Month: December 2010

Homeowners Insurance: Time for an Annual Check-Up
By: G. M. Filisko

Published: August 28, 2009 (Realtor Magazine)

An annual check-up on your homeowners insurance can result in a healthier policy and a healthier pocketbook.

What type of coverage do I have?
The most effective type of coverage is known as “replacement cost,” which covers, up to your policy limits, what it would take today to rebuild your house and restore your belongings, says Jerry Oshinsky, a partner at Jenner & Block in Los Angeles who has represented homeowners in litigation against insurers.

“Extended” replacement cost coverage provides protection to your policy limit, say $500,000, and then perhaps another 20% of the cost after that. Percentages vary, but in this example you could recoup up to $600,000 on a $500,000 policy, assuming your losses reach that high. Extended coverage can compensate for any unanticipated expenses like spikes in construction costs between policy renewals. Now harder to find due to the industry shift toward extended replacement coverage, “full” or “guaranteed” replacement coverage covers an entire claim regardless of policy limits.

A less attractive alternative is “actual cash value” coverage that usually takes into account depreciation, the decrease in value due to age and wear. With this type of policy, the $2,000 flat-screen TV you bought two years ago will be worth hundreds of dollars less today in the eyes of your claims adjuster. Some brokers favor replacement cost coverage unless you can save at least 25% on the premium for going with actual cash value coverage instead.

Even if you have replacement cost protection for your dwelling and personal property, don’t assume everything is covered. Structures other than your home on your property—such as a detached garage or swimming pool—require separate coverage. So too do luxury items like jewelry, watches, and furs if you want full replacement cost because reimbursement for those items is typically capped.

How much coverage do I really need?
OK, now that you’re clear on what type of policy you have, you need to figure out how much policy you truly require in dollar terms. Let’s say you purchased your home five years ago and insured it for $200,000. Today, it’s worth $225,000. Simply increasing your coverage to $225,000 may nonetheless leave you underinsured. Here’s why.

The key to determining how much dwelling coverage you need isn’t the value of your home but the money you’d have to pay to rebuild it from scratch, says Carlos Aguirre, an agent for Liberty Mutual Insurance in Arlington, Texas. Call your local contractors’ or homebuilders’ association and inquire about the average per-square-foot construction cost in your area. If it’s $150 and your home is 2,000 square feet, then you should be insured for $300,000.

There’s no rule of thumb for how much your homeowners insurance should cost. Insurers use numerous factors—age, education level, creditworthiness—to determine pricing, so the same policy could run you more than your neighbor. In recent years the average annual premium was $804. Oshinsky advises against scrimping on insurance because big increases in coverage probably cost less than you’d think. He recently purchased a liability policy that cost $250 for the first $1 million in coverage. Adding another $1 million increased his premiums only $12.50 more.

How can I lower my premiums?
The higher your deductible, the amount you pay out of pocket before coverage kicks in, the lower your premium. Landing on the appropriate deductible level requires remembering that insurance should cover major calamities, not minor incidents, says Foley, the independent insurance broker. Most homeowners should be able to absorb modest losses like a broken window pane or a hole in the drywall without filing claims. If you can, then you’re wasting money with a $250 deductible.

Foley’s rule: If you’re a first-time homeowner and don’t have a lot of savings, moving up to a $500 deductible will probably stretch your budget. However, if you live in a ritzy home and drive an expensive car, then you should be able to afford a $1,000 deductible.

Every major insurer offers discounts to various groups, such as university employees or firefighters. Figure about 5%. Ask which affiliations would entitle you to a discount and how much. If an AARP membership would result in a $50 savings, pay the $16 dues and pocket the $36 difference. Many insurers also offer discounts ranging from 1% to 10% or more for installing protective devices like alarms and deadbolt locks, for going claim-free for an extended period, or for insuring both your car and your home with the same carrier.

Maui insurance considerations:

Is your property in a flood zone?
If your home is a condo, most likely you will have coverage on the exterior of the building under the homeowner’s association’s master policy?  You should review the association’s policy to determine what additional insurance coverage you may want.  Also, if you are renting your single-family home or condo, you may have additional insurance considerations.
Earthquake and hurricane insurance coverage is expensive. Weigh the cost/deductibles with your insurance representative.
Your lender may also have certain minimum property insurance requirements.

Michele Muir White R(S), ABR, SFR
Coldwell Banker Island Properties
Wailea Gateway Office
808.298.8448
michelewhite@hawaii.rr.com
https://www.MauiRealEstateGuru.com

 

 

There have been 58 residential home sales reported for November 2010 at a median sales price of $445,000. This compares to November 2009 when we saw 67 sales at a median of $465,000. This represents a 13% decrease in sales from this year to November 2009.

166 condos sold at a median price of $349,900 last month. This compares to 70 condos sold November 2009 at a median of $399,000. This is a 6% decrease in sales between this year and last year.

Land sales totaled 6 at a median price of $362,500. Compared with November of 2009, there was a comparatively strong 17 total sales at a median of $455,000. This translates to a 65 % decrease when comparing sales from this November to November 2009.

Bank owned properties and short sales constitute a significant part of Maui’s inventory of properties for sale and an even higher percentage of closed sales. 28 bank owned properties sold and 20 short sales closed in November 2010. Almost 45% of all home sales were either bank owned or short sale transactions last month. 33% of the condo transactions were short sales or foreclosures. There were no land sales that were short sales or foreclosures. These numbers continue to track what we have been seeing over the previous few months. Some lenders are putting a fair number of bank owned properties that were on hold back on the market.

It will be interesting to see how the results from our winter season, as we are approaching the start of Maui’s traditional buyer’s season. There are a couple of factors that suggest we may see an increase in buyer activity. The Canadian dollar is almost at par with the U.S. dollar. Canadian second home buyer activity typically surges under this scenario. Overall visitor counts for this winter season are reported to be strong with island hotel and condo reservations at their third highest level historically. Generally, more visitors translate to more potential home buyers. On the other end of the spectrum, it appears that we will continue to see strong influence from bank owned and short sale transactions, as these transactions have moved prices down.

My advice to buyers and sellers remains unchanged. Sellers are still going to find a competitive marketplace. Exceptional properties may continue to draw a premium, but there is still a diverse inventory for buyers to choose from in most market segments. Bank owned listings will provide tough competition and force sellers to keep their eyes on comparable sales and keep their pencils sharp. Buyers can still find good opportunities well below peak market prices, but should expect that they may find competitive bidding on some of the better values in the market place. All buyers who require financing must get pre-approved prior to submitting contracts. Loans are available, but the process remains challenging even for well qualified buyers.

Contact me today with your questions or for assistance with buying or selling Maui Real Estate.
A hui hou,
Michele Muir White R(S), ABR, SFR
Coldwell Banker Island Properties
Wailea Gateway Office
808.298.8448
michelewhite@hawaii.rr.com
https://www.MauiRealEstateGuru.com