5-18-18: Should I change my insurance company when buying a home?

Question of the week: Should I change my insurance company for my cars when I get my homeowners insurance?

 

Answer: It depends, are you using a different insurance company for your home than for your cars?

 

When buying a new home with a mortgage, or refinancing your existing mortgage, you will need to

provide proof of insurance to the lender showing sufficient coverage to protect the lender’s interest

in the collateral, i.e. your home. This is a good opportunity to do an insurance check-up, is the

insurance you currently have the combination of best protection and value?

 

When getting an insurance quote for homeowner’s coverage I strongly encourage you to have

whoever is providing the quote to also provide a quote including auto coverage and any other

policies you may have. Typically, the more policies you have with a company the better pricing you

will get as they bundle products and offer discounts. Asking for just a homeowner’s quote may be

leaving a discount on the table.

 

As for splitting your coverage between different carriers, I do not recommend it for several

reasons. First, when there are split policies I find the auto coverage is generally with a “discount”

carrier that sells low premiums but do not go into details on the coverage as it is usually the most

basic coverage needed. If you are in an accident will your discount policy cover medical costs, is

so how much? What about replacement parts, new or used/refurbished? Liability protection just

the minimum leaving you exposed to higher costs if they exceed your coverage? Second, if you

bundle your coverages you may find the cost difference for your total insurance costs are not that

different, and if you are with a major carrier will often have more robust coverage and protection.

 

A third reason came up recently in a conversation with friend Marilyn, who is a real estate agent.

She came across a property that had a significant fire, making the home uninhabitable until

repaired, that had been vacant for some time. She made some inquiries and learned that the fire

had started in the garage and there was some dispute as to the cause and that the car may have

been the cause. The property owner had one insurer for the car and another for the home. The

two insurance companies were in dispute as to which policy should cover the damage and as a

result the property owner was without reimbursement for damages or funds for reconstruction. He

had to move out of the property, still needs to make payments for his mortgage, taxes and

homeowners premium. The dispute can go on for several more months, causing significant

financial harm to the insured homeowner. Had he used the same company for both home and auto

the claim would have been processed not long after the fire and he would be able to move forward

with reconstruction to make the property habitable.

 

We find a lot of our clients are very loyal to their insurance companies. We certainly appreciate

loyalty; however, it is not a bad idea to check occasionally to see if your loyalty is being rewarded

compared to the marketplace. There are some insurers in the market that when we see our clients

using them we strongly encourage them to make a few calls to compare rates and coverage as we

know these companies are generally amongst the highest in the area for home, and generally

auto/bundled, coverage. However, we are also often told by the client they will stick with their

current carrier because they have been with them for so long.

 

Insurance quotes are free, so if you are having to change your homeowner’s policy because of a

refinance, or because you are purchasing a new home, that is a great reason to get a few

coverage quotes and see if a change in insurer is a good move for you and your family.

If you currently have different insurers for your home and autos I encourage you to spend some

time to explore having all your coverage with the same company.

 

Have a question? Ask me!

 

Perhaps reflecting the increase in mortgage rates, local housing markets showed a bit of

slowing in April. According to data released by the California Association of realtors Los Angeles

County the median home price declined 0.1% from March ($528,550 from $528,980) with 2.9%

more units sold in April from the prior month. Year over year the number of sales are flat, up

0.1%; however, the median price is up 10.1% from a year ago.* In neighboring Orange County

the April median price dropped 0.8% below March’s (from $824,450 to April’s median of

$818,000). The OC also had an increase in units sold from March, up 1.9%. Year to year the

median price is up 5.5% and the number of units is up 1.1%. A slow-down in housing, or slower

growth in the market, is generally interest rate friendly as it reflects a balance coming to the

market between supply, number of houses on the market, and demand, number of buyers writing

offers.

 

To address the asterisk. Last April the median price in Los Angeles County was $480,500 and

the 30 year fixed rate mortgage with 20% down to purchase the median home was 3.875%; today

the median price is $528,550 and the rate is 4.625%. The difference by waiting one year to

purchase the median home is $9,610 in down payment and $366 per month in your mortgage

payment. As well, there is the loss of $48,000 in gross equity from the price change.

 

Begs the question, are we at the top of the market? In a discussion this morning with real estate

agent Julaine, we both feel that with the lack of inventory on the market prices still have upward

pressure as demand still exceeds demand. What may slow down price increases is the sharp

increase in mortgage rates thus far in 2018. Not “slow down” not “cause decline.”

 

Rates for Friday May 18, 2018: Today was the best day this week for mortgage rates with

bonds rallying causing a drop from yesterday. Had we not seen the rally today rates would be

even higher as rates spiked earlier in the week. The primary cause for the rate increases has been

the over supply of bonds in the long-term rate markets as the Federal Reserve sells off its

inventory of U.S. Treasury debt and mortgage holdings. This sell-off was announced last year and

at the time we indicated it would cause rates to increase so the increase in this period is not a

surprise. The Fed will continue its unwinding through the year so there is more expectations for

higher rates than lower rates. Lock your rate as soon as you can.

 

FIXED RATE MORTGAGES AT COST OF 1.25 POINTS LOCKED FOR 45 DAYS:

 

30 year conforming                             4.625%            Up 0.125%

30 year high-balance conforming        4.875%            Up 0.25%

Please note that these are base rates and adjustments may be added for condominiums, refinances, credit scores, loan

to value, no impound account and period rate is locked. Rates are based on 20% down with 740 FICO score for purchase

mortgages.

 

Anyone staying up/waking up for the Royal Wedding? My sister, who generally goes to bed earlier

than I do-and I am not a night person-said she is staying up to watch. I asked why since everyone

has a DVR today and you can watch in the morning with your coffee and toast. She said, “you

don’t get it.” Nope, I don’t. The last, and perhaps only, British Royal event I watched live was

Princess Diane’s funeral, and that was because I was laid up with a bad back.

For those who like the Royal events I hope you enjoy the wedding, and may Prince Harry and

Princess Meghan have many happy years together and are able to manage the British tabloid

press.

 

Have a great week,

 

Dennis