109. Homeowners Insurance Overview in Texas

All right, so I've got there's a there's a number of us on this morning and I'm recording this right now. I've got a guest speaker or guest presenter who will be joining us and I'd proceed a message over the weekend that he would probably be just a little bit. And so I'm watching to see when he joins. So in the meantime to go ahead and get started. I've got these workshop scheduled between eight and 10. And so I've got that time blocked off and so depending upon what is being covered that week, it may be a short workshop or it may take, you know, the entire time. But just going to be dependent upon what's covered that week. So the I'm going to go ahead and get started because I've got three things. One is with our guest speaker is an insurance agent and two of the chapters for this week cover. One one element of chapter two is related to property insurance. And so I wanted to bring an insurance agent on to provide an overview. And I've got a PowerPoint that will use as a guide to the kind of follow along. So one one one assignment this week will be notes based on on his presentation. The second assignment there'll be there'll be two quizzes one for chapter two one for chapter three. And then there'll be a written assignment based on the key takeaways from the presentation by the insurance agent. His name is Eli Varty. And then I've got two other assignments that are practical applications. So one will be looking at the Texas Department of Insurance is website and getting an estimate, getting a general idea of what an insurance premium on a property might be. And then the last item will be and there'll be a quiz associated with that. And the last item will be looking at the bear County flood risk map. And then there'll be an assignment tied into that as well. Okay. Let's go ahead and look at the Department of Insurance is website. So there's there's a number of factors that we'll discuss and and I've got the the course lecture that that audio will be posted soon for chapters two and chapters three. So that the information in relation to the the kind of the underwriting process for insurance on property. There's a number of factors that come into play. So understand that this is just a generalization because there's still other items that may. That will affect that insurance premium. So this is the Texas Department of Insurance is website. They regulate insurance in Texas and one of those those elements is property insurance. So I'm on if you just Google Texas Department of Insurance, this is this is the landing page will be on and then I'm going to click on check home and auto policy rates. So this quick link here on the main page. And then I'm going to select. And then I'm going to compare sample rates and policy provisions for home rates. So I'm going to click on that. And then again, this is just a very simple generalization, but it'll start to give you an idea. If you're trying to run an estimate or get a budget. And then you can go to the resource, a better option would be to contact your real estate or your natural staging, but your insurance agent directly and ask for a quote general quote on on a property. So in this case, I'm going to go to bear County. So I'm going to select the zip code. And in this case, I'm going to select the zip code for for UTSA. So 7, 8, 2, 4, 9. And then question regarding the claims history. So claim for you for five years. And then we've got the credit rating. We've got the homeowner policy amounts and they hear it caps out at 350. And then you got the condo policy and the renters policy. And then the age of residence and then the type of construction. So I'm going to select claims free good credit, 350 on the homeowner policy. It's a relatively new home. And it's a stucko exterior. And I can select get sample rates. And then I can sort these rates by selecting the link at the top in the heading. So I'm going to have you complete an assignment a quiz that walks through this process. So there'll be some questions that you answer based off of this. And again, these are just very basic generalizations that come into play to give you an idea of the insurance companies and in the rates of potential premiums that are out there. So I see Eli see that you're on. Can you hear me? There we go. Let me unmute you. Okay. So Eli, are you there? I am. Can you hear me? I can. Yes, sir. Fantastic. All right. Good morning. Morning. I appreciate you joining us this morning. So I've got a number of students who are on this morning. And let me go ahead and pull up the PowerPoint. I'm sharing my desktop screen right now. And let me. Let me get back there. Awesome. I'm a big technologically unsavvy, but I hope I can follow through. I think you're on. So that's that's half the battle right there. So let me say, can you can you see the PowerPoint slide? I can. Yes. Okay. Good. So I'll go ahead and do a quick introduction for you. So I had contacted a friend of mine, Bob Hutchings, who's been a farmers agent for a number of years in the San Antonio market. And he is moving. And so he had suggested that I contacted Eli and asked him to be a guest speaker this morning or guest presenter this morning. So Eli has been a real estate agent for over 20 years. He's been a broker for 19 years. He's been involved on the real estate investment side flipping homes and decided to get into the insurance. The insurance business. And so he's lived and worked in a number of states and has been in San Antonio for a while and is currently a farmer's agent. And we go ahead and put up his information there. So there's his contact information. And so Eli, I appreciate you joining us this morning. And what what I wanted to start off with is. Kind of a just a broad overview of the difference between the insurance companies. If you could just give me your. Give us your opinion on, you know, why one insurance company over another. What is what does it come down to? I think what it comes down to is service. I think what it comes down to is not just service and reputation, but how. You know, how is how solid is the company that someone is hiring to ensure their properties? So when we pay premium, we expect that company to cover us when there's a loss. So we want the strongest financial company out there that can deliver on that promise when we have a claim. So like any business, there are some top tier companies and there's some other companies are. You know, below that farmers among other company other top companies. Pretty much has a large portion of the market, but they're also one of the most financially secure. So if you look at the top three four companies, which is farmers, state farm, all state. Well, pretty much neck and neck. State Farm has a larger portion of market than we do. So then what distinguishes us from other companies is our relationship that the agent has with their clients. So if someone has a client service based agency, they're more likely to retain their business. And they're more likely to be there for the client when the client needs them when there's a claim. So I tend to look at my clients as clients, not as customers. We don't want to be transaction oriented. We want to be service oriented. We want to be educators to our clients much like an attorney or a physician. And there's a there's a long term relationship that you're focusing on. I think that that's that's an important aspect of that as opposed to I just want to sell you something. And you know, if you if you continue to pay your premiums or not, I don't I don't care. You know, there's there's some out there with that mentality and and then you also get into a very low level of customer service. And one one thing that really gets me is when when I hear people say that that they're trying to get the cheapest insurance possible. You don't always want the cheapest insurance possible. You don't ever want the cheapest insurance possible because there's a reason for that. It's going to tie into that level of service. And then I think as you mentioned, the supplies to a number of different businesses as well. But you want to make sure that that business is financially sound. I think we've got a there's an assumption out there today that that we're not not necessarily assumption. But I think that people just don't realize that the companies fail. And I'm more in tune on the title insurance side of the business. And same thing there were title companies are are going under not right and left, but they do fail. And when they do that impacts your your coverage. So so those are some some great points. Let's talk about the types of homeowner policies just in general. So that if I if I said I have no nothing about homeowners insurance policies. What what kind of overview can give me? Absolutely. So you know, you have to think the insurance industry has done a pretty bad job of throwing a lot of jargon at clients. And I believe they have not done a great job of explaining how insurance works. So together with state regulators they started to simplify the type of car bridges that are out there. And also give some commonality to some of the terminology. So so you have to think of it as what we're going to talk about now as cars. You know, if you look at car all cars are functioning. They'll have an engine that have four wheels. They've got a steering wheel. They'll get you from a to b. It's the same with insurance policies. So think of HOA is just a basic car. That tends to be a car that doesn't have too many frills. And what we call HOA is basically a named peril, which means that the company is going to list very specific types of car bridges or parals. I'm sorry, losses or perils that they will cover under. So they might have, they might have for instance 16 types of perils or nine types of perils. And anything that outside of this 16 perils is not covered. And in addition, they will only cover based on what we call actual cash value. I'm sure you all understand what depreciation is. So if you have a home over the years, the value of the home, I'm sorry, the home itself will depreciate. And then the insurance company will cover based on that depreciation. So that's the basic of HOA. You can think of HOB as kind of in the middle. More perils covered and it could be a little bit more flexible. It may be actual cash value or the other term is replacement value. Another which the insurance company will pay to replace that item up to the policy limit, but not base the claim on actual cash value. And HOC is probably a more fully loaded life, I mean the policy if you may. So that means it's got probably an open paral which means that the company, the insurance company will say, "We'll cover for almost all perils. We're not going to name them. We'll leave it open for us to cover." And we may just have some exclusions and we will have more coverages and we will. There's more meat to the policy. So unfortunately most people just look at how much a policy cost as Ray was saying earlier, but not really get into the specifics of each policy to see what suits them best. So the named risk is HOA. The hybrid is HOB and the all risk or open paral is HOC. And there's going to be a different premium associated with each of those, correct? Absolutely. The HOA tends to be the cheapest. HOB is in the middle and HOB tends to be the highest premium. Which is why you never want to compare just on premium because as most of you know McDonald's is a lot cheaper than say a steakhouse. They're both food, but one is very cheap and one is not. Yeah. And one thing that I've seen over the years, you know, I've heard the stories is one where individuals are underinsured. And then two, that when there is a loss that they're not covered because they got the cheapest policy they possibly could. They just assume that everything would be covered and then once that loss occurred, then they realize that the insurance company is not going to cover it. And then what do I do? I don't have tens of thousands of dollars to come out of pocket to make these repairs. Absolutely. And I believe it's the job of the agent to educate their clients on how these policies work. And this is where the service comes in as opposed to taking an order from an online company. Yeah. Yeah. Let's talk the different types of coverage. So I've got a short list here. You know, it's really personal property, other structures, personal liability and medical. So can you talk about how that fits like if I if I came to you and said, I need to get I just bought a new house and I need to get an insurance policy. I think most people think that okay, it's just a policy to cover the house itself, the real estate, the improvement. What is what is how does all of this other stuff fit into that policy? Okay, so insurance companies have gotten better over the years and really identifying what is covering what is not the most important thing people want to cover is obviously during dwelling with where they live. That's your your primary residence, that's your house, that's your grand style, that's your two story or one story, whatever. So the insurance company is going to say we will cover your dwelling for the perils that we talked about before. If something happens to it, if there's a loss, we will cover that. And we will cover it up to the policy limit. So again, let's assume that there's a fire. If there's a fire, the insurance company will come and they'll pay for what it would cost to fix the property up to the policy limits. But it's not just fire, it could be wind, it could be hail, it could be it could be a tree falling on it, it could be many, many different things. And the insurance company in the policy will identify that things are covered and that things are not covered. But at the same time, while we're living on the house, we also have our stuff, right? Our TVs, our clothes, our furniture. So you can think of personal property that if you took your house and kind of turned it over and dumped and opened it upside down, everything that falls down, that's your personal property. And the insurance company will say we will cover that up to a specific limit. So something happens to your house and the fire will cover your TVs, your furniture, your clothing, your jewelry, your computers, anything so you, almost everything so you can get back to your life after a major loss. Other structures have to do with your tool shed or your pool house, things that are physically separated from your dwelling. It could be a separate garage, it could be a cabana, it could be any other structure that's physically separated from the garage. So, you know, if a tornado comes as an example, wipe out your primary residence and that which is your dwelling, and then the pool, there'll be two separate pay-outs under the insurance policy. The next one is personal liability, and that's very important, people sometimes forget about that, some people have pets, sometimes pets bike. Some people have guests come over and the guests interior themselves, you know, people fall down or something happens where an attorney decides to sue the homeowner, that's where personal liability comes in, and insurance company will pay for that. Up to a certain limit, but sometimes, you know, it could be that someone fell down and broke a pink, a pinky, and you know, in order to pay for the pinky without people getting sued, they'll have medical coverage to say, "Burns is up to $5,000." So, a guest can come and fall down and they'll get covered under the medical, and then the insurance happy, and then the person that had the claim is happy as well. And usually in that case, when I say no questions asked, somebody's injured on the property, they go to the met clinic or they go to the hospital, they've got some medical bills, they break a hand, break a wrist, something like that. There's damages, but this is to cover those medical expenses. We're not getting into all the other pain and loss of use of that hand, and so forth, so it's the insurance company says, "We're going to pay that out." Historically, you were seeing about $2,000 on that, but I think that's gone up to about $5,000. Is that $5,000? Absolutely. I mean, you know, medical care is getting more and more expensive, so limits have to rise with that. So, I think the other thing to keep in mind is that if you have people coming on your property, that again, you get the cheapest insurance policy, and then something happens and then you're sued, this is where all of these coverage has come into play. If you're underinsured on the dwelling, then you're going to have to make up that law. Same thing, I think people often don't realize how much personal property they really have the value of that property they really have in their house. And, you know, so if the house were destroyed by fire or something else, that if you had to go in and replace, you know, just your clothes alone can be a significant amount. We just don't realize that. And, the same thing with personal liability, you want to make sure that you're not underinsured so that if there is a lawsuit, so that you've got coverage. And so, you talked about some of these, the types of losses that are covered, is there, are there others that when you talk about the perils that they can be added to this list? I've got fire, lightning, theft, vandalism, smoke, explosion, sudden and incidental water damage. How does that, how is that from? Okay, so this is where the difference in policies really come into effect. So let's say you have a leak in your shower that's over a couple of years, it started to do damage to the sheet rock around it. And it gets worse and worse and worse. I mean, sure it's the size of the file claim. The insurance company say this is not sudden and incidental because it's over a long period of time and that's means sudden incidental is if a water pipe breaks all of a sudden and then causes a lot of damage. So things that are that occur over a long period of time are not covered. Things that happen, water damage that happens suddenly is covered. But that does not include flooding. Correct. Does not include flooding that's separate. That is so. One thing, you know, we've seen recently with the hill damage, you know, there's a significant pay off recently. It was at two, three, four years ago within the last few years. And then insurance companies change their policies in relation to hill damage that you started to look at if the roof is still functional. That there may not be a claim paid out on it, right? Compare it's if it's an aesthetic like if you have a metal roof and you've got hill damage in the roof. But it's still functioning like it's supposed to then there may not be a claim paid out on that. So that's based on which insurance company you're with and what your policy provides or does not provide. To tie you to what we talked about about open peril, these are named peril specifically the company says this will cover a limit. And you're an example of an unnamed peril. So let's assume you have a house. And for whatever reason it decides to snow in San Antonio and the snow gets heavier and heavier and heavier. It sits on top of your roof and collapses your roof. Unless that peril is an open at less that policies and open policy open peril that that that snow damage will not be covered. And this is where this is where open peril versus named heroes makes a big big big difference. So in it's and going back I know you've said this already a couple times, but it's important to sit down and have that conversation and review that policy versus just purchasing a policy and and waiting until something happens and then finding out what's covered and what's not covered. Absolutely. What about so types of losses that are generally not covered so the what we call exclusions. Okay, so that's exactly right. So on a policy the insurance company say these are the things where we we are not going to cover. And the reason that they don't cover these unless you have specific insurance for those is that the loss would be so huge and it is so undeturnable that it could bring a pot insurance company under. And the biggest two are flooding and earthquakes not so much earthquakes here in San Antonio but earthquakes in California. So for instance flooding you know if if a dam decides to fail let's say can you make that fails and it floods all the neighborhood all of that it is so catastrophic that the insurance company is to say we're not going to cover that unless you have a specific policy or writer to cover that it's a sin for earthquake. It's the same for termites and rodents it's the same for freeze it's the same for wear tear wear tear because you need to maintain it. A big one is mold you know mold Hig insurance companies very hard for five years ago because by then back then it was an open peril. And then insurance companies said listen if there's a mold problem there must be an underlying reason for the mold problem and and we are not going to cover that. And then the last one is vacancy obviously the house is vacant for more than 30 days insurance companies say hey listen it could be broken into it's not being taken care of it's not being maintained there could be damage to the. To the property and we're not going to cover that our policies that do cover that but under your homeowners most likely under your general policy not so that's that's where you pay an additional premium for that coverage because there's an additional risk that comes into play. Absolutely yeah so so that's important to know because I don't think people realize that if you leave a property vacant you know there's there's different insurance for and here and here's where I was going to. Get into that rather the residents is occupied whether it's a second home whether it's vacant there's there's different. Indoor endorsements that you would purchase and paying additional premium for that that covers because of the additional risk. Absolutely so I think most of you understand that if you're own your own home your occupying it but you make it to a point when you say you know I really like that house on on the lake and I want to ensure we're there every so often but we're not there all the time insurance company said okay well we will ensure that but we want to charge you a different type of premium. A residential vacant is hey I put my house on a market it's empty it's for sale and it's going to take we moved out and it's going to take 30 to 60 days maybe 90 days until someone moves in we want insurance. Insurance company said great we'll just have to charge you a little different premium for that but we must know you have to tell us ahead of time. Renters insurance some of you may know if you rent an apartment or a condo or a house you want to cover the contents because if something happens to the property the landlord is covered but the rent renters personal property is not. And and the same for condo or town on where you own a fractional share the building you have some common walls there may be a master policy that covers the complex but not the inside of each unit. And then farmer ranch is you may have a big a big branch that has a tool shed or a barn that has a you know equipment and farm and then insurance company so we'll say okay yes we'll cover that we'll charge you an appropriate premium for that. Commercial is a little different commercial you can be a commercial that owns a their own property and then you want to cover that or you are a tenant like I am I rent my space here and I want to cover the inside of my unit where the landlord is going to have a policy that covers the building. In essence that's that's just a short rundown of the types of policy and we generally what we generally see in commercial tenant leases whether it's office retail and this is this is general in nature because it can always be dependent on that property and the type of operation can change this but generally we see about a million or two million dollar. Policy requirement by the owner that the tenant has to maintain that level of insurance and that's because if somebody came on to the property and and was injured then the tenant had an attendance suit or the landlord suit then the lease is generally say that the tenant will and demify that owner and then and then provide that insurance coverage. So this ties in I got a question from a from a student to sit other than this goes back to the to the personal liability coverage and a residence and then that's a tie that in here to the commercial property as well but the question was other than a bite from a pet could you give some other examples of what personal liability might cover. Absolutely a very common one is slip and fall so someone comes to your house and for whatever reason inside your house there was a section of wet floor and that person slipped and fell and hurt their back and you know they need to go to a chiropractor and you know they have to have some back work done that's a very very common one. Another one might be something falls you know an object falls and someone's you know body and injures them those are liability covered losses and there's almost you could you know as you walk onto a property if you could just imagine just about anything happening you know a tree tree branch falls. There's a there's a hole in the ground that the home owner either knows about or does not know about that they know about if they haven't fixed it and somebody sprains an ankle you know there's significant injury there's you know individuals that have pools you know there's additional risk there because of the potential for you know accidents to occur either with the pool you know death the drowning etc so you just just about anything that you can imagine from the time you walk on to a property until the time you leave of what could happen and the same thing with the commercial premises as well you know there's crack sidewalks there's a lot of things when it's raining you'll see businesses put out the cones alerting you know providing a warning that the that the ground is wet or the flooring is wet and slippery to provide that notice of the individuals will take caution and then also taking taking action to make risk for minimized so there's there's a any number of items that can come into play in terms of what that personal liability insurance would cover if you talk about some of the commercial clauses and these are these are general and I didn't you know there's there's a laundry list of items you could come up with on the business side itself and I was trying to think just mainly in relation to real estate because on the business side there's a there's a laundry list of items and so you know you've got the personal property coverage if you had a commercial tenant in a building and then we of course we've already covered the liability and then some of the others business center route corruption or loss of income and then there's any others that you could think of but you could talk generally about it. Absolutely so you know a business needs to stay in business in order to be in business right so the biggest one is let's say you're a restaurant and you have something happened to that restaurant and they're not able to stay in business. That's where business interruption will come in loss of income but one of the most important ones that we need to cover and I would assume we covered here is workman's compensation. So workman's compensation covers employees in case they get injured on the job businesses have to have that and that falls under commercial commercial insurance. So you want to be able to cover the actual property of the business liability if they do something wrong to one of their clients if their business goes down and then to cover their employees. And I was reviewing a commercial lease for retail tenants recently and in that lease there's a clause that says if the property is damaged and the landlord can repair the damage then the landlord has up to 180 days to do so. And then if it's more substantial than that and the landlord decides that they're not going to repair then there's another clause in terms of what happens to that lease. So I was talking to the tenant that was going to sign that lease and I said one of the issues you've got taken consideration is it could take that landlord up to 180 days to repair that property and in the meantime you're not doing any business. You know you can't put your business in because you're not operating your business you're not going to be able to pay your employees and so then your employees are going to scatter so then by the time everything gets repaired you're having to hire new people go through retraining you know the whole nine yards and I said so this is where having business interruption loss also income comes into play so that you can maintain that status quo until the properties repaired by the landlord. Absolutely and then we generally talked about talked about this a little bit at the beginning the difference between replacement cost and actual cash value what can you give some some you know your perspective on the like the primary differences between the two and then is there is there one that's better than the other what's kind of a generalization in terms of the difference premium for these two coverages. Absolutely so again the insurance industry has done I don't think a really good job explaining those but they're very very important this is probably the most important understanding insurance policy that I would recommend people pay attention to so if you have a house and your house is 10 years old you know that over time the. The actual physical house is what is wearing down so replacement cost is what the insurance company will pay to replace it up to the policy limits so it's not what the house is selling for right now is what construction cost will be in the future in order to replace the exact same structure so if I love my neighborhood and I want to live there and I want to rebuild the house I know it's going to cost me more money than what I bought the house for because building costs keep going up so that's replacement cost what a cost to replace that house and insurance company will cover me up to the policy limit so insurance companies want to do a really good job of estimating what the replacement cost will be. Actual cash value is the same as replacement cost except it takes in the appreciation so you know if you have a 10 year old car you know that 10 year old car has been depreciated over time and actual cash value means that the insurance company will will replace that car or will pay on that car that claim. Based on what it's worth right now not what a cost to replace and that's really the essence of it I would recommend that people get replacement cost it does cost more money but the difference between the two can be substantial and it can have a significant impact at the time of loss that's what that's something I don't think people taking on the front end when they're purchasing that policy nothing's going to happen it's a brand new house it's I don't have to worry about this and then when it happens that's that's when the you know the shot kicks in because they're not getting what they thought they were absolutely when we look at and I underwriting a premium so I took the students at the very beginning to the Texas Department of Insurance's website just to get a generalization and and so I didn't get to finish that but there are so many more issues that come into play with underwriting that policy so whatever and after we finish here I'm going to go back to that page because there's an assignment that ties into that but so that's that's just a very basic generalization because there's a number of other items that come into play when you're looking at that policy so we've talked about the replacement cost versus the actual value so that will be a component in that underwriting and what that premium will be and then we look at some of the other elements here on this list and then can you talk about the you know like the if we're looking at the difference in the in the age of the home and the condition of the home you know you've got a brand new home versus you know a house that's 20 30 40 you know 50 years old and then the the condition of that property. Absolutely so the job of a underwriter is basically to assess a potential future claim and we know that not all homes are the same and not all locations are the same. So age plays a very significant determination because as a home gets hold as as a home gets newer and newer builders are putting more and more into a house. You've got fancier kitchens and you got callers ceilings and fancier windows, fancier bathrooms so the job of our underwriter is to look at a specific age of a home and see what it would cost to build that home the way it was. So obviously an older home may have a different payout structure than newer home but an older home and also will have an older roof and that we know that older roofs are depreciated and newer roofs are not. So an underwriting an underwriter will break that down to see hey how do we need to charge a property for that. And the next one is construction house the house build is it built with brick is it built with just wood is it doesn't have fancy stuff on it doesn't have fancy doors. So underwriters will classify house based on the type of house it is is it a standard house is it a custom house you know and how much isn't going to cost to rebuild the house to replace it should there be a major loss. Location obviously also plays an important role because we know if a house is maybe a hundred miles out from a major center the cost of construction may be higher because there's no local home depot there's no local suppliers and someone to build that house will charge more than a centrally located residents. But the bigger biggest one is fire protection if a house is not close to a fire hydrant or close to a fire station and insurance companies going to want to know that because they know if it takes longer to put out a potential fire then there is more there is a bigger likelihood that there is a bigger claim if there is a fire. So underwriters will classify house based on that to see what the premium should be so they can spread the risk appropriately. The other ones claim history you know if if a house has the same claim over and over and over again whatever may be. And insurance company is going to say we don't feel comfortable covering the house because there's a problem that's not been rectified or we need to charge more premium because there's a continual problem that's not rectified. So that's very important but what's also important to a an underwriter is how is the client what is the ability of the client to pay the premium. They have done statistical analysis and they know that there's a correlation between a good credit score and premium paying ability but also the amount of claims there's a direct correlation the higher the credit score the less average claims there are. So an insurance underwriter is going to look at that and rates that person appropriately so it's very important for the underwriter to understand because they never get to meet the client right but an underwriter is going to want to know hey what can you tell us about this potential why so we can rate this properly. But at the same time insurance companies over the years have gotten to standardize claims and they all join an organization that reports claims so they minimize fraud that organization is called clue so if there is a claim every insurance company knows what type of claim it was so any particular. Client that decides to the fraud insurance company has a list less likelihood of doing so because the information about the claim is public and shared amount insurance company. You know and that's one thing so if we talk about the claims history on a property that that's where there's a clue report is like a credit report for that house and then you've got the credit report for the the owner of that property so both of those are going to get underwritten and and I think it's something that individuals don't don't realize is that when they're buying a house if that previous owner has had a significant number of claims on that property. If a number of claims on that house that's going to show up in the clue report but then that can also affect the premium that that that new owner is going to pay because of the because of the previous owner's claims and so one of the things that that may be worthwhile is to contact an insurance agent like Eli before buying a house or during the option period to determine if there's any issues with with the claims haven't been filed on that property. So last thing last slide I've got here other types of coverage and some of these are unique based on the areas where the property is located. I don't know I don't know that we just I'm not we may have some some tremors in Texas but I just don't know that we have earthquakes but you never know you know we always say that you know with with the the flooding that we've seen lately people said well that was a hundred year flood and we didn't expect that to happen and you hear that. More and more these days so you never know what what may happen but if we talk about flood insurance there's there's a requirement by lenders if the properties in a if the like if you've got a loan with the federal insured lender where the properties in a certain area they're going to require flood insurance and then there's also the opportunity to purchase flood insurance even if you're not required to have it by the lender so can you give some some you know perspective on that. Sure flood insurance as you know specifically with Houston over the end of two two years ago is flooded insurance can have a catastrophic severe impact on the community so. So the federal government has done a better and better job of identifying areas that are prone to to floods and that can be a hundred year floods and a flood maps so our lender is going to look at where is it where houses and relationship of flood map and if it's inside of flood map a lender is like like I said is going to require there's flood insurance separate from the homeowners insurance. However there may be some locations that or some instances where I give you an example is on the coast if you have a house down in corporate corpus Christi the subject to flooding because of a wind storm some let some insurance companies may cover that and some may not so if there are locations that no insurance company will cover. They have pulled together to form to you which is a pool of five or six top insurance companies that agreed to share the cost of ensuring a particular difficult property that is hard to ensure under flood insurance. Same for wind storm especially on the coast so these types of policies are in addition to your basic homeowners and they are in very specific areas prone to flooding or wind storm or or or hurricanes stuff like that and as Ray mentioned before earthquake you know my house is not cover on your earthquake but if I was in California. I for sure want to get earthquake coverage because what we're likely to do is a much higher that something will happen and I would want to ensure my house in case that happens. Extra coverage has to do with people that have personal items in excess of the policy limits so for instance if I have a very expensive gun collection I would want to talk to my insurance agent and say hey I want to cover that gun collection because it's worth a lot to me and the basic policy limits will not cover that. Please ensure me for my fancy gun collection or my my real expensive dinner set or my expensive art or my expensive jewelry and that's when we will have a specific endorsement that covers that otherwise you just get basic coverage on the policy. And then the last one is one that's you know has been traditionally difficult to understand but if we look at homeowners and my homeowner insurance is liability limit of 300,000 and something happens and I get sued and I have a million dollar lawsuit that I found liable for. If my limit is only 300,000 that's not sufficient for me so we get what's calling an umbrella policy that increases that liability limits to a specific amount of $1,000, $2,000,000 whatever it may be and me is an insurance agent I have that on myself because I can't afford to lose my agency in case something happens and my. Basic homeowners liability does not cover is that likelihood that something happened will happen no and I do that because I want to have a piece of mind that if something does happen i'm not going to go under so you know I will kind of sum this up by saying to you hey the way insurance work is we pay very little premium. In relationship to what insurance company will pay in the future and as you're doing your shopping don't shop on price shop on value. Let me just check real quick see if there's any students that have questions if you post those in the chat window real quick give you just a few seconds and. Just see if any of you have a student's have any questions i'll make one final comment on that I think that saying it's the same with auto insurance coverage as well where individuals get the minimum requirement that you look at if you have individuals in your vehicle say three other individuals. And you get to an accident where you enter somebody else in another vehicle that has four individuals that seven people now that fall under that minimum coverage and that's not even going to come close. To cover anything and so that's where you look at not just yourself but. If you got into a situation with you where you were sued do you have enough insurance to cover that risk and when you were talking about that with the house i was thinking about you know there's just a story that popped into my head when. You have a bunch of individuals on a deck and the whole debt collapses and you know that could be 10 15 20 people and you've got significant injuries and it was because of. A property defect that the owner may or may not have known about but when the owner gets sued that that general coverage that liability coverage is generally not going to be enough. To protect that owner so then the result is that that owner ends up being personally liable for those damages and so that's where having a number of policy can be a significant benefit so I don't I don't have any questions from the students right now so. I really appreciate your time this was great information and advice and thank you for joining us this morning. Thank you very much appreciate your time ladies and gentlemen have a great day if you have any questions don't hesitate to contact me by phone or by email alright thank you you have a great day. And we'll get you out if you'll just e-live you'll just click on in in the meeting yeah i'm clicking on will leave meeting will leave meeting there you go well nothing's happening. Oh you know what let me hold on just a second okay okay all right so for those of y'all on i've got originally had 19 on now I've got one two three four five six eight of you need to make sure that y'all all checked in with the chat window so if you haven't make sure that you sent a good morning and then I'm going to have you do a check out here in a minute as well so I've got. One two three four five i've got six of you that have checked in so two of you have not so please please be sure to check in right now and then. Move this back over here so what did what did y'all think just generally real quick any comments questions before I move on to the next. Section either by either by the chat window or by audio. All right so let's no questions no comments let's get back to the what i was talking about earlier so we're on the Texas Department of West insurance is website and as as I was mentioning the the there's a number of other factors that come into play here that this this will give you a generalization that the underwriter is going to look at all of those other factors so the property condition the age so here it's one to you know. Let me go back here to this window. It was ten years old so they they've classified that as one to 34 years and then 35 years old 35 plus and so this is a huge window right here in terms of will is the house 10 years old is it one year old is it. 30 years old so that's going to be significant difference in terms of the that property condition and then. Go back here and then they're going to look at the credit rating for the. You know claim free 350 10 years old and stuck go and so and then i'm going to. Oh credit rating where's credit right here we go good good credit and then how do we define good credit there. So that's going to that's going to be a window that's going to be a range in terms of what. You know the credit of that of that that insured. So this again gives you a generalization and then once you get into you know the the clue report on the property the credit rating for the for the insured the. The condition of the property the location of the property is it close to fire fire station or fire hydrant that's important because if not that premium is going to go up so you when you look at it you look at will this is this is a good idea of what a premium will be but it's not close to fire hydrant so there's an additional add on. You want the umbrella policy that's an add on you want flood insurance even though you don't you don't you're not required to have it by the lender it's a it's a lot less expensive if you're not in the flood plain and you're not required to have it versus you being required to have it then the cost significantly goes up just for that flood insurance you look at. What else were we looking at the the condition the construction of the property. Number of other factors come into play here so this will give you a generalization of the insurance companies and what what that premium might be and then there's some other. Difference is based on what is covered like if you get additional you know how much personal property. That that you need coverage on that dollar amount the type of of policy that you're going to purchase you know with the HOA B and C. And so as you go up the B is going to be more expensive and the C is going to be more expensive than that you look at the credit rating of that insurance company that's important I think we we often take that for granted that if we buy something that. That it's just going to you know by insurance it's going to take care of me and that's not always the case because of what what that policy says it will cover and then all the exclusions and it's important to to know both of those what it will cover and then also what it won't cover. What are all those exclusions. I'm looking here somebody says there's a there's a lot of stuff that has to be taken into account. But it's an expense you never see the true value until you need it and that's that's true is when you look at it from from you know an annual perspective you were paying you know I I probably now pay well over $5,000 a year just for home and auto insurance and I haven't added a teenage driver on yet that's that's about to happen. And so I'm an attorney I recognize the risks and you know you've got individuals that say you know I'm just I'm going to do the bare minimum because I don't expect anything to happen and I don't feel I give my money to the insurance companies. From from my perspective having seen a lot of these issues play out and having seen individuals uninsured having seen individuals not get the coverage that they thought they were going to get is it ends up being a significant out of pocket expense so you can think of it in terms of you can you can pay upfront and pay. Probably what we consider a little bit less but when that's amortized over over you know the number of years over the term until you have that loss that you know it's one of those things that you will likely come out ahead if and when that happens because the insurance companies can bear that risk you don't want to bear that risk. So and I don't think in some instances it may be worth looking at getting the cheapest policy I would never you know that that's something you're going to have to go through that analysis on yourself you know where for your your home and your your residents where you live you've got. You know all the coverage whereas maybe with a rental rental property you've got less coverage on the on the property itself but then you've got an umbrella policy for personal injury because there's there's you know you're putting more money into that versus the rental property improvements themselves so number of factors here so the credit ratings important for that. For that company and then you also want to look at the complaint index and then also what what percentage has the rates have the rates changed over time as well because that that can be a significant. I have a significant impact on your budget okay so you're going to have an assignment based on this and so use this resource you can come back and refer to this video here to complete that assignment i'm just reading through the comments real quick. Yeah and then the other thing is look look at the difference in insurance companies i think oftentimes individuals just go to one insurance company maybe their family has used that same insurance company for twenty thirty years but i think it's important to. To talk to you know to get an idea from different insurance companies of what what the coverage will be you know if you picked out two or three insurance companies to interview and i think even more important it's also. The the service that you're going to get and so with somebody like Eli or or i contact as i mentioned contact about Hutchings who i've known for. Getting close to twenty years you know based on on who he is the service that he provides his character his reputation the way he does business the way he communicates it's it's the it's the same thing with with other aspects of industry you know different industries where you may buy services or products that you want somebody that's going to be there for you to provide that that level of service. And so i had somebody ask you talk about business insurance. The the comment was individual couldn't get business insurance because the business was was was only a year old and was not insured for two consecutive years so i that's a that's a whole nother factor and there's there's so many different types of business insurance that are out there that i didn't get into but if you let's. Just going to stick with. Farmers and I may go state farm may have. Here let's just go here real quick. So you got workers workers comp we've got the umbrella policy. You have you got the personal liability the we go back here and see if I can't. A commercial auto insurance is different than your general insurance or your personal liability for auto coverage. You've got you've got things like cyber cyber security you've got employment practices for discrimination sexual harassment wrongful termination things like that. You've got coverage on your business personal property and so depending upon what type of property you have like within that like let's say within a retail location. I've got somebody that that has bought a UPS franchise and so you look at. And so there's a number of copyers that are that are in that location versus just what we consider your general. Business operations equipment like your desks and chairs and computers and things like that that there you've got additional. Products to cover and or equipment to cover crime insurance you've got theft there's there's any number there's a number of other. And so there's a number of other companies that are in that kind of a lot of coverage is to come into play on the business side. And one thing to note about that is I do work with nonprofits and I was trying to get insurance coverage for nonprofit recently. And it's all general business it's all the stuff I just mentioned. And so I had a lot of the profit that it is that individual the you know the company just can't get their head draft around it. I'm like it's not that complicated. It's it's very basic. It's just a nonprofit business that you know happens to provide this service. And so I even went through farmers to try and get coverage because I had a laundry list of items I want to cover. And at the at the 11th hour their underwriter came back and said no we we're not going to do it as too risky. Because it's I'm like it's just general you know insurance coverage for nonprofit think of it just like business coverage insurance. So I've got two other insurers that applications are our insurance companies that applications are with right now that are reviewing the coverage. But I wanted cybersecurity you know the nonprofits taking online donations things like that. So the insurance companies I think another thing that we don't we don't realize is that insurance companies are in the business of making money. And so they don't like to pay out on premiums if they don't have to. So they're going to assess the risk of an individual of a property of a business to determine if they're going to provide insurance coverage. And so I think that's something else that we also take take for granted is that we're just going to get insurance coverage. And that's not the way it always works. So in that case what I would suggest it is there are insurance companies out there. It's just it's a matter of finding them and the problem we run into and then you get insurance coverage for one or two or three years. And then you go to what I would call them more not that those insurance companies are not reputable but what what we would consider more of your reputable insurance companies to get coverage then. Because once you've been in business for you know a few years then you've got some some history. You can show your financials you can show how you've how you've done business and then the insurance company can assess that risk. And so there are there are insurance companies that will provide some sort of insurance out there. It's just a matter of finding them and I think what we see or what we interact with on a day-to-day basis is more of your everything's got to fit into a box. I need car insurance. I've got two cars. I've got you know. I'm driving my wife is driving and so we need insurance coverage and they go check check and you know what type of vehicle and how many miles and you know here's your insurance premium. I'm buying a house you know four bedroom two bath two and a half bath. So production home it fits in this nice little package right so anytime you get outside of that package that's where it becomes complicated. Alright so next. Next item is so we've talked about the homeowner insurance and then you're going to have an assignment tied into that and then we also have. I want you to look at the flood risk map for bear county and so if you go to bear flood facts dot org. You know what let me back out of this if I just Google bear bear flood facts dot org that's the domain name that takes me to this main page. And now this is a great resource to use the gives you a lot of information about you know master plan for the watersheds capital improvements and knowing your flood risk is is what we're going to look at and then they've also got it. A link to water quality as well and so we come down here to the flood risk viewer. I'm going to click on more. And then this is going to take me to a GIS page and now I've already accepted the disclaimer so when you get on for the first time there we go. I make me do it again so I'm going to accept the disclaimer and so this is on a on a GIS platform and so that's taking a map and then overlaying data over that map and then if we come over here we can look at the different layers that are included. So we've got the risk map streams the San Antonio River basin watersheds and then the 1%. A chance of flooding and then we could also add 30 year risk of flooding as well the. We can also select the type of map. That we want to see how we want this to appear visually. There's information about you know getting started and then using the icons over here in the menu and then here's the map legend and so this this is the watershed for San Antonio and and I love. This they they used to have something like similar to this and then they they changed up their page to where that went away and you couldn't see the big picture. But if you look at this this is these are all the watersheds and everything is flowing south and so. The drainage is one of the biggest impacts of real estate development and in particular residential development because of the amount of density that you're putting on the to a track of land and so all the drainage has to work within. You know has to fit within these watersheds and so on the we've got the Medina on the on the far far west and then here in San Antonio proper we've got. Leon Creek on the west side of town and then we've got Salato Creek on the on the east side of town and then we've got the San Antonio Riverwalk. In the in the central and then downtown. And then going south of downtown and it's all to control the the water drainage and so one of the things I'm going to have you do is an assignment is let's. I'm going to walk you through this here see if I can get to my. So this is this is Maverick Creek the Maverick Creek subdivision which is on you know what let's do I tell you let's do a different one let's do I was going to do Maverick Creek let's do. I'm looking here let's do this oxbow and I want to do I want to find a street on so I'm just on Google maps right now so on spring crest so I'm going to make a note this is going to be the site your assignment will be in. In the oxbow neighborhood and so right here so where we are this is UTSA is up here. Here's UTSA and we're coming down Babcock here's 1604 we're coming down Babcock and then. Babcock turns over to days of all and so we're on. Spring run spring rain come down spring rain and that brings us over to spring crest and so I'm going to find a property address here on spring crest and the way I'm going to do that is I'm going to go to. B CAD I'm going to go to B CAD and I'm going to look for a property on spring crest. There we go and let's just I'm just going to pick the first one here so 11 319 spring crest. San Antonio Texas so now I'm going to go back to that that flood risk map. Bring this down. And I'm going to type in that address and and there we are so this gives you this gives you an idea now of there's there's that that's the property and let me zoom out. So you start to see now where that property is located and it's got there are two sources of water that could potentially be for drainage that surround that property that surround that neighborhood and this is this is the big one and that should be that that's going to be Leon that should be Leon Creek Leon Creek watershed. Let me see if I can get some more. That's not so so look at how close that property is now if you were to if you were to go over there and and walk down this area you're not going to find any you're probably not going to find any water right now and that's because it all drains South of town. Whatever whatever rains the issue is whenever whenever it does rain you look at and if you haven't done this and I'm not saying like like just wait for this to happen to go do it but if we go up a little little ways here look at all this this water being fed into this into this watershed and then if we come up here to 1604 and let's let's go over a little bit I'm going to come back to that property here in a minute but let's go over here to 1604 and I'm looking for. I 10 and that should be let me double check and see if this is. Here. There's you TSA. There we go so this this is 1604 and I 10 and so this is a top golf is right here you're going to lock and Tara over here lock and Tara shopping center and all of garden and. What the other restaurants that are right there this is this is the beginning of really really on creek really starts to put a lot of water into into that watershed and so if you ever have a really big rain come look at the water that's running under I 10 and 1604 right here to get an idea and all that water then is running south and feeding into the. That watershed and so there's been times lately where and then you can start to see what that looks like here and where we've had rain you know day after day after day and so what we've had are these situations where you've got individuals to say. I'm my property's not going to flood it's not going to be an issue i'm not in the flood plain so that's never going to affect me and this is where I come in and I look at this and say you know what this is a potential risk right here you know if you were. You know and then you've got to look at the topography but you know maybe if you're over here in this way else even here you've got water in this area so you start to look at it well what is the potential risk based on the topography of that property and where your properties located and then is there potential for flooding because we hear it over and over and over these days of I didn't expect that to happen i'm not in the flood plain why did my house get flooded and and if you don't have flood insurance then that creates a significant. In terms of what are you going to do to rebuild that property because a lot of times you still have a. Alone on that property and you've still got to pay you know taxes and you've still got to maintain insurance property insurance and so you've still got to service all this debt with this property that's been flooded and now you've got to come out of pocket to make those repairs and then you get into another situation depending upon the severity of the flooding like what we saw in here. To where there's just not enough resources available there's not enough supply or materials and there's a shortage of labor to be able to go in and make those repairs. Aside from the fact you're having to come out of pocket at that point so if I if I lived in this house right here and I was not this was my house and in the lender said you're not 100 year flood plain so we're not requiring you to have flood insurance I would have flood insurance right to minimize that risk so is my house going to get flooded I don't know if you're going to get flooded. I don't know but having that peace of mind of me paying that annual premium it's not going to be that much compared to if I was in the hundred year flood plain and the lender required me to have insurance that that's where you can go into a couple of thousand dollars a year in addition to your home or policy so I'm going to have another assignment for you to where I'm going to have you right up a report and you're going to select a property and you'll include the like the Google map. The street view and then let me get back over here to the Google map and then you're going to include a copy of this map. This is this is your street view right here and this will give a big picture of where this property is located so this will be your street view map and then you'll have the flood risk map. Here and I would do one words you zoom in as close as you possibly can. You know you can do a screenshot of this and then also one where you zoom out and you give a little bit bigger picture based on the potential flood risk of where that property is located so you have the street view map and then two maps of the of the flood risk map so this is this is worth looking at if you're looking at buying a property if you're looking at buying investment property I always have my clients. Sign off on this map showing that they received it and the potential flood risk because the worst thing is when you got somebody that comes back and says why didn't you tell me I needed flood insurance and you're like that's you know the lender didn't require it's and that's up to you to make that determination but from a from a professional service standpoint it's providing as much information to the client is possible to say hey here's a potential risk you need to think about and you know do your own analysis and you know talk to an insurance company to if if you want to purchase that insurance but at least I'm telling you that there's potential risk there so that that's all I've got so you've got. So just a chapter two chapter three quiz I'll have those lectures posted very soon and then you'll have an assignment based on our guest speaker this morning you'll have an assignment based on the quiz based on the Department of Insurance website and then you have an assignment based on this so if there's not any questions then that will conclude today's workshop. [BLANK_AUDIO] [BLANK_AUDIO] [BLANK_AUDIO] [BLANK_AUDIO] [BLANK_AUDIO] [BLANK_AUDIO]