You’ve put a lot of thought, time, and energy into choosing a home that’s right for you, so why not do the same when it comes to home insurance?
How to choose the right home insurance in San Francisco can be a bit complicated, since housing prices have soared in recent years and people are often wondering when the next big earthquake is going to hit. Home owners want to make sure that the value of their home is covered in the event of any major disaster or emergency, but they also don’t want to get gouged with paying high insurance premiums. It’s all very risk versus reward and it can be tricky to navigate, especially in an expensive city like San Francisco.
As a top real estate agent and team leader at SFhotlist Team Keller Williams San Francisco, it’s my job to help home buyers make the right decisions. A good real estate agent will walk you through every step of the home buying process, even after the sale closes. This is why we reached out to insurance agent Joe Freund from State Farm to get the inside scoop on purchasing home insurance in San Francisco. The following seven factors will help you choose the home insurance that’s right for you.
The true value of your home isn’t necessarily what you paid for it. According to Joe Freund, an insurance agent at State Farm, many first time buyers make the mistake of thinking they need to insure for the market value of their home, but you don’t need to insure the land, just the structure. Even in a city like San Francisco, where the yard space tends to be minimal, the value of your home will still be less than its sales price once you subtract the value of the land from the overall cost.
Once you determine the true value of your home, it’s recommended to get replacement insurance, especially considering that the values of houses in San Francisco are so high. Joe Freund says, "When choosing a replacement cost for your new home, there’s not an exact science to determine that, so we use a real estate appraisal or a contractor’s estimate. The average cost to rebuild per square foot in San Francisco is between $450-$700. We use the appraisals at time of purchase as a general tool and State Farm also has an internal tool based on the kind of materials used for the home."
Many people think “it will never happen to me,” until it does. It may have been a while since San Francisco has seen a big earthquake, but the city is due for one soon. At any rate, if you plan on staying in your home for the long haul, chances are that it will receive at least some damage from earthquakes. The good news is that earthquake insurance rates have decreased over the past couple of years and there are more options and flexibility for owners to pick the coverage they want.
Also be aware that all insurance companies in San Francisco are required to offer earthquake insurance. Joe Freund points out that people purchase homes in cash in San Francisco on a daily basis. Buying a home with cash would result in a big loss if there were an earthquake and the home wasn't insured. So while earthquake insurance will increase your premium, it could be worth the expense in the long-term.
A good way to determine the types of problems you could potentially encounter with your new home is to know the insurance claim history of the home’s previous owners. When purchasing a new home, ask the seller to provide the insurance claims history. The reports will cover things like fires and floods and will make you aware of unseen problems. Previous claims on the home might even make it more difficult or expensive to get home insurance, so knowing the claims history is also a good way to be financially prepared.
Many people don’t give their insurance claims policies a thorough read and mistakenly assume that things like earthquakes are covered. Make it your own policy to know your insurance policy inside and out. Is backup sewer and drain covered? What about earthquakes? It’s a good idea to get extra coverage for items not covered in your home insurance policy, especially liability insurance which will protect your assets in the case of a lawsuit. Insurance agent Joe Freund recommends a $1 million liability insurance policy for homes in San Francisco. It’s better to have coverage than to risk paying out of pocket, especially in a city like San Francisco where the average price for a home is around $1 million.
Location matters. In other parts of the country, it may be wiser to go with higher premiums and lower deductibles, but not in San Francisco. In other words, if you can afford a home San Francisco, you can afford the deductible. Joe Freund points out that most insurers are handling smaller claims for maintaining your home, not larger repairs. This means that going with higher deductibles (lower premiums) specifically in San Francisco will help save on insurance costs.
There are differences between captive agents, like Joe Freund, and insurance brokers. The advantage of purchasing home insurance in San Francisco through a captive agent is that they provide an understanding of the individual rather than just insuring the home. Captive agents make it their job to understand your unique situation and insure your home accordingly. Also be aware that each insurance company will have different polices, such as the discount State Farm offers for having a reporting burglary alarm system.
The advantage of an insurance broker is that they can broker out to different carriers. This is beneficial if you have needs that are not met by one insurance company, but keep in mind that brokerage fees will apply.
Home insurance in San Francisco typically takes up to two days to process and up to ten days if the home is valued at over $2 million. Once you’ve secured home insurance, there are still some things to be aware of. Joe Freund recommends maintaining a good claims history and to remember that the first year’s premium is usually paid out of the escrow account. Thereafter, home insurance can be paid as part of a mortgage or set up as a payment plan with the insurance company.
Lastly, as is currently often the case in San Francisco, if you are planning on renting out your home in the future, you will need to inform your insurance company when the change happens and have your home owners insurance transferred to a rental dwelling policy.
Are you looking to purchase a home in San Francisco? Reach out to Danielle Lazier :: SFhotlist Team Keller Williams San Francisco and let us know what you’re looking for.
Special thanks to Joe Freund from State Farm Agency
Joe is an insurance consultant specializing in helping individuals to create a custom insurance plan that provides protection, security and longevity. Joe educates his policyholders about the potential risks we face in owning or renting a home, driving a car or owning a small business. Joe provides a detailed analysis of an individual’s unique needs and offers short and long term solutions to assist his clients to attain their goals, realize their dreams and leave a legacy for those they left behind. Learn more at www.joefreund.com
