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

Posted on June 22, 2021June 12, 2021 by cvargas

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

Posted on May 4, 2021April 13, 2021 by cvargas

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

Posted on April 27, 2021April 13, 2021 by cvargas

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

Posted on April 20, 2021March 25, 2021 by cvargas

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)

Posted on April 13, 2021March 25, 2021 by cvargas

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

Posted on March 30, 2021March 12, 2021 by cvargas

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.

Here’s What Happens When You Make a House Insurance Claim

Posted on March 23, 2021February 23, 2021 by cvargas

Having your house insured can save you a lot of trouble. House insurance usually covers your house and its contents. However, policies vary, and some may cover the structure alone. In case a risk materializes, you should put in a house insurance claim for compensation from your insurer. Settlement can take days, months, or even a year, depending on the damage.

Making a house insurance claim can be very complicated. Most insurance companies expect you to fill a claim form, giving a detailed description of the incident. You may also have to attach proof of purchase to have damaged items replaced or repaired (depending on your policy). Here’s what happens when you put in a claim on your house insurance.

1. Determination of the House Insurance Claim

Once you put in a claim on your house insurance, your insurer is expected to respond within two weeks. The insurer may contact you for more information within this period. In extreme situations, the company can hire a loss adjuster to investigate the incident. The adjuster will examine the property and ask you questions about its state, before and after damage. The adjuster’s report will then guide the insurer’s decision to accept or deny the claim.

If your claim is denied, your insurance company should send you a detailed report clearly explaining the reasons for the denial.

2. Compensation for Property Damage

Based on the information provided, your insurer makes compensation arrangements. This decision is based on the loss adjuster’s report and your past adherence to the insurer’s policies. The insurer determines the amount of compensation based on the degree of damage and the pre-established policy amount.

The insurer can decide to pay through a bank deposit or by cheque, depending on the claim. However, if you acquired your house through a mortgage, your insurer will wire a payment check directly to the mortgage company. Therefore, you should inform the company of the insurance claim early in the process.

3. Urgent Financial Need and Preventive Repairs

In the event of peril, you may have financial hardship due to the damage to your property. Your insurer should make advanced payments to help you overcome such difficulties. Additionally, any costs you have from making emergency repairs to prevent further damage should be reimbursed by your insurer.

Getting compensated for damage to your home can be quite a headache. Working with a local independent insurance agency can help you avoid this headache. An independent insurance agent represents you and does not work for any insurance company.

Vargas & Vargas Insurance is a premier local independent insurance agency that solely serves your interests and not those of your insurers. At Vargas & Vargas, you will get custom and affordable insurance coverage for your specific needs and have all of your insurance questions answered. Contact us today to get started.

How an Insurance Agent Can Help With Your Home Purchase

Posted on March 2, 2021February 20, 2021 by cvargas

Purchasing a home is one of the most exciting events in a family’s life. It is also a great time of confusion. So many pieces have to come together to turn a house into your new home. Having the right team throughout the home buying process is an important part of the puzzle. It’s common to think of realtors and mortgage brokers as part of your team, but did you know your local independent insurance agent can be a vital player, as well?

Resources

Independent insurance agents are not only in the community. They are an active part of the community. Because of this, they know the answers to most of those all-important questions when you’re purchasing a home. With knowledge of community services, neighborhoods, school systems, and referral partners, your insurance agent can be a great resource to help in your home purchase journey.

Guarding Against Surprises

You wouldn’t purchase your home without knowing how much the mortgage will be. You’ll also want to review your homeowners insurance in advance of your home purchase. This way, you can detect any obstacles like pre-existing or current home damage, which may affect your insurance, before purchase. Your insurance agent will review all the features of your future home to make sure you are properly covered. The replacement cost of your home versus its market value can be very confusing. Your insurance agent will walk you through the difference and explain your coverage in detail. This is also a great time to re-evaluate all of your insurance in consideration of your changing needs.

Ease of Home Purchase

Your insurance premium is often escrowed, meaning it is included as a part of your mortgage payment. Your insurance agent can work directly with your lender to deliver all insurance documents before your closing. This takes one more thing off of your hands and ensures your coverage begins immediately.

A home is an important purchase. Vargas & Vargas Insurance, a premier local independent insurance agency, will customize your homeowners insurance, answer all of your questions, and be there for you on the journey to your dream home. Contact us today to learn more.

When should your review your home insurance

Posted on February 28, 2021March 2, 2021 by agentinsure

About a month before your home insurance is due for renewal you will receive a copy of your policy details in the mail or maybe in an email. The front page of that is your Homeowners Policy Declaration. It includes your policy number, the dates your policy is in effect, your agent’s name, and the address of the property being insured. It also includes your liability limits, deductibles, and any additional coverages you have. At Vargas & Vargas Insurance in Dorchester, MA, our staff is focused on making sure our customers have a positive insurance experience. We put our customer’s needs first.

When your policy renews

When you get this notice from your insurer, it is the perfect time to review all the figures. Look at the amount of coverage you have for the replacement of your home, contents, outbuildings, living expenses, and liability coverage. Do they make sense? Has the cost of your policy gone up substantially? Is there a legitimate reason for the increase? What is your deductible? After you have looked it over you may want to have a discussion with your insurance agent.

When you add a significant amount of additional content

If you receive or purchase expensive jewelry, your policy may not cover it. Most traditional home policies have a low threshold for jewelry and other expensive items. You can add a rider to your policy to cover these items.

You make upgrades

If you make changes to your home: finish the basement or attic, add an extension or upgrade a kitchen the value of your home may have increased. If you replace your roof or add a home security system, you may be eligible for a discount. Make sure your agent knows all the latest information about your home.

Contact Vargas & Vargas Insurance in Dorchester, MA with your home insurance needs.

Should You Have an Office in a Downsized Home?

Posted on February 16, 2021January 13, 2021 by cvargas

Downsizing requires careful consideration of whether you need various features of your home or whether they can be eliminated. A home office is a full room that many people who are downsizing to a smaller home can eliminate. This can have a positive impact on your home insurance policy.

Consider Your Lifestyle

Deciding whether to include an office in a downsized home or not is not a one-size-fits-all situation. It can be tempting to make this decision solely based on space or insurance implications, especially when you are being intentional about downsizing. But it is also important to consider how keeping or creating a home office fits into your current career, educational, or recreational goals.

The past year has led to a drastic shift in many employees’ interest in working from home. Other people have begun to see the benefits of taking courses from home, both for credit and for fun. Online side gigs have also gained popularity.

Suppose you are currently participating in any of these activities or are considering doing so in the future. In that case, the benefits of having a dedicated home office space for working and learning may outweigh the cost of having an extra room. However, if you have no interest in working from home or are downsizing because you are retired or your children have moved out of your home, choosing a smaller home that does not include an office space is often the best option.

Insurance Implications of an Office in a Downsized Home

A home office is, of course, an extra room that needs to be insured. At best, it will add additional square footage to your insurance policy. In addition, your homeowners insurance may not fully cover your office in your downsized home. Why? It blurs the line between typical issues that all homeowners could experience and business-related expenses that are more complex. You will likely need to purchase an additional insurance policy if you are working from home. This is even more important if you are running your own business. Some employers may also require additional insurance coverage for remote employees that may not be fully covered by their regular workplace insurance policy.

A home office can be beneficial under the right circumstances. But choosing a home that does not include one can benefit your insurance policy. At Vargas & Vargas, we are the premier local independent insurance agency. Contact us today with any questions you have or to learn more about customizing your insurance policy to meet your pricing needs.

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