In observance of National Insurance Awareness Day on June 28th, we sat down with Megan Flanagan-Mills, an insurance broker and owner of the Flanagan Mills Agency and a 15-year veteran of the insurance industry. We know Megan personally, and we love her “education-first” style of service.
Since insurance is about being prepared and since Rochester Fire Restoration experiences a lot of overlap with insurance carriers, we wanted Megan’s take on what property owners can do to better position themselves when it comes to having the coverage they need when they really need it.
Here’s what she had to say:
Review Your Policy, Even If You Just Moved In
Property insurance is not a ‘set it and forget it’ transaction. But when you first move into a new property, it can be easy to just check the box and not think about it until your renewal rolls around in 12 months.
Sometimes it’s such a complicated rush to get to mortgage closing that owners understandably won’t spend a lot of time on an in-depth review of the coverage and endorsements they’re buying. That’s especially true if your mortgage broker is trying to help you get to a certain price to qualify for a loan.
But what kind of coverage did you end up with? Enough to get your mortgage approved, certainly, but maybe not enough to be covered in all the ways I would encourage my clients to be covered. That’s why we always recommend a granular review of your property insurance about 60 to 90 days after closing.
And of course, we suggest everyone review their coverage at least every three years, no matter how long they’ve been with their carrier. Think about any physical changes you have made to your property. Did you install a pool or hot tub? Renovate your kitchen or bath? Upgrade your HVAC? Replace all your living room furniture? Those changes could impact your coverage needs.
Review your policy with your agent and/or shop around if you want to know what types of pricing is out there. If your premium is paid by your mortgage escrow, just make sure to do that review 45 to 60 days before your policy renews in case you end up changing carriers. It goes much smoother if we can get that switched before the premium payment has been disbursed.
Replacement Value & Cash Value: What to Be on the Lookout For
Whether you have a longtime relationship with an agent, or you shop around every few years, it’s ultimately up to you to stay on top of both your evolving needs as well as what’s evolving in the insurance industry. One variable to keep informed on is replacement value.
The replacement value of your property is the actual cost of rebuilding from the ground up, calculated at a value per square foot. And because that’s attached to labor and materials costs, it’s a number that will always go up.
If you’ve asked your agent to lower your premium, or you’ve shopped around for a lower premium, you need to look very closely at whether a decrease in replacement value coverage is how they got you into that price. In fact, ask them, “What changes did you make? Did my replacement value decrease?” If it’s a new policy, ask what the replacement value is they wrote in.
I currently advise my clients to insure for replacement value coverage at $200-per-square-foot, and I base that on what I know of current property values and costs to rebuild. So that means a 1,000-square-foot house would have a $200,000 replacement value.
Another way to lower a premium is to insure for Actual Cash Value instead of Replacement Value. Most primary dwellings are listed on replacement value, but some are listed on actual cash value especially if the house is in less-than-ideal condition. But the value at the writing of the policy will depreciate from the time you made any changes to your house. So, if you have a claim five or ten years later, you might not have enough coverage to rebuild.
Bottom line, insure for full replacement cost and make sure your agent has a formula that considers current property values and costs to rebuild.
What is Typically Included, Excluded, and Top Mistakes
We think about our insurance most when it comes time to file a claim. Setting yourself up with knowledge about your policy coverage will save you a headache later.
Policies include coverage in three big categories: a sudden catastrophe happening to a physical building (like a fire or a tree falling on your roof), the loss of personal property in a sudden catastrophe, and liability in case someone who doesn’t live in the dwelling gets hurt.
The categories that are typically excluded are flood, earthquake, intentional acts, and maintenance:
Flood coverage wouldn’t be required unless you live in a designated flood zone – and if you are in one, definitely have it. Your mortgage company may tell you if you are. This type of flooding is ground water seeping into your home because of something like heavy rain from a hurricane.
Water in your home from a burst pipe, an overflow, or the failure of a sump pump is covered by a Sewer and Drain endorsement, which is not standard but you can add it on. Another add on is Underground Utility, which applies specifically to your sewer line from your house to the street.
Earthquakes are not covered under a traditional home insurance policy and likely isn’t necessary in our region.
Intentional Acts refers to the property owner’s actions. You can’t sledgehammer a wall because you saw it on the DIY channel, then decide you really don’t want an open floorplan. That’s not covered! If a vandal came in and smashed a window, that’s different and would be covered.
Maintenance seems like something we shouldn’t have to say. If your paint is peeling or your siding has faded, that is not covered. If your foundation hasn’t been kept up and is now crumbling from age, that is not covered. If your roof shingles are lifting, that is not covered. Your property insurance is meant to cover sudden accidental losses.
An endorsement you can add is home warranty insurance for major appliances and mechanicals, like kitchen appliances, laundry, and HVAC.
And Avoid This One Big Mistake …
Frivolous claims are hands-down the most common mistake I see.
Say your sump pump motor burns out and you get water in your basement. Before filing a claim, call someone like Rochester Fire Restoration. First off, they can get started on cleanup right away and give you a good idea of what the costs will be like. If it’s more than your deductible, get in touch with your insurance agent to get started on filing a claim. Knowing that starting price point when you call them is going to be key.
If the cost to mitigate is less than your deductible — say it will cost $800 to clean up and your deductible is $1,000 — then DO NOT file a claim.
Two things to make sure of before you file a claim in general: verify that your endorsements will cover it in the first place and then verify that whatever it’s going to cost to mitigate the damage is not less than your deductible amount.
A claim that doesn’t pay out still counts against you, because the data shows a customer that puts in a claim is more likely to make future claims. And that factors into carriers dropping customers.
Tips for Being Proactive Before Disaster
I suggest to my clients that once a year they go around their house and take photos or video. You can do this with your smartphone. Get a good view of everything in each room and even open closet doors and drawers. This way you are documenting and categorizing all your belongings. Then save those images in the cloud or if you print them keep them in a fire safe.
If your insurance carrier has an app, download it to your smartphone and make sure to create an account. Everything about your coverage will be there when you need it.
And save phone numbers in your phone — your insurance agent’s and the number for a service like Rochester Fire Restoration. You don’t want to have to do that research in the middle of a crisis.
Know Your Stuff … or Ask Someone Who Does
There are so many factors that go into getting the right property insurance coverage for you at a price you can afford. The challenge right now is inflation impacting every industry. The premium increases you’re hearing about are in direct response to trying to keep up with the rising costs of rebuilding. On top of that the industry in New York is still recovering from the moratorium on raising premiums that lasted through the pandemic.
Naturally, people are going to shop around. If you’re with a captive agent (someone exclusively contracted to sell policies with one carrier only), they can work with only what is within their carrier’s product offerings.
A broker can streamline that research process for you by shopping multiple carriers at once and with access to a larger variety of products. Whether you’re shopping with a broker, working with your longtime agent, or calling new agents, know what big coverages you need and know what to ask for.
We covered a lot of that in this post, so make notes about Replacement Value and the types of endorsements you might want to add on, like Sewer and Drain backup or Underground Utility, and on any improvements you’ve made in recent years.
Most importantly, we want you to be prepared and supported in the event of a disaster. The best way to do that is to know who to call to start putting things back together — a broker you have a good relationship with, and service providers like Rochester Fire Restoration.
About the Author: Megan-Flanagan Mills
Megan is the owner of the Flanagan Mills Agency. She has worked in the insurance industry for 15 years in various capacities. Megan opened her own agency in October 2015. The most rewarding part of owning her own agency is to work with customers daily on developing the best insurance program for their needs. Megan’s key strengths include relationship building, networking, and the ability to build trust and respect.
The Flanagan Mills Agency is an independent insurance agency located in Irondequoit, New York.
Rochester Fire Restoration provides full-service water and fire damage restoration, mold remediation, contents cleaning, and construction services for residential and commercial. We’re available 24/7 at 585-434-3436.
