Basic Homeowners Insurance

For new homeowners, the process of buying basic homeowners insurance can often be overlooked in the stressful process of buying a new home. In this interview, LoveToKnow Insurance speaks with Dan Weedin, an insurance expert who helps remove the mystery from homeowners insurance.

Based out of Poulsbo, Washington, Dan Weedin is an insurance consultant who serves his clients with knowledgeable and professional insurance advice. Dan originally worked as a commercial account executive for two insurance agencies in Washington, as well as an underwriter for United Pacific Insurance. Today Dan is a Certified Insurance Counselor (CIC) and also serves as a faculty member with the Professional Insurance Agents (PIA) of Washington. As a highly-involved member of his community, Dan takes safety and liability protection seriously. Through his outreach work with a number of community organizations, Dan helps to educate people regarding the many ways adults and children should be adequately protected.

Dan founded Toro Insurance Consultants in order to offer unbiased insurance advice, helping clients learn how to protect themselves and how to save money in the process. You can also find him (and his insightful advice) at his Toro Insurance blog.

LTK: What groups of people, in general, require homeowners insurance? Do all homeowners require it, or only certain groups of homeowners?

DW: All homeowners are required to have homeowners insurance if they have a mortgage on their house. They wouldn’t be able to get a mortgage loan to buy the home without it. Even homeowners that have a paid off house should have it because it’s the only financial protection that they have for what may be their largest asset.

LTK: What's the difference between homeowners insurance and mortgage insurance?

DW: Mortgage insurance simply protects the bank’s financial interest for the amount of the outstanding loan. It’s for the bank’s protection, not yours. Homeowners insurance protects the home, its contents, any loss of use due to a disaster (i.e. renting a hotel room while the home is unlivable), and your personal liability. Homeowners insurance protects the homeowner, not the bank.

LTK: If I'm buying a $250,000 house, does that mean I need to insure it for that amount, or for more or less and why?

DW: It depends what that $250,000 includes. If the value of the land is included in that total amount (which it normally is), you will not have to insure for the full value because land is not insurable for property insurance. The agent will determine the actual value of the "dwelling" and write a policy that protects the value of the home.

LTK: How do I choose a good deductible that's right for my situation?

DW: Choose a deductible at the limit that you no longer can comfortably afford to pay out of your own pocket. The standard deductible is $250, however many people can stomach a higher deductible in return for a lower premium. Each person has their own flinch point. Wherever that risk tolerance is; that’s where your deductible should be set.

LTK: Are only items inside the house covered, or are vehicles, boats, tractors and equipment stored in outbuildings also covered?

DW: Outbuildings (or any unattached building) normally are covered at 10 percent of the dwelling value. In other words, if my home is being insured for $250,000, the unattached structures have an insured limit of $25,000 automatically. The policy will also cover contents, which will include equipment and tools. What it doesn’t include are vehicles (auto insurance), boats (boat insurance), RVs (RV insurance), and any other motorized vehicle. Tractors, as long as they are used only to maintain the premises and don’t leave, may be included. It is best to check with the agent on any type of farm equipment because a separate policy may be necessary.

LTK: What do I do if I want to be sure not only the house is covered, but also my valuable items inside it, like jewelry?

DW: Your contents are covered for about 70 percent of your dwelling value (depending on the insurance company). That is normally far more than is necessary. However, many items like jewelry, furs, silver, and antiques have limitations for theft. Each company is different, but my rule of thumb is that if one of those items is valued at over $1,500, you should ask your agent to specifically insure, or “schedule” the item. An individual must ask this type of question to prospective agents, because each company has different theft limitations.

LTK: Does your company, Toro Insurance Consultants, Inc, provide any services related to homeowner's insurance? If so, could you describe those services?

DW: As a consultant, I don’t sell insurance. I do have a booklet titled Your Personal Insurance Survival Guide available on my website that details the steps homeowners should take when buying homeowners insurance. I am also available to analyze policies and assist insurance buyers in getting the right coverage for their situation and family. I work on a flat-fee basis as opposed to commission.

LTK: As an insurance professional, do you have any advice or tips for a new homeowner buying their first home, and who may need to select a homeowner's policy demanded by the mortgage company?

DW: Always take the time to shop around on your own among at least three agents. Don’t just take the mortgage company’s insurance because they only care about the dwelling. Interview three agents and find the agent that you feel will be most responsive to your needs. I recommend interviewing at least one independent agent and at least one direct writer (State Farm, Farmers, Allstate, American Family). Your home may be your largest financial asset. Make sure you are protecting it, your contents, and your liability properly.

LTK: Thank you for taking the time to help educate LoveToKnow readers about basic homeowners insurance.

DW: Thank you for the opportunity!

The world of insurance can often be confusing and complicated. Most homeowners choose the convenient solution and accept the insurance offered by their mortgage company. However, buyers typically have the option to shop for their own insurance. The safest approach is to take everything you own into consideration, including not only your home, but all of the contents of your home as well as the outbuildings. If your situation is very complicated, consider obtaining the unbiased insurance advice of a fee-based insurance consultant such as Dan Weedin at Toro Insurance Consultants. Fee-based consultants don't need to sell you specific insurance products, leaving them free to provide you with information that serves your best interests.

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