you have to be careful there's two pieces of this coverage that you have to be very careful with so the first is don't count jewelry guns for anything that pink teens anything that has high value those are excluded or they're added but they're only to a certain

amount each company's different but most commonly it's about a thousand to fifteen hundred dollars per item so if you have a jewelry ring that's thirty thousand dollars and it's stolen or there's a fire and it's gone you're only covered for a thousand or fifteen hundred dollars on that that thirty thousand dollar ring you need to do what's called an addendum you need to add a writer or an extra coverage to cover

that specific amount because the policy specifically says in most cases and that when I say most I mean like the majority in most cases the policy is only going to cover a certain amount because they know in every house you're gonna have about fifteen hundred dollars in jewelry if you're above that then they need to add extra premium for it it's not that expensive I think fifty thousand dollars where the jewelry

would probably cost you another you know eighty dollars per year it depends on the on the item and all that so that's your personal property the second piece of personal property do you absolutely want to focus on you want to make sure it's full replacement cost not actual cash value actual cash value is like your car insurance the older your car gets the less that you it has so you want to make sure that as your

couch is sitting in your house for 10 years the older it gets you don't want it to lose value because if you have a fire and let's say the entire house goes up and you go to replace a hundred thousand dollars worth of your stuff and they write you a check for $40,000 you are not going to be happy it's crazy how some people do this so you want to be very careful with that make sure you always do full replacement

cost same thing for renters if you're in that situation replacement cost it doesn't matter even if you have twenty thousand dollars worth of stuff you don't want to check for eight thousand dollars when you have twenty thousand dollars worth of lost stolen or damaged item okay so that's the second part so you've got coverage a coverage B and coverage C those are the main pieces of insurance now just to

go back and cover the next spot so you also have the next coverage which I believe is D and that's gonna be loss of use that basically means if you are let's say there's a fire in the kitchen in the kitchens gonna take a month and a half to repair you have to move out of the house because they're gonna be all over and they're making dust and stuff you can't be in there it's not safe right so you have to move out of

the house for the next month and a half you're not near the house you have to get to work someone asked mow the lawn you just gotta cut their stuff you have to pay for because this loss this covered peril because of that loss you're losing money and that's gonna cover that so loss of use is gonna cover you renting the other house for $1,000 a month or $1,500 a month and you paying the guy to mold along

any any thing that you occur any any loss of funds that's going to be covered in that piece because of the loss of use so that's a great coverage to have it's normally I don't know what that is it's it varies from company to company some are actual loss sustained because there's very odd that you're going to be very rare that you're gonna max that out because usually they can fix the house within a month or so

and then you're a couple couple thousand dollars loss of use and it's not a big deal otherwise it's ten twenty percent of coverage a so you might get forty fifty thousand dollars loss of use which is probably fine in my situation I don't think I I'm gonna rent a mansion or anything the last part is coverage D which is medical payments and that just means if somebody gets hurt on the property they're gonna pay

that amount it's typically defaulted to a thousand not a bad idea that go to five thousand that's pretty normal it's not there to cover their whole hospital bill someone gets hurt if they're your friends over there chopping lemons and they cut your their finger right they need stitches it's five hundred dollars they would rather pay up to the $500 or thousand dollars just flat-out to get the medical done then have

them deal with a lawsuit of them trying to get you know two thousand dollars later or five you know whatever it is it's there so to pay their deductible or just to make them whole as far as if they get hurt on the property if that is not enough coverage than what your friend is gonna do and they pretty much have to let's say they cut their finger off right and it was cuz something fell off you're off the ceiling and

bumped him in the head and they slipped in you cut their finger off right or they fell down your stairs and and they broke their neck right they've got a three hundred thousand dollar medical bill now and they don't have medical so what they're gonna do is they're typically gonna sue you or your insurance hopefully your insurance if you have enough coverage in our situation we did five thousand medicals

so it'll automatically pay that if that's not enough they're gonna go after our insurance company and that's the next coverage called liability that's anything you're liable for if your friends over at your house you're liable if they get hurt okay that's just how it is right if they slip on your driveway and you didn't clean off the snow from it that's your fault you're responsible for the front of your house even though

the government might own your sidewalk you're supposed to clean it off so it's safe so that that is what they're gonna go after liability now typically here's the scary part I see a lot of people and a lot of companies doing the minimum which is a hundred thousand dollars think about that in your car insurance you're usually doing two fifty or a hundred per person up to three hundred or five hundred

thousand per accident so you're typically doing almost a half a million in liability in your car insurance if you're a homeowner that's the most common one so you probably should max it and do at least a half a million five hundred thousand on your liability at home that's the typical starting point and then if you need more you can bump it up but in that situation I would lean towards something we'll cover later

which is like an umbrella okay that's something that that covers in excess of that liability so most people are our basic two hundred and twenty thousand dollar house we're gonna do a half a million a liability and the reason we're doing the half a million is because I added up all my assets and I turn that I don't have more than five hundred thousand dollars worth of assets so the odds of somebody coming

after me personally is gonna be low and that's what you're looking for you're looking for the insurance so if something happens you don't get sued the insurance company gets sued the next part so we've got the the property so dwelling we've got separate structures we've got the personal property we've got the loss of use we've got the medical and then we also have the liability those are the major pieces the last

piece is your deductible most commonly the default most insurance ages is just think in their head it's a thousand dollars that's the most common one now don't be afraid if you have extra money you may want to bump it up to twenty five hundred if you're the type of person that has enough funds where you can save away for a rainy day and you have and you're not going to use your insurance anyways

because I mean unless there's a $5,000 $10,000 or $20,000 claim the roof got ripped off because of a storm right I'm not gonna claim that I'm gonna fix the problem myself not worry about the insurance and deal with my prices going up and down and all that stuff right so then that is probably a good idea to go with for that person wants to save some extra money and just would rather have a higher

deductible your insurance agent will probably like that because that means that you're telling them that you're not likely gonna file a claim unless there's a major claim and that's really what they're looking for that's the whole point of the insurance program is not to clean it because my power went out in my and I have fridge coverage and it covered five hundred dollars worth of my stuff in food and I'm gonna

claim just the five hundred dollars it's crazy your insurance rate will probably double the following year and so you're gonna get five hundred dollars today and now you're gonna pay an extra at eight hundred dollars per year for the next three years I mean come on this is the one thing that is a little sad is how and this isn't because they're trying to trick you or anything like that or you're just doing

something wrong but when you file a house insurance claim it's a lot different than if you should file an auto claim with when you file an auto claim you can have two three four up to five accidents tickets all that before they start getting mad right they kick you out of the program well here you file one home claim that can raise your home insurance 20 to 50 percent huge one claim that's it so make sure the

claims worth it if you file a second claim in some states if you file one one water claim I believe it's Texas don't don't quote me but I'm 80% sure it's Texas but if you found one water claim that gives them reason to kick you out flat out I mean they can't kick you out until the renewal but then other companies won't pick you up and those are usually the companies that you want to go with ok so there's different

little laws and rules you want to be careful in that claim aspect with home insurance specifically you don't want to use it if you don't have to keep in mind if a claim happens you don't have the money something's there if you got to use it you got to use it that's where it's there for right it's there for your protection just don't abuse it to the point where you're just you can't afford it right because it will be

affordable as long as you're in the right area so those are the main coverages there's a lot of little things that I'm not going to go over today's video there's tons of stuff you can raise the price on guns jewelry's furs you can increase just general jewelry if you have a thirty thousand dollar ring you're gonna have to get an appraisal done okay so you got to prove that well what should i do how do I know that they're

gonna honestly take care of my claim well that's easy the best way to do it and here's what I tell but if you have valuable stuff for your stuff you think they'll question take a photo put it online put it where people can't see it you go to Facebook you can put a photo up there that's hidden so only you can see that photo if you have Dropbox anywhere that you can get that access to that in the future do that that

way if someone says well how do you know how do we know you have that well here's a picture here's the model number here's that what they're gonna do is they're gonna look at your credit card statements you probably have a record of you buying it but in case you paid cash or you just got it from a friend take a photo it's not gonna hurt you the last piece I want to cover and cut in the home insurance is a

major piece especially for Michigan sewer and water backup so sewer water backup is if your pipes backup you ever seen a toilet that bubbles that's usually like an air leak and something's about to happen like the water is gonna come out of toilet in a month or two so something like that is gonna be covered in that if you have a sump pump where they pump water out of your house because you're in Michigan

you're kind of like in a bowl of clay right and you're just sitting in water and hopefully it's not coming in well if they didn't SS debate it correctly then you're gonna you're gonna need that coverage because water is gonna come in it doesn't typically cover water coming in from the foundation so make a mental note of that that's not usually going to be covered but if the water backs up a sewer pipe backs up a pipe

burst something happens where it's not your fault usually it's a covered peril remember this I know we'll go over that in a second but as long as that's the situation then you're covered okay so you want to have that I've personally Clayton that twice on my house at a sump pump it failed ended up feeling about eight thousand dollars with the damage I only had five thousand worth of coverage I've bumped that up

to ten thousand it failed again in the following near just a bad setup we had to fix that ended up going into the other part of my house and that was all that was actually right about ten thousand dollars to fix so I'm glad I up to that yes these all add pieces to it each little piece kind of adds to the insurance the two things I want to mention real quickly before I in the video and these are probably the things that

you're wondering about why is mine so much higher if that's the case you're probably in a higher protection class that just means the response time from the fire station to you is slower than the typical house and it's easy to find out you're ranked from 1 to 10 and you are you somewhere in between there if you're a 2 you're usually in the city I don't see many ones if you're a 3 or 4 year right near the city

you've got a fire hydrant within a thousand feet the fire department's less than five miles or three miles away you're good if you're then it usually jumps it usually doesn't go into five and six there are a few but it usually jumps you're a seven eight nine ten somewhere between there ten is where you got to get approval from the underwriters and prove that you're gonna be okay that means you're usually in the

country you're away from the city there's not a fire hydrant near by the fire station it might be five miles away instead of three miles and then they might not have a tankless system so they are a tank system so some fire stations have tank systems where the water is built into the truck right so they've got to get water used to some house and maybe the fire station over there instead of this one that's near you it has

to go because there's not a fire hydrant near you to get access to that so if your house catches a fire it's gonna burn down it's pretty much what they're saying so that could be a reason if you're gonna hire protection class that's a huge reason that prices go up the second is what I already mentioned before it is all perils so what that typically means is any occurrence the calm act of God's act of God where there's

a tornado or hurricane a hailstorm something happens where like a tree gets hit by lightning it falls on your house you can't control that there's nothing you could have done to fix it or prevent it that's what an all peril is if there's a fire if somebody goes into your house and steals your stuff you can't control that part anyway guys I hope this helps if you liked the video give me a thumbs up if you want to learn more