Ep #18: Homeowners Insurance: Do You Need It?

Welcome to Your Real Estate Connection in Westchester, a show for people looking to buy or sell homes in the Northern Westchester County area. Join local real estate expert Harriet Libov as she shares her professional advice on the local real estate market, connects you with knowledgeable community residents, and gives you helpful insights behind the home buying and selling process. Now, let’s dive into today’s episode.

Today’s episode will cover homeowners insurance and getting the right coverage. Do you need homeowners insurance? Yes. And if so, when in the process do you buy it?

There’s no law that requires homeowners insurance, but mortgage lenders do require that you get insurance coverage before they will agree to finance your home purchase. Homeowners insurance protects the lender’s investment by providing money to repair or rebuild your home if it is damaged by a fire, storm, tornado, or some other catastrophic event.

For starters, it covers your house; garage; shed after damage from a covered loss; your stuff—your possessions, from furniture to your silver and China; and a place to stay.

Insurance may cover additional living spaces, such as a hotel or lodging while your home is being fixed or rebuilt, as well as legal bills. If someone slips on your walkway, for example, it will cover medical bills, legal costs, and potential corridor wards to a dollar limit determined in the policy.

Generally, a policy does not include earthquakes or floods, so depending on where you live, you may want or need that extra coverage. And if you have valuable art or jewelry, then you may want more protection for that as well.

So much to know and understand. And if this is your first home, you really need guidance from someone to help you decide to make decisions that are right for you.

Today, we will talk to Ken Fuirst, the owner of Levitt-Fuirst Insurance. He lives in Chappaqua and is a fan of the podcast. If you have questions on the best way to protect your home and assets, I think you will enjoy this episode. So, let’s settle in and begin the conversation.

If you have listened to prior episodes, you know that I believe in working with experts, whether it’s choosing the location where you want to live and an agent to work with, your inspector, your attorney, your mortgage professional… Finding out what the right path is for you is always the best coming from an expert in that field.

As a result, I have to make a lot of referrals in my business, and I get a lot of referrals from the network I have created around me. I’m rarely asked about homeowners insurance referrals, and that’s because that piece of the puzzle happens after contracts are signed.

And a buyer is hard at work with their legal counsel or mortgage professional, providing paperwork to get to the closing table. I, therefore, assume that my clients get their insurer either from their attorney or a lender or from family or friends.

But when I started this podcast, I did a local mailing to towns in Northern Westchester. Ken Fuirst, of Levitt-Fuirst Insurance, reached out to me to say he had listened and enjoyed the podcast and to say that he would love to share his experience and thoughts about choosing homeowners insurance.

Ken grew up in Westchester and has lived in Chappaqua for the last 27 years. His firm is a 70-person firm, which is the largest privately owned insurance broker in Westchester. The firm specializes in insuring homes over a million dollars. They are one of Chubb’s largest agents in the country and also represent Pure, Cincinnati, Berkley, AIG, and Travelers.

Fast forward almost a year, I have covered many topics, and I’m now focusing on the pieces of the puzzle once a buyer finds their home. The inspection was our last episode, and insurance is today.

So, we’ll be talking to Ken. And he likes to distinguish between homes valued under a million, and what is essential for that homeowner, versus homes valued above a million, and more premium coverage for that homeowner.

That’s his prime customer. Both ranges are prevalent in the communities where I sell real estate, so I am interested to hear more about how Ken determines and advises different clients based on the value of their home.

Full disclosure: my husband is the insurance person in our family and always has been, since it’s more in his realm of expertise. So, this is a topic I need to learn more about.

I’m going to do more of a Q&A format on this episode so we can learn together. So, let’s speak to Ken and get the skinny directly from him today.

—

Harriet Libov: Hi, Ken.

Ken Fuirst: Morning, Harriet. Thanks for inviting me.

Harriet: Oh, no. I appreciate you joining me today. As we’ve talked about, insurance is not my area of expertise and there’s so much for a homeowner to understand.

If someone doesn’t do their homework, unfortunately, they can learn the hard way when a problem strikes, and they find out they’re not covered. So, there are so many different types of policies and needs depending on the value of your home and the assets that you have in the interior of your home and where they’re located.

So, where do you begin when you speak with someone looking to get coverage on their new home? I think this is important, not only for first-time homebuyers, but anyone who owns a home.

Ken: Correct. And usually what we start with is we try to take a step back and say, “Let’s focus on the big picture. Where do you want to spend your insurance dollars?” A house—especially our niche is houses over a million dollars—it’s usually a major asset of people, so we say, “Focus on the big picture. Catastrophic exposures that you might have.”

Most of our clients could afford if they have a little water damage, a roof leak for a few thousand dollars. They could afford to and they should take care of that themselves. But if there’s something catastrophic that happens—a fire, a major water pipe breaks, a lawsuit—that’s where they need to be protected and that’s where they want to focus.

So, we usually take a step back and say, “Let’s look at your biggest exposures.” And so, as I said, the physical structure of the house. You want to make sure that your house is properly insured to the proper limit. And the better-quality companies will give you what’s called “guaranteed replacement costs,” so no matter what it costs to rebuild that house, these carriers will pay for it.

So really, the first thing you do is talk to your agent about how much to insure this house for, and in case there’s a total loss—and as crazy as it sounds, we’ve had three total losses in Armonk, Chappaqua in the last 10 years. Fortunately, it’s not a frequent thing, but it can happen.

So, your number-one thing is to talk to your agent about how much to insure the house for and to make sure you have guaranteed replacement costs on it.

Harriet: Right.

Ken: And then the other catastrophic exposure is lawsuits. So, you want to make sure you have what’s called an “umbrella policy” to protect you in case someone sues you.

Harriet: Right. Right. Okay, so that’s, somebody falls on your property… I actually think about that a lot when I’m listing homes.

For example, I was showing a home with a buyer, and they had giant holes from doing fill in the backyard. And we were walking the property, and somebody really could have hurt themselves. And I mentioned to the listing agent, because I don’t think the homeowner even realized it was there. And yet, it was something that they needed to know.

Ken: Harriet, these are great concerns. And the good thing about an umbrella policy is it covers not only if someone trips and falls on your property, making a delivery or… You know, it covers if a kid falls off a swing set… Your children have friends over and someone gets hurt…

But an umbrella covers you over your whole life, so if you’re out skiing and you ski into someone, or you hit someone with a golf ball, you bike into someone…

Even if you get into a serious car accident, because your car insurance only gives you a few hundred thousand dollars of protection. But if you take your eye off the road for a second and—God forbid—you cause a bad car accident and you get sued for millions of dollars, this umbrella policy—which is very inexpensive—covers you over all that. All those aspects of your life.

Harriet: Very interesting. I did not know that. One thing I learned when I renovated my last home was, when I increased the value, I believe it was my architect said, “Okay, you now have a bigger home and a more expensive home. You should speak to your insurance person and upgrade your insurance.”

Do you find that most people realize this? And how often do you suggest meeting with your insurance professional to just discuss any changes that have happened?

Ken: Unfortunately, many people forget to alert us of changes. So, we send out a letter at the beginning of every year to remind people.

But if you’ve done a major addition to your house, you should definitely communicate with your insurance broker about that. If you’ve put in new alarms, put in a backup generator, did other safety devices, you should tell your insurance broker about that.

Or, you know, quite a few people when they’re doing their estate planning, they change the name of their home. They put it in an LLC or a trust. These are important factors that you need to alert your broker about.

Harriet: Okay. And I know an alarm system brings the price of your insurance down a little bit. Are there any other things that do that?

Ken: Well, the key word there that you said is “a little bit,” which is accurate. It costs more to put the alarm and the other—the generator and the safety features—into your house.

But you will get a savings on your insurance and it’s important to put these devices in. A permanent backup generator, as we’ve all known through these storms, is a lifesaver to be able to keep your heat on during the winter, keep your sump pumps running during a bad storm… So, you will get a credit on your home, but it won’t overcome the additional costs for a $15,000 backup generator.

The latest safety device that people are putting in is called a water flow shutoff alarm. And water, it turns out, is the number-one cause of loss [in 12:03] people’s homes.

Their toilet overflows and no one realizes it and it just flows for hours. Or the bathtub. Or you’re away for the weekend and your pipe burst. Or the hose to the refrigerator ice machine snaps off and water’s just running and running and running for hours on end.

So, over the last couple of years, devices have been created that go onto your water line leading into your house. You put it in your basement. It costs a few thousand dollars.

But it sets off an alarm, because it’s a smart system and it senses, “Wait a second. Water shouldn’t be flowing. This is an unusual time of day.” Or “It’s flowing for too long of a period.” And it sets off an alarm, and if you don’t turn off that alarm, it turns off your water so that you don’t have water just flowing and flowing and flowing and ruining your house.

Harriet: All right. I want one of those. Who installs that?

Ken: Well, you call your plumber about that. Unfortunately, a lot of plumbers are not comfortable with it. It’s such a newer technology. So, you might have to ask around.

Chubb, who’s the largest insurer of high-quality homes—on their website, if you go to Chubb.com/Water, they have a lot of information. And there’s even an 800 number there that you could call, and they’ll just answer questions about how to put in a water flow alarm. And they could refer you to plumbers that can do that.

Harriet: That is valuable information. Thank you so much. I think that’s incredible.

The other thing is that when there’s an occurrence of a hurricane, that groundwater is not covered—and that’s always a surprise because people just assume any kind of water is covered in their house, and then they find out that, in a rare situation, that it’s not. Does this water flow thing help with that at all?

Ken: This water flow thing does not help in that because, as you said, what you’re referring to is the groundwater during heavy rainstorms…

Harriet: Okay.

Ken: …Which is not as infrequent as you mentioned. Just in the last two months, we’ve had Ida and then we had another major rainstorm recently and quite a bit of flooding. People think, “Oh, I don’t live in a flood zone. I don’t have to worry about this.” But 25% of water claims are in houses that are not in flood zones.

And as you said, flood groundwater is excluded off of everyone’s homeowners policy. So, if your land—if your house is located on a piece of property that you think water flows towards it, not away from it, and it’s possible that a major rainstorm could just build up water around your house and flood your first floor or your basement, you need to talk to your broker about getting flood insurance.

But you need to really dive into it because most of your stuff in your basement is not even covered when you do get flood insurance. So, you need to speak to them to learn what is covered and what is not covered with flood insurance.

Harriet: Okay. And flood insurance is expensive. I know that in the 20 years that I’ve been selling real estate, that the requirements have changed as to who needs it. So, what can you share with me about that in the floodplains and how they’ve changed and what’s been designated, etc.?

Ken: So, the US government has expanded the flood maps, especially as more and more of these storms are overflowing streams and brooks and little ponds and so forth. So, you might be shocked to find that your house is in a flood zone.

The majority of houses in Armonk and Chappaqua and Bedford are not in flood zones, and then the basic flood policy—which, again, does not cover much in the basement—is not very expensive. It’s just a few hundred dollars.

If you are in a flood zone, what you do is you speak to your local engineer and you get what’s called an “elevation certificate,” which is not very expensive to do. An elevation certificate will diagram how far your house is above the local water. Maybe it’s up on… The foundation’s a couple feet high and the basement’s raised and so forth. And depending on where your house is located on its foundation will determine the rates for that flood insurance if you’re in a flood zone.

But if you’re not in a flood zone—and it takes 10 seconds for your insurance broker to look it up online—if you’re not in a flood zone, it’s very inexpensive to get basic flood insurance.

Harriet: It is inexpensive. Okay, because I find that that’s a responsibility as a buyer’s agent that we, as agents, have gotten over the year that people don’t like to find out after the fact—after they’ve gone into contract—that they need flood insurance, and they didn’t know it. So, for a house that is more in a floodplain, that maybe wasn’t five, 10 years ago, what is the cost of flood insurance?

Ken: It could be a couple thousand dollars. It varies. The flood coverage, again, is pretty… Everyone focused, especially in Westchester, on their basement, so there’s not much coverage there. But if you’re with a better-quality company like Chubb, you can buy coverage for your contents, the finished basement, and it might be a few thousand dollars if your house is just a normal house. If it’s right next to the Long Island Sound or you’re right next to a lake in Armonk, it could be more.

But it’s something—what we do for our clients when they’re looking to buy a house, we run the floodplain map to let them know if their house is in a flood zone. We also do what’s called a “clue report” to see if that house has had any fire, water claims in the recent past so they know what [type 18:12] of house they’re getting themselves into.

Harriet: That’s something else, again, in my 20 years—in most recent years, after somebody goes into contract, they find out, I guess, when they go to purchase insurance, what has happened in the house and the claims and “Why wasn’t it disclosed?” and all of that. So, that must be about that clue report that you’re talking about.

So, Chubb is really the only one that offers that extra basement coverage, but I think that’s a very important thing for people to know, because Chubb is really—correct me if I’m wrong—the most expensive, but the benefits that you get if you do have a problem are the best. Would you say that’s correct?

Ken: You get what you pay for with insurance. Chubb is not the only carrier that offers the flood insurance in the basement.

Harriet: Okay.

Ken: And there are basically four major carriers that specialize in houses over a million dollars. Chubb is, by far, the largest, and then there are carriers like Pure, Cincinnati, and Berkley. Those are probably the four key players in this market.

And they’re not that much more expensive than your standard carriers because those companies gear their policies. Their clients usually take higher deductibles and gear up their policies to focus on more of the catastrophic exposures. They could afford a couple thousand dollars of little damage.

So, it’s not really that much more expensive when you do a side-by-side comparison. But those four carriers offer substantially broader coverages than you get on your standard policy.

People think all homeowners policies are the same. But they’re not. And those four carriers give you true guaranteed replacement costs. Which means, your house burns down or you have a major loss, they’ll pay whatever it costs to rebuild your house. And just now, over this last year, that’s a major factor, because, as you know, the cost of lumber went up 70%.

Harriet: Right.

Ken: The cost to get appliances went up substantially. The cost to get contractors went up substantially. And to rent another house in this market while you’re doing a construction went up substantially.

So, the better-quality companies—there are no limits on that. They’ll pay so that you get to rebuild what you need to rebuild. And whatever that cost is—and those costs obviously keep going up. Whereas your standard company gives you a limit—there’s usually some flexibility; they’ll give you 25% over that limit—but there’s a cap on it. And you really have to dive into that.

And the better-quality companies also allow you to cash out. Your house burns down and you want to rebuild, that’s a two- to three-year project. By the time you catch your breath, get an architect to design that house, then get it approved by the town, then bid it out, and then bill, can be two to three years.

Most people don’t want to go through that. Their kids are in school. They just want to go on with their lives. Those better-quality companies will just hand you the money and say, “Go buy another house.”

And we just have that house in Chattaqua that burned down two years ago. Within three months, they took the money, they sold their property, and they bought a beautiful new house in Greenwich. And within three months, they were back to life.

Harriet: Right.

Ken: And there are a bunch of other coverages—on the jewelry… The coverages on those four better-quality companies is much broader. They’ll pay—if you buy a $30,000 ring and then you lose it and it turns out to be $45,000 to replace it, those carriers give you 150% of what you insure your jewelry for. They give you broader coverages on your cars. You get what you pay for with the insurance. But it’s not as scary as you’d think.

Harriet: Interesting. So, listening to all this, I cannot imagine there is a scenario where you would not get homeowners insurance. Is that correct?

Ken: Ironically, the only client that—and I’ve been doing this 28 years—the only client that I’ve had say, “I think I might go without insurance,” was just this summer, and they bout a $32 million house on Long Island. But I don’t know anyone else.

You take a high deductible. You could take a $10,000, $25,000, $50,000 deductible on your home if you’re not worried about it. But for catastrophic exposure, you should have a homeowners policy. It’s not that expensive to protect your home.

Harriet: Right.

Ken: This is a major asset.

Harriet: And you can build it… If you don’t want to be paying out of pocket, people build it into their mortgage payment, correct?

Ken: Correct.

Harriet: Right. So, that it just is out of sight, out of mind, and gets taken care of every month.

Okay, well, thank you so much. Thank you for contacting me. It’s nice to know people read things that come in the mail and that you listen to the podcast, so I really appreciate you reaching out. You’re such an expert in the field, so this is really perfect. So, thanks again and have a wonderful holiday season. Anything else you want to share with me?

Ken: Well, if people have more questions or want to learn about these differences in coverages, during COVID, we created four very short videos that are on the Levitt-Fuirst website under “Personal Insurance.” You’ll see four educational videos.

They’re each two or three minutes long. And they kind of explain the differences between your standard home insurance and the better-quality ones—the differences in the umbrella policy, the auto, the jewelry… So, if you want to get educated…

Harriet: No, that’s great. And actually, maybe we can post that when this gets posted on the platform. So, thank you for sharing that. I think that’s great, because if somebody listens, then they can watch them, and there you go. Okay. All right.

Ken: Thank you, Harriet.

Harriet: Okay.

Ken: Thank you very much.

Harriet: Have a great day and thank you for all of your expertise.

—

Thanks so much for listening today. I hope you learned something valuable by hearing Ken talk about homeowners insurance. The takeaway for a new buyer is to do your homework and learn what’s covered in case of a catastrophic disaster of any kind.

If you are a long-time homeowner, think about what insurance you currently have. And if you’ve made improvements or refurnished your home, you may want to upgrade. I know I’m going to check out that water flow shutoff alarm. I thought that was priceless information.

Please reach out to me if there’s a topic you would like to hear more about. I’ve loved the feedback that I’ve received from many of you, and I want this to be about topics that are truly interesting to you as a potential seller or buyer. That’s all for now. Have a great day.

If you enjoyed today’s show and don’t want to miss an episode, you can subscribe on Apple Podcasts, Spotify, or wherever you listen to podcasts.

And if you haven’t already, I would really appreciate it if you would leave a rating and review to let me know what you think and to help others find Your Real Estate Connection in Westchester.

It doesn’t have to be a five-star rating, although I sure hope you love the show. I want your honest feedback so I can create an awesome podcast that provides tons of value. Visit ConnectNorthofNYC.com for step-by-step instructions on how to subscribe, rate, and review.

Please share this show with anyone you know who may be looking to buy or sell homes in the area. See you next time.

Thanks for listening to Your Real Estate Connection in Westchester. If you want more information on the area or you’d like more info on local real estate, visit ConnectNorthofNYC.com. See you soon.