5 tips navigate insurance crisis

5 tips to help you navigate the Colorado insurance crisis

There is a major crisis coming for property owners in Colorado.  Many property owner’s insurance renews in the summer (most real estate transactions in Colorado occur during the summer/fall months) and you could be in for a shock.

I recently got a notice from my insurance company and I couldn’t believe what I was reading….   My policy was getting canceled!  I have had the same insurance on the property for 15 years, pay in full at the beginning of the year and have never had a claim.  The insurance company didn’t care; I was out the door in 30 days.

I knew I had to move quickly since I had a mortgage on the property (forced place lender insurance is about 3 or 4 times market rates).  So what did I do?   Here are 5 tips to help you navigate the process and actually get better coverage and save money.

First, I got a notice of cancellation from a major insurer in Colorado.  I have been with the same carrier for 15 years and have never had a claim.  I recently bought a property in Steamboat that has a fire hydrant in the front yard (less than a mile from a fully staffed fire station) with primarily aspen trees around the property.  Yet, according to the insurance company my home was in a “high fire risk area”; I asked for a map outlining the fire risk and saw that across the street and one door down were in low fire risk areas.  This was crazy, but the insurance company didn’t care about logic, they were going off their risk models and maps.  I was out the door in 30 days!

Initially I was ticked off, but as I thought about it, I haven’t requoted my insurance in a while; was I really getting the best deal?  I knew I had to move quickly since my mortgage company was not excited about having an uninsured property and if I didn’t get a replacement policy would force place which would cost 4 or 5 times what I was paying.

As I investigated other carriers some of the rates increased by 40% and other refused to even cover the house without stupid requirements.  With the fires of a few years ago (and all the California fires) property insurance companies are either dropping policies all together or raising rates substantially.  So based on my experience getting dropped here are 5 tips to help navigate this issue.

1. See who the primary carriers are in your area. It likely will surprise you who the primary carrier is.  In my case, I found out state farm was the largest carrier which shocked me since I had seen state farm in my last neighborhood drop all their policies.  This is important since you will want to make sure you quote whomever has a large market presence.
2. Use a local agent. If your property is not in an area like downtown Denver, it is important to use someone with local expertise that understands your market. This is particularly important when you get into the mountain communities.
3. Make sure you are comparing apples to apples. Insurance is complex, make sure you are comparing like policies to like policies, for example coverage amount, deductible, covered items, etc….  The lowest price is not always the best choice (for example if coverage is less you could be grossly underinsured).  When you are quoting, you can typically get a discount if you bundle auto with your property insurance
4. Raise your Deductible. Your homeowner’s insurance should be used for catastrophic events. Raising your deductible will save you substantial money
5. Shop every 2 or 3 years. I’d been with the same carrier on home and auto for 15 years since it was always such a pain to shop around.  This event forced me to shop and ultimately saved me money with better coverage. This is a good reminder that at least every 3 years you should take the time to shop around for coverage since carrier’s policies change, new entrants come into the market, etc…

Based on the steps above, I got quotes from 4 different carriers.  I ended up raising my premium a little and saved almost 30%.  Ironically not only did I save 30 percent from my prior carrier that dropped me I also got substantially better coverage from a much better provider.

References:

• Mountain Homes find insurers reluctant to cover: Denver Post
• Homeowners insurance undergoing an overhaul in Colorado: Denver Post
• Colorado Department of Regulatory Agencies: insurance info from the state of CO

Written by Glen Weinberg, COO/ VP Fairview Commercial Lending.  Glen has been published as an expert in hard money lending, real estate valuation, financing, and various other real estate topics in the Colorado Real Estate Journal, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.

Fairview is a hard money lender specializing in private money loans / non-bank real estate loans in Georgia, Colorado, Illinois, and Florida. They are recognized in the industry as the leader in hard money lending with no upfront fees or any other games. Learn more about Hard Money Lending through our free Hard Money Guide.  To get started on a loan all they need is their simple one page application (no upfront fees or other games).