How to Decide How Much Homeowners Insurance You Need

homeowner calculating the replacement cost of her home as she determines how much homeowners insurance she needs

Figuring out how much homeowners insurance you need to cover your home and belongings can be challenging. But there are steps you can take to determine what types of insurance you may need and how much you should purchase. Here are some tips for calculating how much homeowners insurance will meet your needs.

Determine Local Risks

Most homeowners insurance plans cover:

  • Basic storm damage
  • Interior water damage from burst pipes
  • Fires
  • Other types of damage that any homeowner could sporadically experience.

But most homeowners insurance policies do not automatically extend to severe flooding from hurricanes or other types of natural disasters that do not affect homeowners in all parts of the country. 

For this reason, you will need to assess what specific issues your home may be prone to based on your location. Then you can determine whether you need to purchase extra policies, such as flood insurance, on top of your regular homeowners insurance policy. 

Determine the Overall Value of Replacing Your Home

Knowing approximately how much replacing your home would cost if it were completely lost is also important. It’s another key to determining how much homeowners insurance you should have. This should include the value of your home itself and your possession. It should also include any costs associated with having your home rebuilt. 

This information can generally be determined by this formula: multiply the square footage of your home by the approximate cost to rebuild per square foot. But this formula is not always accurate. Other factors to consider that may help you come up with a better estimate include:

  • The materials used to build your home
  • Any improvement projects you may have done over the years
  • Any vintage or other unique features your property has

At Vargas & Vargas Insurance, we prioritize protecting you and your property. We don’t work for your insurance company. Contact us today to learn more about how we can help you determine how much homeowners insurance you need to keep your home and property adequately covered without overpaying.  

The Smartest Home Insurance Deductible Move

Do you know that you can save hundreds of dollars on your yearly home insurance bill by simply increasing your home insurance deductible? By this, we don’t mean changing from $500 to $1,000. We want you to think bigger: $2,500. Opting for a low deductible is a characteristic mistake. Read further to understand why.

1. Lowered Monthly Premiums

For home insurance, a higher home insurance deductible means that you will be paying low premiums. A lower deductible, on the other hand, equals high monthly premiums. Therefore, the most effective way to lower your premiums is to increase your deductible.

2. Increased Premium Savings

A great way to save money on your insurance is to review your deductibles. There is an inverse relationship between your cost of deductibles and your cost of monthly premiums. One way to look at this is to make a comparison of your potential savings over several years against the additional out-of-pocket risk you incur. While this is by no means a definite way to make a decision, it is an important piece of information to help you measure your risk trade-off. 

3. Higher Deductibles Mean Fewer Claims

You could raise your deductible to avoid making many claims.  Your premiums increase each time you make a claim. You most likely do not want to make claims for small losses. Therefore, it is in your best interest to get a higher deductible, so you are only worried about paying up for major disasters or larger claims.

Your home insurance deductible should be the amount of money you are comfortable paying in case your home is damaged. We recommend having a minimum of $1000, but you might increase this to access long-term savings. 

Vargas & Vargas Insurance is one of the premier local independent insurance agencies — we work for our clients and not the insurance company.  We will customize your insurance coverage to your specific needs at the right price, and we are also here to answer all of your insurance questions. Contact us today.

How to Prepare Your House for Hurricane Season

homeowner updating her house insurance as part of preparing for hurricane season

We’ve talked about preparing your business for hurricane season, but knowing how to prepare your house for hurricane season can be just as (or even more) important. There are ten to sixteen named storms in an average hurricane season, including four to eight hurricanes. When winds reach over 155 mph, you’re going to be thinking about protecting your life and family when a hurricane hits, not your home. We’ll give you some tips in this guide so when the wind starts howling, your house will be safe.

Keep Supplies Handy

When the hurricane comes, you want to be prepared, know where everything is, and have a kit of emergency supplies. Keep some flashlights, batteries, and more in the kit so you don’t have to search for them in an emergency.

Trim Your Trees and Shrubbery

Tree branches can go through your windows like missiles during a hurricane; make sure you prune your trees and remove all loose branches from your trees. 

Unplug All Electronics

Electrical surges are widespread in hurricanes. By unplugging your electronics, you minimize the risk of damage.

Seal Windows and Doors

Ensure that your windows and door stay locked and secured. If you have storm windows, ensure that they are properly installed and locked, as well.

Prepare for Long-Term Outages

It may be a good idea to purchase a backup generator. Then, if the power goes out, you still have options. Also, keep your bathtubs full of water in case you lose access for any length of time.

Review Your Insurance Policy

It’s best to do this before the storm, when things are still calm. If it’s been a while since you’ve reviewed your home insurance policy, you may not be carrying the correct amount of coverage. The amount may not be enough to rebuild your home if the worst happens. Get peace of mind and know you have coverage as you prepare your house for hurricane season.

How We Can Help

Vargas & Vargas Insurance is one of the premier local independent insurance agencies. We work for our clients and not the insurance company. We will customize your insurance coverage to your specific needs at the right price, and our team is here to answer all of your insurance questions. Contact us today.

What’s the Difference Between Builder’s Risk Insurance and a Home Insurance Policy? Part Two

Happy couple came to an agreement with their building contractors at construction site.

It’s easy to understand the importance of home insurance when your investment is immediately accessible to you, as are all of the belongings you put inside. However, a building under construction sometimes requires a little more explanation as to the importance of builder’s risk insurance.

Why Does Home and Builder’s Risk Insurance Differ?

A completed home provides all of the information for proper risk assessment. All of its features are fixed in place for determining the replacement cost value. The liability risks are mitigated as much as possible. Your coverage needs are clear. Thus, the home insurance policy can be tailor-made for your home as it stands, with all factors known. 

For a building under construction, there are many unknown or constantly changing variables. Your insurance provider calculates the replacement cost, and therefore coverage, based on the expected features of the completed home. The building’s completion stage is varied. So the liability risks also vary at any given time. At some points, there may be more materials on-premises than on the structure. Because the building changes, it needs a policy that addresses this reality. 

How Does Builder’s Risk Insurance Address the Changing Protection Needs of a Building Under Construction?

Why do you pay the same premium and have the same amount of coverage for a building in the beginning stages of construction as in the final stages? This is a fair question considering the amount of loss is much greater when the building is nearing completion.

Builder’s risk insurance addresses this by considering the most coverage needed at any time during the construction period. It also considers the premium needed to cover that risk. The insurance company then takes into account normal construction time periods. Instead of changing the coverage and premium throughout the build, they average the cost to insure the building over the entire construction period at various stages of completion into one premium. This assures that the building has proper coverage at a fair premium, regardless of the building phase. 

What Coverages Are Unique to Each Policy Type?

A home insurance policy provides much more personal property coverage and additional coverages. This includes additional living expenses in the event of a claim. These types of coverages would not necessarily be needed under a builder’s risk policy since the home is not occupied. 

What about a home addition? Home insurance policies vary on how they cover home additions. It may be that you would have adequate coverage under your home insurance policy. However, a larger addition may require a builder’s risk policy or a special endorsement of your home insurance policy. Having an insurance agent you can trust to advise you on your particular policy and needs is imperative. 

A builder’s risk insurance policy provides coverage for theft of building materials and often even for building materials in transit to the building site. It also provides liability protection for the enhanced risk of a building under construction. The liability does not extend to the contractors or subcontractors. But it does provide coverage if a child or neighbor were to wander onto the site and get injured. 

Ultimately, all builder’s risk insurance policies are temporary. Once the building is complete, you should consult your insurance agent to discuss whether you should convert to home insurance, rental dwelling insurance, or commercial insurance. For additional information, see part one of our series, What’s the Difference Between Builder’s Risk Coverage and a Home Insurance Policy?

Whether you need home, rental dwelling, commercial, or builder’s risk insurance, Vargas and Vargas Insurance is here to advise you on your journey. We work for our clients, not the insurance company, to provide individualized coverage at the right price. Contact us today to discuss your insurance needs. 

What’s the Difference Between Builder’s Risk Coverage and a Home Insurance Policy? Part One

Young happy couple standing at the construction site of their home and giving each other a high-five.

You’ve found your dream home, and now you need to protect that dream with home insurance. Maybe you couldn’t find the perfect home you had envisioned, so you are building it. That investment also needs protection, either through builder’s risk coverage or home insurance. How are these two types of homes and home insurance protections the same, and how do they differ? Most importantly, why does it matter? 

Who Needs Home Insurance or Builder’s Risk Coverage?

Home Insurance

If you are the owner of a fully constructed home and you and your family reside in the home, home insurance is the right choice for you. Home insurance provides coverage for your dwelling, personal property, and liability you might incur as a homeowner, among other optional coverages. Home insurance is not for rental homes (when you’re the renter), commercial properties, or homes in the construction process. 

Builder’s Risk Coverage

Coverage for buildings in the process of being built requires specialty coverage to meet the unique risks associated with a building that is changing daily. The building may be residential or commercial, and coverage may be needed by a variety of individuals, such as:

  • Homeowners
  • Property Owners
  • Contractors
  • Subcontractors

Ultimately, the individual named on the construction loan, or the person who retains the deed to the property, needs the builder’s risk coverage. They are the one taking on the risk of a loss until ownership changes hands. 

When Should You Begin Coverage?

A home insurance policy should begin immediately upon ownership, effective on the date of the home closing. If you change insurance providers, it is imperative that there is no gap in coverage from one insurance company to the other. Make sure you understand the date and the time coverage will cease with the current company and coordinate coverage with your new insurance company to prevent any unprotected gap in time. 

A builder’s risk policy provides coverage from the time construction begins until the project’s completion. Because the construction phase is constantly changing, the coverage and premium are designed with this in mind. Most insurers require a builder’s risk policy at the beginning phase of construction. They will not provide a policy mid-construction.  It’s just as important to convert your builder’s risk policy to a home or commercial insurance policy once completed for coverage more appropriate for a completed and occupied building. 

Now you know who needs home insurance versus builder’s risk coverage and when coverage should begin. For further explanation on how these two policies differ and why it matters to you, see the second part of our series on What’s the Difference Between Builder’s Risk Coverage and a Home Insurance Policy?   

Vargas and Vargas Insurance understands the importance of having the right insurance for every stage of your journey. We are an independent insurance agency that works for our clients, not the insurance company. We will customize your coverage for your unique needs at the right price. Give us a call today. 

Home Insurance Terms You Need to Know, Part Two: Homeowners Coverage Terms

homeowner reviewing homeowners coverage terms as she renews her policy

The only thing worse than having a homeowners insurance claim is having a claim and realizing you didn’t understand the home coverage terms in your insurance policy. Now you don’t have the coverage you thought you had. Vargas & Vargas Insurance wants you to have the knowledge you need to make the right decisions about your insurance. Arming yourself with the knowledge of homeowners coverage terms is crucial in preventing unwelcome surprises when a claim occurs. 

Homeowners Coverage Terms

Dwelling Coverage

A dwelling is the building in which you live. In home insurance terms, your home is your dwelling. It is insured for the perils in your policy up to the policy dwelling coverage limit. But this is for the main structure only and does not include the contents. Contents have their own coverage area in a home insurance policy. 

Additional Structures Coverage

Any structures on the premises not attached to the main dwelling are other structures or additional structures. This includes a workshop or shed, for example. An amount equal to 10% of the dwelling coverage is usually also allotted toward additional structures as part of your basic coverage. However, you may want to purchase additional coverage, if needed. This coverage does not apply to the contents of the additional structure. Those are covered with your personal property coverage.

Personal Property Coverage

This is for all of your personal belongings, such as clothing, furniture, electronics, household tools, etc. It’s important to speak with your agent about items you think may fall into this coverage area but actually may not. Examples might be golf carts and four-wheelers. Keeping an inventory of your personal property is important, as you will need to itemize them in the event of a loss. 

Liability Coverage

Homeowners can be held liable for a wide variety of events occurring on their property. Liability coverage provides legal protection for the majority of these, up to your policy limit. Also, most policies come with a basic amount that you can increase for a minimal additional premium. 

Additional Living Expense/Loss of Use

When a claim occurs, your home may not be inhabitable for a time. This is why Additional Living Expense coverage, also known as Loss of Use coverage, is so important. This coverage will help with the cost of displacement up to the time period specified in the policy. 

Endorsement

An endorsement is an addition to your homeowners policy. You may need more coverage than allotted in your basic policy in a particular coverage area. Endorsements allow you to add that coverage. A common example is for jewelry. Most policies provide a limited amount of jewelry coverage but allow more coverage through endorsements. 

Exclusion

An exclusion is a coverage area that insurers specifically do not include in your policy. Your policy will have a list of exclusions. It’s imperative to review these exclusions, as there are often options to provide coverage for the excluded perils separately. One example is flood coverage. Floods are usually an excluded peril, but flood insurance is available as a stand-alone policy. 

Inflation Protection 

The cost to repair or replace your home and belongings does not stay static. Most homeowners policies include inflation protection, which raises your coverage in small increments each renewal, as needed, to keep pace with inflation. 

Risk/Peril

A risk is the possibility of something unexpected happening. A peril is the cause of something unexpected happening. The peril of a wind storm increases the risk of damage to your roof. Knowing what perils are covered under your policy is imperative for you to have proper protection from the risks you face as a homeowner.

For more homeowners coverage terms, see the first installment of Home Insurance Terms You Need to Know. Homeowners coverage terms can be intimidating while also being vitally important. That’s why Vargas & Vargas, a premier local independent insurance agency, is here to help. We will customize your insurance coverage to your specific needs at the right price and are here to answer all of your insurance questions. So contact us today.

Home Insurance Terms You Need to Know, Part One

couple researching home insurance terms in their kitchen

When it comes to your home, proper home insurance coverage is vitally important. However, insurance terminology can make reading a quote or policy feel like reading a foreign language. Without understanding home insurance terms, you could find yourself with far less coverage or far different coverage than you thought. Vargas & Vargas Insurance is committed to making sure you have the knowledge you need to make the right insurance decisions regarding your home insurance. 

General Home Insurance Terms

Declarations (Declarations Page)

This refers to the page of your policy that gives your basic information, including the name and address of the insurance company, coverage to and from dates, basic coverages, deductible, premium, and any additional interests. It’s an overview of your policy and is often what your mortgage company will ask for to show proof of coverage. 

Insured/Insurer

The insured is the person that coverage is being provided for—generally, the owner of the home. The insurer is the insurance company providing the coverage for your home. 

Additional Insured

The declarations page will list the additional insured, along with the insured. The additional insured is anyone else, other than the homeowner, who has a legal interest in the home. The most common additional insured for a homeowners policy is the mortgage company. An additional insured will be notified of the policy renewal and if the policy is in danger of cancellation. They may also be payees on larger claims checks. 

Policy Period

This is the time period your home is currently insured for, which is usually one year. Most homeowners insurance policies renew automatically, assuming the premium is paid. 

Premium

The annual amount you pay for your homeowners insurance is the insurance premium. This premium can come in convenient payments of monthly, quarterly, or semiannual installments. Typically, homeowners pay it directly to the insurance company through a mortgage escrow account. 

Deductible

The deductible is the amount the insured (homeowner) is responsible for in the event of a claim. If a claim is less than the deductible amount, the insurance company bears no responsibility for payment of the claim. If the claim is more than the deductible, the deductible will be subtracted from the claim’s total amount before the insurer pays out. The deductible is not paid to the insurance company. 

All-Risk/Named-Peril

An all-risk insurance policy covers all potential causes of loss other than the ones specifically excluded in the policy. A named-peril policy covers the causes of loss specifically listed in the policy and no others. While an all-risk policy can be more inclusive, it is generally much more expensive and not as common. Most insurers choose to cover the most common risks, providing a broad scope of protection while keeping premiums affordable. 

Replacement Cost Value (RCV)/Actual Cash Value (ACV)

When you purchase your home, the sales price is based on the market value of your home. The price depends on the desirability of the location and many other factors. When you have a loss, however, the location’s desirability has no bearing on the cost to rebuild your home or replace your roof. That’s why it is important to understand the difference in replacement cost and actual cash value.

The replacement cost value is the cost to replace a damaged item or item, whether it be your TV or your roof. The actual cash value takes into account the depreciated value of the item. If your roof is ten years old, you got ten years’ worth of value from your roof, so a deduction is taken from the amount paid for your claim to account for the age of the roof. Knowing which type of coverage you have before a claim can prevent many misunderstandings during the claims process.

General home insurance terms are important to know, but there are many more terms that can make all the difference in understanding your home insurance. For more insurance terms, see the second part of our series on Home Insurance Terms You Need to Know. 

Vargas & Vargas Insurance is a premier local independent insurance agency. We work for our clients, not the insurance company. We will customize your insurance coverage to your specific needs at the right price and are here to answer all of your insurance questions. Contact us today.

5 Home Improvements for Lower Insurance Costs

couple setting their home's security system

Home improvements breathe new life and style into your home. They can also bring a decrease in your homeowners insurance premiums. Both can be exciting. Which home improvements not only bring new form and function to your home but also can decrease your homeowners insurance?

1. New Roof

Roof insurance claims compose a large portion of total homeowners insurance claims. Newer roofs are typically better able to handle wind and hail storms. Perhaps when you first purchased your home, you didn’t qualify for a preferred policy due to your roof’s age. But because of the new roof, you may now qualify. Your new roof’s material can also impact your homeowners insurance rates. More importantly, by keeping your roof maintained, you may be able to avoid claims. This will have a positive impact on your insurance through claim-free discounts. 

2. Security System

An alarm system monitored by a central station is another way to avoid potential claims by discouraging burglaries and quickly notifying emergency services in the event of smoke or fire. This helps you retain your claim-free discount and prevent damage to your home and loss of property. Your insurance company rewards these efforts in the form of a discount. 

Most insurance companies require that the alarm system automatically notify emergency services. It cannot simply sound an alarm or record video. However, they may offer a partial discount for these options. A central station burglar alarm will save you between 5%-15% on your home insurance if your smoke alarms are connected to the monitored system. 

3. Wiring and Plumbing Updates

Fire from faulty wiring and water damage from plumbing concerns are also common homeowners insurance claims. The age of these systems may have prevented you from receiving a preferred rate initially. Updating these systems could change that. 

While discounts can be available for wiring and plumbing updates, these updates may require the wiring and plumbing to be completed updated by removing and replacing all existing writing and plumbing, rather than a partial update. But any updates to your wiring and plumbing can prevent damage. It can therefore reduce claims and benefit your homeowners insurance over time, even without a specific discount. 

4. Simple Updates: Deadbolt Locks and Fire Extinguishers

Deadbolt locks are a simple update to your home that can provide added protection and a potential discount for your insurance. Fire extinguishers may be another easy addition to your discount portfolio.

5. Pool Fencing

Insurance companies often require fencing around a pool due to the inherent risk of an accessible attractant to a drowning hazard. If you do not have a fence around your pool, adding one will reduce the risk of a tragedy. It could also prevent surcharges on your insurance for this risk.

Home improvements provide value to your home regardless of the potential benefits to your insurance. However, when determining which improvements are suitable for your home and the costs associated with each, possible decreases in your homeowners insurance should be considered. 

At Vargas & Vargas Insurance, your premier local independent insurance agency, we work for our clients, not the insurance companies. Contact us for advice on how the home improvement projects on your list can reduce your homeowners insurance premiums. 

2 Ways Home Improvements Change Insurance Premiums (And How to Protect Your Investment)

mom and her daughters in a new pool at home

When deciding the monthly premiums for your home insurance policy, your insurer has to consider multiple factors. However, with time, you may feel the need to improve your home for a better living experience. What most homeowners do not know is that such improvements can expose them to uninsured risks. Here’s how home improvements change your premiums and what you should do after such enhancements to keep things in check

1. Effects of Home Improvements on Insurance Premiums

Once you improve your home, you either increase the property’s value, increase the likelihood of peril, or protect the property from risk. Based on the following three scenarios, your insurer may increase or reduce your monthly premium.  

Home Improvements That Increase Your Premiums

At some point, you may decide to expand the size of your house, upgrade your kitchen space, or even redesign your bathroom. Such improvements increase the value of your property to an amount exceeding the sum insured. Increasing the value of your property means increased your monthly premiums.

You also attract higher monthly premiums on home improvements that your insurer considers risky. For example, you may decide to spice things up with a private pool. While this increases your property’s value, your insurer may increase your monthly premiums to bolster your liability cover.

Home Improvements That Reduce Your Premiums

Depending on the nature of your home improvements, your insurer can also reduce the amount you pay in premiums. You can decide to renovate your roof or install one that is resistant to disaster. You can even choose to have a locking fence around your pool or install a protective cover. Such improvements are likely to reduce your monthly premiums as they reduce the likelihood of peril.  

2. What You Should Do Before Home Improvement Projects to Be Safe

Before starting on any home improvements, you need to contact your insurer. Whether it is a simple addition or a major renovation, your insurer should let you in on its effects on the value of the property. Failing to notify your insurer of improvements may lead to underinsurance.

Almost all home improvements change insurance premiums. Let’s face it; there’s still a chance that you made some home improvements without notifying your insurer. It is not too late. Be sure to contact Vargas & Vargas for guidance on the best way forward. We are a premier local insurance agency that places your interests before those of your insurers. We work for you only and will help you find the best insurance coverage for your needs.

5 Home Improvements That Could Increase Insurance Costs

Home improvements are exciting. Visions of increased functionality, luxury, and property values are almost equal to the initial purchase’s excitement. Home improvement projects are at an all-time high. Families are spending more time at home due to COVID-19 restrictions and fears. As a result, they are making their home as enjoyable as possible. There are many decisions to be made and multiple factors to take into consideration. One of those considerations should be the probability of an increase in your homeowners insurance premiums. Look at what can happen with these five popular home improvements that could increase insurance costs.

1. Increased Square Footage

A home that fits your family’s needs at the time of purchase may no longer do so after a few years. As your family grows, increased square footage is often needed. This could be in the form of an addition to the home, but it can also include finishing existing unfinished spaces, such as a basement or attic. Additions can also mean outdoor space. The addition of a deck, porch, covered patio, or attached garage also necessitates homeowners insurance changes. 

Each of these additions increases the rebuild (replacement) cost of your home. Increased replacement cost directly equates to a needed increase in your dwelling coverage. More space usually means more personal property purchases, as well. This could also mean a need for an increase in personal property coverage. 

2. Kitchen and Bath Upgrades

Kitchen and bath upgrades are some of the most popular home updates. These upgrades can have the greatest return on investment for property values. While your homeowners insurance is based on replacement cost, not appraised value, upgrades to kitchens and baths mean it will cost more to put your kitchen and bath back to their upgraded condition in the event of a loss. It’s essential to make sure you increase your homeowners insurance coverage relative to those increased replacement costs. 

3. Home Office Additions

As more and more individuals work from home, home office additions are becoming more common. A home office may be a modification to an existing space or an addition to the home. It could also mean you need more personal or business property coverage on your homeowners insurance. Your liability exposure is also enhanced, and coverage may need to be increased accordingly. 

4. Pools

In-ground pools are arguably the most fun addition. They are also a costly addition with enhanced liability risk. Your homeowners insurance company may require fencing or other risk reduction measures. Reviewing your increased risk and making any needed changes can make the poolside all the more relaxing. A personal liability umbrella policy can add additional liability protection and peace of mind.

5. Home Business

Brick-and-mortar businesses are rapidly decreasing as companies move to a virtual or home business environment. Business in the home brings about an entirely different set of coverages and risks than a personal home office. Disclosing a business in the home and exploring how this affects your homeowners insurance is crucial to your business’s protection.

There are many home improvements that could increase insurance costs, but home upgrades are an excellent way to extend the functionality and enjoyability of your home. Potential increases to your homeowners insurance would be due to the increased cost to rebuild your home and protect your assets. The value of these upgrades and the knowledge that your home improvements are properly covered far surpasses the cost of potential changes in your homeowners insurance premiums.

Vargas & Vargas Insurance is a local, premier independent insurance agency. We understand your home is important to you. So we will customize your insurance to your specific needs at the right price. We will also carefully evaluate home improvements that could increase insurance costs. Contact us to discuss your home insurance needs.