Homeowners Insurance

You must have a homeowner's insurance policy in place at close of escrow. The insurance company that you select will contact the Title Insurance Company and provide its proof of coverage (effective of course on close of escrow). In return, the Title Insurance Company will pay the first full year's premium directly out of your closing costs.

START WITH THE INSURANCE CARRIER OR INSURANCE AGENT THAT PRESENTLY HANDLES YOUR AUTOMOBILE OR OTHER CASUALTY INSURANCE. THE CARRIER MAY OFFER A "PACKAGE DEAL" IF YOU PLACE BOTH HOME AND AUTO INSURANCE COVERAGES WITH IT.

If you are considering an insurance company other than a well known carrier, confirm with the Department of Insurance that it is an admitted carrier. The Department sets minimum standards for admitted insurance companies, monitors their financial solvency, and regulates the rates they charge for different levels of insurance. Non-admitted carriers - usually off-shore or out of state companies - do exist and often are the ones with unbelievably low premiums. The rates are real but since the companies aren't regulated, you have no assurance that they will be there if you ever file a claim. Even if you were willing to go with the roll of the dice, it is not likely that your lender would ever accept such a carrier to insure THEIR security.

One way to approximate the basic amount of insurance coverage on your home is to multiply its square footage by current construction cost. Other insurers may use other formulas. In any event in California the lender has no right to demand that you purchase insurance in the amount of its loan. You need only purchase enough insurance to cover the value of the improvements (ie., buildings).]

Since the Northridge Earthquake and the Oakland fire storm, Guaranteed Replacement coverage is basically non-existent. It has been replaced by the Building Structure Reimbursement Extended Limits Endorsement which extends the policy limits to repair or replace the dwelling up to a specified percentage over the policy's limit for a covered loss. When last I checked the three major underwriters of homeowner policies in California offered the following: State Farm offers 120% extended limit, Farmers offers 125% extended limit, and Allstate Insurance offers 150% extended limit.

Current building code and zoning laws may require significant upgrades to repair or to replace a damaged or destroyed dwelling - to conform with required standards. These upgrades can cost the homeowner thousands of dollars without the endorsement known as the Building Code upgrade.

Coverages for personal property and for loss of use are generally scheduled as a percentage of the coverage on your home. Most carriers will require that you schedule valuable items (jewelry, fur coats, fine art, etc) separately.

Personal Property coverage is also on a Guaranteed Replacement basis - although many carriers require that you actually replace the lost/damaged item. So, if you purchase a replacement sofa, you will be reimbursed; but if you don't, you'll only get its depreciated value.

With respect to Liability coverage, I recommend that you purchase at least $300,000. If you have other substantial assets discuss a separate "Umbrella" policy with your agent. This provides liability coverage from the basic $300,000 to a minimum of $1,000,000.

Finally, as with your automobile insurance coverage, the higher the deductible the lower the premium. I recommend that folks consider no less than a $250.00 deductible. However, be guided by your own insurance agent's advise.

Earthquake coverage is distinct from the coverages discussed above, requiring a separate quote from your insurance broker. Consult the California Earthquake Authority site for member insurance companies, rates, premiums.


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