The Pending Home Sales Index, released on August 3 by the National Association of Realtors, dropped 2.6 percent to 75.7 based on contracts signed in June from 77.7 in May, and is 18.6 percent below June 2009 – another sign of the stagnant housing market.

“In many cases, people who have been trying to sell their homes for awhile have moved forward with their plans regardless, leaving a vacant home on the market,” said Commissioner Poizner. “Having an unoccupied home can create several insurance implications that typically are not covered under a standard homeowners’ policy.”

The Added Risks of Vacant Homes

Homeowners’ policies are meant to insure homes that are occupied, so they generally include exclusions for neglect or property abandonment on a home left vacant or unoccupied for a specified number of consecutive days.

Because vacant and unoccupied homes pose a higher risk for damage than occupied homes, insurance companies insure these properties differently and usually at a higher price. These risks include:

· Break-ins: When a home has been unoccupied for awhile, it can show signs that nobody is around – unkempt lawn, full mailbox, and no lights on – that can tip off burglars to an easy target.

· No emergency response: Without anyone home to call 911 or respond to emergencies, a manageable problem – such as a small electrical fire – can turn into a much larger, more costly disaster.

Keeping Your Vacant Home Properly Insured

As there are variations in language addressing vacant or unoccupied dwellings in the policies issued by insurers, it is of the utmost importance that homeowners read their individual policies very carefully. The definition of vacancy and unoccupancy can vary from policy to policy. Some insurers may not pay claims if a home is vacant for 60 days or more. Some policies might automatically shift to a different amount of coverage (e.g. liability insurance only) after a specific number of days left unoccupied. It is also not unusual for policies to exclude coverage for losses due to vandalism, malicious mischief and/or breakage of glass if the dwelling had been unoccupied for more than 30 consecutive days prior to the loss.

Some homeowners’ policies have a “vacancy clause” that can be triggered if the homeowner is gone for an extended period of time. If this happens, the homeowner could violate the terms of their contract and some or all of their coverage may not apply in the event of a loss.

“Before you decide to leave a home vacant or unoccupied for a long period of time, talk to your insurance agent or insurance company to learn how they define vacancy and unoccupancy, and whether the company will pay claims if a house is unoccupied,” added Commissioner Poizner. “Be honest about your situation, because while an extra policy or endorsement to provide coverage during the vacant or unoccupied period of time might cost more, it could save you money down the road should there be an accident or damage to the home.” 

Many insurance companies offer an endorsement that will provide coverage for a dwelling that is unoccupied for an extended period of time. Vacancy policies can also be purchased for different term lengths to cover a few months to a year, depending on the need. 

For more information contact please visit the Department of Insurance website at www.insurance.ca.gov or call us at 800-927-HELP to obtain consumer information guides about additional insurance products, or for any insurance-related questions.

If you would like a quote for a Vacant Home Insurance Policy in CA please call me at 916-797-4454

Most policies will cover physical damage to the rental car and liability coverage if you cause bodily injury and property damage to others.  The two claims that are often NOT covered however are “Loss of Use” of the vehicle during the time of repair and “Diminution in Value” of the vehicle and what they call Administrative Expenses.   When you think about “Diminution in Value,” think if you pulled a CarFax report and it showed that 10K in repairs had been performed on the vehicle a few years back.  Would you rather buy that vehicle or another without the damage although they look exactly the same?  There is a dollar value associated with Diminution in Value that you could be on the responsible for if not covered by your policy.  Loss of use is simply the loss of rental value to the rental business because the vehicle is in the shop getting fixed.   

Next time, before you go on a business trip or vacation, be sure to determine what is covered and what it not.  Ultimately, it’s going to come down to your risk tolerance, but I still recommend that my clients take the insurance.

By the way, if you are told that you are covered for loss of use of diminution in value, I recommend getting it in writing.

With the divorce rate hovering around 50 percent, a new type of casualty insurance is targeted at those who want to hedge their bets in the event they find themselves an unfortunate statistic after they say “I do”: divorce insurance.

A new insurance group based in North Carolina, SafeGuard Guaranty Corp., has released what it says is the world’s first divorce insurance, called WedLock.

The casualty insurance is designed to provide financial assistance in the form of cash to cover the costs of a divorce, such as legal proceedings or setting up a new apartment or house. It is sold in “units of protection.” Each unit costs $15.99 per month and provides $1,250 in coverage. So, if you bought 10 units, your initial coverage would be $12,500 and you’d be paying $15.99 per month for each of those units. In addition, every year, the company adds $250 in coverage for each unit.

Then, if you get divorced and your policy has matured (see below for the maturation rules), you would send WedLock proof of your divorce. In return, you’d receive a lump sum of cash equivalent to the amount of coverage you had purchased.

So how does the company prevent people who know they are going to get a divorce from signing up? To prevent that kind of adverse selection, the policies don’t mature until 48 months after their effective date (though people can purchase additional riders to reduce that maturity period to 36 months and to get their premiums back if they happen to divorce before the policy matures).

And what about other possible selection problems related to people with volatile relationships or a family history of divorce purchasing policies in large numbers? John A. Logan, chief executive officer of SafeGuard Guaranty, said the company has performed risk assessment and actuarial studies with this in mind. He notes that even in the worst case scenario, not all of those divorces would happen at once.

Still, it seems that people would be better served by self-insuring, i.e. putting $15.99 per month into a savings account and earning interest, rather than paying for such coverage and then possibly never getting divorced. Plus, some divorces are relatively amicable and may not cost tens of thousands of dollars.

In response to this notion, Logan said that while people could end up with more money that way, there’s always the chance that money would be squandered by a soon-to-be ex spouse. He also argues that the $250 per-year appreciation per unit is much more than the miniscule returns available today on savings accounts.

“There is nothing to stop your spouse from raiding those investments and taking it all. And then with all the money gone, you’re left with all the legal bills,” said Logan, who said the idea for the product came from his own experience with a financially painful divorce. In addition, the company’s Web site makes the argument that most people don’t have the discipline to save consistently.

Another possible downside of the coverage: the policies, which are being underwritten by surplus lines insurance company Prime Insurance Company, aren’t covered by any state guaranty funds that would honor them if the provider goes bankrupt. But Logan said the company plans to have the policies fall under such programs in the future.

A plan to extend the National Flood Insurance Program (NFIP) for five years was forwarded by the U.S. House Financial Services Committee to the full House.

Rep. Maxine Waters (D-CA) submitted HR 5114 recently to the committee, where she is a member for consideration after several short-term extensions of the program overseen by the Federal Emergency Management Agency (FEMA). In recent months, the program has expired with Congress having to reauthorize it retroactively.

“Without being reauthorized, the flood insurance program has been relying on a series of short-term extensions but recently it expired, leaving homeowners and prospective home buyers in affected areas unable to buy insurance,” Waters said in a statement.

If approved by the House, Waters’ measure would still require action by the Senate and President Barack Obama.

The same committee also passed a measure sponsored by Rep. Gene Taylor (D-MS) that would add wind coverage to the NFIP, an effort that has failed previously in the Senate.

Waters’ office noted the increased reliance on the NFIP beyond properties in special flood hazard areas to areas of increased flooding to aid homeowners nationwide.

The proposed measure not only would extend the federal program to Sept. 30, 2015, but also would phase in actuarial rates and increases coverage limits.

“The maximum coverage limits for flood insurance policies needed to be increased because of inflation and higher housing costs,” Waters said. “However, the focus on NFIP should be on providing coverage for those vulnerable to natural disasters, not to subsidize the wealthiest Americans, so we are phasing out premium subsidies for second homes and vacation homes, which will save the program a lot of money.”

Several insurance organizations, including the Property Casualty Insurers Association of America, have supported Waters’ bill to find a long-term solution to the constant reauthorization of the flood program.

“We need a long-term, sustainable solution to the flood program,” David A. Sampson, president and CEO of PCI, wrote in a recent letter to the House committee. “Rep. Waters’ bill takes a responsible approach to making the NFIP more financially stable, providing the program with an important multi-year extension through 2015 and limiting additional federal exposure to natural disasters. The bill also works to increase local awareness of the devastating effects of flooding and the need to purchase flood insurance.”

The cost to rebuild a damaged home went up approximately 3.95 percent nationwide last year even as real estate prices were declining, according to a study by a technology firm.

Orem, Utah-based Xactware said in Phoenix, the hardest hit metropolitan region, where average home values fell 32.9 percent in 2008, the rebuilding cost went up 5.38 percent.

Its findings, said Xactware, point to the need to keep updating insurance coverage based on construction costs.

The firm said changes in cost, according to its reconstruction cost index, showed the top five states were led by Alaska, where they soared above 8 percent, followed by Nevada, at over 6 percent. Hawaii, Texas and Georgia were all above 5 percent.

In its regional year-end median cost to rebuild on a per square foot basis, Xactware said for premium homes the cost was nearly $600 in Hawaii, with Northern California, Alaska, Southern California and Florida all at or slightly above $500.

The firm said the construction industry is still coping with the effects of high gas prices “months after they have dropped.”

The cost of 25-year composition shingles, it reported, jumped 71.4 percent, and lumber went up 2.8 percent, with drywall rising 5.77 percent.

Despite a lack of high-profile disasters in 2008, Xactware said the number of insurance claims was higher in 2008 and the total dollar amount reported to Xactware was just over $23.8 billion compared to $13.9 billion in 2007.

According to the company, despite higher costs the pace of increases has slowed and its material and labor index increased 3.16 percent in 2008 compared with 5.87 in 2007.

The study found that average “retail” labor rates for insurance repair work increased 5.43 percent in 2008 compared with 7.68 percent in 2007.

Overall, Xactware said, labor costs have continued to rise over the past several years despite the downward trend in the economy.

More information is available at www.xactware.com.

NEWS RELEASE

Insurance Commissioner Poizner Announces Street Race Video
on YouTube Leads to Arrest of Diamond Bar Siblings for Alleged Auto Fraud

Brother, Sister Submit Claim For Nissan GT-R ‘Supercar’ Accident Found on Video Sharing Site

California Insurance Commissioner Steve Poizner announced today that on Friday, March 5, Jay Xi Chen, 21, and his sister, Tracy Chen Chen, 29, both of Diamond Bar, were arrested at their residence on felony auto insurance fraud charges for filing an allegedly false insurance claim surrounding damage done to a Nissan GT-R supercar. Jay was charged with six counts; Tracy was charged with one.

“We are all victims of auto insurance fraud by paying for our fellow consumers’ false claims,” said Commissioner Poizner. “This case also highlights the diligence and creativity with which we will pursue allegedly fraudulent claims.”

A four-month investigation revealed that Jay reported to Farmers Insurance Exchange that his sister had been driving the GT-R when it was involved in a collision on Interstate 10 on March 16, 2009. Tracy corroborated this story. Jay later withdrew this claim, stating he would pay for the repairs himself.

On June 2, 2009, Jay reported another claim with the same vehicle, stating that this time he crashed the auto while driving on Highway 60 in Riverside County.

However, ICC Collision Center reported that it had Jay’s unrepaired Nissan GT-R in its shop since March 2009.

Furthermore, a video found on YouTube (http://www.youtube.com/watch?v=MXKUd8oCKSQ) showed a Nissan GT-R being driven on San Gabriel Mountain Road during what appears to be a street race. The supercar crashed into a wall. Detailed inspection of the video showed the GT-R has the same damage as the one in Jay’s claim. The potential loss of this claim was $76,000.

The criminal charges were filed against the Chens by the San Bernardino County District Attorney’s Office, which is prosecuting the case. Each count could result in a penalty of up to five years in prison and/or $10,000 in fines if convicted.

The arrest resulted from an investigation by the Inland Empire Organized Automobile Fraud Interdiction Team operating out of the California Department of Insurance’s (CDI’s) Inland Empire Regional Office. This team is comprised of CDI and the California Highway Patrol. Farmers also provided assistance during the investigation.

Commissioner Poizner oversees 16 CDI Enforcement Branch regional offices throughout the state. Approximately 2,000 insurance fraud-related arrests have been made by the Department of Insurance’s enforcement division since Commissioner Poizner took office in 2007 – more arrests than have been made during any other two year period, under any previous insurance commissioner.