Do you need insurance if a monsoon happens?
From lightning to wind, to hail to rain, Arizona monsoon storms can pack a punch. Is your home insurance up to par with the Arizona monsoon? If you want to make sure your home is properly protected there are a few things you will want to make sure your home insurance policy covers.
1. Open Peril VS Named Peril. To make sure you have the best coverage you will want to be sure you have open peril and not named-peril for the dwelling on your policy. Open peril means all perils are covered unless specifically excluded in the policy. This type of coverage gives a much broader range of things that will be covered versus Named Peril coverage. Named peril coverage means the loss is only covered if it is “named” in the policy. There are 16 named perils and if the loss doesn’t happen from one of those named perils, there is no coverage. You can see why it is a big deal to have open peril coverage. There is one other category called “all perils” coverage but most carriers do not offer this type of coverage and even if they did it would likely be cost-prohibitive.
2. Replacement Cost Versus Actual Cash Value. You are going to want to make sure you have replacement cost and NOT actual cash value on your policy. If you have Actual Cash Value or ACV coverage and you submit a claim, the insurance company is going to subtract depreciation from the settlement amount. For example, let’s say your roof was 16 years old and it had a “life expectancy” of 20 years and you had a claim for wind damage to your roof for $10,000. Let’s say the roof originally cost $20,000 and depreciates at $1000 per year. This means you have $4,000 of useful life left on your roof and out of your $10,000 claim the insurance company pays $4,000 and you are on the hook for the remaining $6000, not to mention whatever your deductible is. The difficult part about ACV is that the insurance company can change what once was a replacement cost policy to an ACV policy by endorsing the policy with an ACV endorsement and mailing the insured a letter. This usually happens when the roof of the home reaches a certain age and the insured has not provided evidence of updates or replacement of the roof to the carrier. The carrier does not want to assume the risk of having to replace a roof that is at the end of its useful life so they endorse the policy and change it to an ACV policy. Agents and insureds alike are often unaware this change has taken place because the agent is not always notified and the insured doesn’t read or doesn’t understand the mail they receive from the carrier. That is why an annual review of your policy is essential.
3. Be aware you may have lower limits for downed trees. It is common for large mature trees to be blown over during a micro-burst. Homeowners’ policies often only cover $500 per tree or shrub and also have limited coverage for debris removal. If you have any high-value trees that you love and would want to be replaced you need to be mindful of these limits.
4. Know your deductible. The deductible is the amount you are responsible for if you file a claim. For instance, if your claim is a $5000 settlement and you have a $1000 deductible, you will receive $4000 from the insurance company. Some carriers have switched from a flat dollar deductible to a percentage deductible. You need to be aware of this. If you have a 1% deductible on a $500,000 home, you might not be happy paying $5000 out of pocket during the settlement of a claim.
Make sure you are working with a qualified agent who not only has the knowledge but also has the right products available. If the agent doesn’t have the right products, he/she is going to provide you with what they do have available, even if there is something better.
At Insurance Professionals of Arizona, we have the right products and the knowledge to help you get the coverage you need at the market’s most competitive premium.
