Car Insurance Rates can Depend on Local Factors
A frequently–heard complaint about car insurance rates is that they can be unfair to good drivers because they are often based on local driving conditions. One of the most important such conditions is the likelihood of accidents in a given state or locality. Some consumer groups have moved in recent years to prohibit the use of such data by car insurance companies, insisting that rates must be set strictly according to an individual driver’s driving record and years of experience, along with perhaps the make and model of car he or she drives since some types of car are more expensive to repair than others.
These efforts have met with limited success, in part because place–based data related to accidents can provide a powerful indicator as to how likely an accident will be. The claim of “But I am a good driver” has some merit, but the fact of the matter is that even if you are, the people driving in the cars in front of, behind, and beside you may not be. They may cause an accident that affects you, and if they do not carry insurance and you have the right kind of coverage, it will be your insurance company that ends up paying for items such as your car repairs and your medical damages.
A New Form of Homeowners Insurance
In most cases, a home insurance policy will protect homeowners against financial losses due to circumstances such as fire, theft and wind damage. Protection against special forms of natural disaster, such as flood and earthquake, must be specifically purchased, as they are not usually a part of the standard default policy.
A homeowner’s insurance policy that would protect against market–based financial losses, however, is something that has never existed until now. Beginning this month, a Home Value Protection policy will be available for homeowners in Ohio. Over time the program, offered by Home Value Insurance Co., will be rolled out to every state in the nation. The purpose of the policy is to allow homeowners to insure against a decline in home values. Such a policy would have been of great use to home buyers who purchased their home from 2001 to 2006 when values were high. Since 2007, home values in most areas of the nation have taken a steep decline – in some areas by more than 50% of their 2006 values.
The policy is not intended for all consumers, but rather for single–family houses as well as condominiums. One requirement of the policy is that the property must be owner occupied, not leased or rented out.
The policy is designed to become effective at the time a house is sold. Should the sale price be less than the ‘pegged’ value of the home established in the policy, homeowners will be compensated. This compensation can take one of two forms: either the amount of the loss will be refunded to the homeowner, or the difference between the home’s value on the S&P/Case–Shiller Home Price Index and the insured value will be paid to the policyholder. Regardless, the lower of the two calculated values is the amount the homeowner will receive.
Other Conditions and Limitations
The new home insurance policy is designed to protect a ‘Protected Home Value’. This value is calculated as the price the homeowner paid for the home, as long as the home was purchased less than 12 months ago as compared to the date the policy is purchased. New Form of Home Insurance Slated to Roll Out, Ohio First For homes owned longer than a year, the Protected Home Value will be calculated using a complex model to determine valuation.
In addition, homeowners will receive no payout at all unless general home values in the local market have experienced a decline. The Case–Schiller index will be used to measure local market values. The purpose of this clause is to make sure that any proceeds from the policy truly do compensate homeowners for declines based on general economic conditions. Should a house sell for less than the previous value because it has been allowed to degrade into a less valuable condition, for example, the policy will not pay a benefit.
While the new policy is available at present only in Ohio, homeowners in every state do need to make sure they possess an up–to–date standard home owner’s insurance policy to protect the value of their homes against fire, theft and wind damage. Use Insurancequotescomplete.com’s homeowners insurance quotes form to compare home insurance rates today.
Fire Prevention Awareness for the Winter Heating Season
With temperatures dropping across the nation, homeowners are starting to heat their homes again in order to ward off the winter chill. Unfortunately, the onset of the heating season also brings with it what might be called the prime house fire season.
Statistically, homeowners are more likely to experience a fire during the winter months than at any other time, for reasons that are not hard to divine: heating a home involves using appliances powered by gas and electricity, as well as burning wood pellets or natural wood in some areas that support the use of wood stoves for home heating. When used properly and kept in good repair, all of these heating mechanisms stand little chance of contributing to a fire, but when accidents and malfunctions are taken into account, the picture changes significantly.
Although all homeowners should carry appropriate amounts of homeowners insurance to protect the financial investment that a house represents, nobody wants to have to make a claim against that insurance. It is much better to avoid the likelihood of fire in the first place. To that end, there are some things that homeowners can do to help assure themselves of a happy and healthy home heating season.
House Fires: Prevention Methods
Houses that have furnaces or chimneys should have each of these inspected at least once every year. An annual cleaning for chimneys is also a good idea. The best time to have both done is at the very end of the fall season. This will help to make sure that chimneys and furnaces are ready to perform their allotted functions as soon as temperatures fall enough to make home heating a necessity.
A surprising number of house fires are caused by fireplaces and wood stoves. One of the most common culprits is the practice of allowing flammable items to sit too close to the flames, or in the case of a wood stove, too close to the iron box containing the fire. This box heats up to tremendous temperatures when a fire is burning inside and it is possible for a couch cushion, for example, situated too close to catch fire. This becomes even more likely if the cushion has heated up already, becoming extra dry in the process, and then an opened door on the wood stove allows a spark to escape and land. A homeowner’s best practice is to allow adequate clearance between all heating appliances, even electrical space heaters, and room furnishings.
Never ignite a fire by using a chemical accelerant. It is all too easy for the resulting flame to get out of hand.
A non–heating related precaution to also keep in mind relates to clothes dryers. The lint filter of clothes dryers is a fire hazard, particularly when it has not been kept free of debris. Clean such filters out on a regular basis and use the long thin extension of a vacuum cleaner to try to remove lint and debris, which may have fallen from the filter further into the dryer.
Common sense and reasonable precautions are invaluable, but nothing can replace the peace of mind that comes from having a dependable home insurance policy as well.
Understanding Home Insurance – Market and Construction Values
According to the Information Pulse Survey, recently conducted and released by the Insurance Institute, almost 50% of homeowners surveyed had a fundamental misunderstanding about the amount of homeowners insurance they should carry. These consumers believed that their home insurance policies should be pegged to the market value of their homes. Unfortunately, home values have declined in many areas since the housing crash began in 2007. Understand Market versus Construction Value with Home Insurance
In some areas, market values have decreased by more than 50%. Some consumers in these areas have responded by lowering the amount of insurance they purchase. This may be a result of a general desire to economize during hard times, or it may be linked to their belief that if their home is worth less, they do not need as much insurance coverage. Either way, reducing coverage can be a serious mistake. In a worst–case scenario, it can even be a catastrophic one.
Market Value Versus Construction Value
Nobody wants to see their home value decline, but one thing to keep in mind is that market value usually represents a highly theoretical number in any case. Take the situation of an individual who bought a home for $400,000 in the late 1990s. By 2005, the market value of the home may have reached $600,000, but the only way to actually realize the gain would have been to sell the house. Until such a sale, that extra $200,000 is merely theoretically possible. Similarly, if the home today is worth only $300,000, there has been a $100,000 “loss,” but again, this loss is just a theory assuming the house is not sold. The value may recover back to the original sales price in the next few years, in which case the homeowner will not have lost any actual money on the transaction.
If a home’s value fluctuates according to the data given in the example, how much insurance should a homeowner carry? In other words, which figure should a homeowner use for insurance purposes? The answer may surprise many homeowners: none of them.
That’s right – none of them. Insurance is not designed to protect the “market,” or theoretical sales value of a home. It is instead designed to help a homeowner have sufficient funds to repair or completely rebuild a home should it become partially or completely damaged due to an event such as a fire or windstorm.
The home should, therefore, be insured for its “construction value,” or how much money it would take in order to completely reconstruct the structure. In many areas of the country, the construction value of a home is much less than its market value. This is due to the fact that the market value also includes the value of the land it sits on, and the land, of course, will still be there after a fire or windstorm. In places such as San Francisco, California, the land value may represent three–fourths or even more of the total market value of a home.
Be sure that you have enough home insurance to cover rebuilding, but also make sure to compare insurance quotes online so that you pay as little as possible for the coverage you need.