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Home-Buying Process:
Insurance

Objectives for this Lesson:

* Include in partcipant's packet.

Resources for this Lesson:
Key Points For Educator: What to Say For Learner:
Slide #1: Insurance
Insurance Introduce yourself. Participant Introductions
Slide #2: Objective:
  • Define Homeowners Insurance
  • Discuss the Stability of Insurance Companies
  • Determine the Cost, Coverage and Services Provided by Homeowners Insurance
Explain: By the end of this session, you will be able to define homeowners insurance, discuss the stability of insurance companies, and determine the cost, coverage and services provided by homeowners insurance.
Question: What is homeowners insurance? Participant response.
Slide #3: Homeowners Insurance
  • Necessary purchase before you can close on your house
  • Protects the homeowner from "casualty" (losses or damage to the home or personal property) and from "liability" (damages to other people or property)
  • Required by lenders and usually included in the monthly mortgage payment
 Explain: Homeowners insurance is a necessary purchase before you can close on your house.
Homeowners insurance protects the homeowner from "casualty" (losses or damage to the home or personal property) and from "liability" (damages to other people or property).
Homeowners insurance is required by the lender and is usually included in the monthly mortgage payment.
Slide #4: Homeowners Insurance
Good Coverage Takes Preparation:
  • Check your credit rating.
  • Check your filing history on home insurance claims.
 Explain: Many people spend months looking for a house but spend very little time selecting insurance. To get the best coverage at the lowest rate, you will need to begin by preparing for your home insurance purchase even before you start looking for a house.
First, check you credit rating. Good credit not only helps you get a lower interest rate on your mortgage, but also can save you money on your home insurance policy.
Second, if you owned a home previously, check your filing history on home insurance claims. The better your claim report, the less you may pay for insurance. You can obtain your free filing history on home insurance claims by requesting a CLUE Report (Comprehensive Loss Underwriting Exchange Report) online at www.choicetrust.com.
Transition Statement: Knowing your credit rating and well as your record on your CLUE report may help you in finding the best insurance policy to meet your needs.
Slide #5: Homeowners Insurance
Considerations When Purchasing:
  • Stability of the Insurance Company
  • Cost of the Insurance Policy
  • Services Provided by the Insurance Company
 Explain: Some things you need to consider when choosing an insurance policy are the stability of the insurance company, the cost of the insurance policy and the service provided.
Question: Have any of you ever had a bad experience with an insurance company (not just home insurance - health, car, dental, etc.)?
Share with us your experience.
From your experience, what do you think is important when looking for insurance?
Instructor Note: Create a list of qualities discussed by participants.
Transition Statement: These are excellent qualities and can be very important when looking for home insurance. Let's discuss the stability of insurance companies and why it is important.
 Discussion: Participants share their experiences in dealing with insurance companies.
Allow students to suggest qualities they feel are important for insurance companies to have.
Examples of “Qualities”:
Accessible customer service
Willingness to pay claims
Affordable
Dual language service
Slide #6: Stability of Insurance Companies
Check a company's financial rating in the public library or online
Many insurance companies list their ratings in their companies' information.
Lenders usually have a certain rating requirement that insurance companies must meet.		 Explain: To make sure the company you buy from is financially stable, check its financial rating. The higher the rating, the stronger they are and better prepared to be there if a real disaster strikes.
A.M. Best Company, Inc. and Standard & Poor's Insurance Ratings Services are two of several companies that rate insurance companies' strengths. Their publications are available at the public library or online.
Choose a company that has a higher rating on the scale used by the rating company. For instance, A.M. Best Company uses the rating scale between A++ to F-, so you would want to choose a company with a rating between an A- to A++.
Many insurance companies list their ratings in their companies' information.
Mortgage lenders usually require customers to work with an insurance company that meets certain requirements.
Transition Statement: Not only is it important to find a stable insurance company, but it is also important to find the company that provides the best coverage at the lowest cost.
Slide #7: Cost and Coverage of Insurance
Explain: It pays to shop around and get at least three price quotes from companies and agents. When trying to get the right insurance coverage at the lowest price, you should consider these three suggestions:
  • Take the highest deductible you can afford.
 Take the highest deductible you can afford.
The deductible is the amount of the loss which you will be responsible for paying before benefits from the insurance company will be paid. You may choose a higher deductible to lower your premium. Since most people file a claim only every eight to ten years, you will save money over time and preserve your insurance for when it's really needed. However, in your spending plan, you should set aside the deductible as part of your emergency fund in a savings account.
  • Ask about available discounts
 Ask about available discounts.
Some policies offer multi-policy plans (house, car or other policies with the same company), discounts if you have smoke detectors, fire extinguishers, sprinkler systems, burglar and fire alarms that alert an outside service, and other safety devices. You may also qualify for a retiree or long-time policy holder plan.
Get enough coverage to:
  • Completely rebuild the house if destroyed.
  • Replace everything in it.
  • Protect yourself by including liability.
 Get enough insurance.
Take the time to properly insure your house. Make sure that you have enough coverage to:
  • Completely rebuild the house in the event it is destroyed by fire or other insured disaster
  • Replace everything in it
  • Protect yourself by including liability insurance in case someone is injured on your property and sues you
Slide #8: Cost and Coverage
Additional coverage for:
  • Replacement cost coverage for possessions
  • Extended or guaranteed replacement cost coverage for the structure
  • Building code upgrades
  • Sewer and drain back-ups
  • Inflation-guard
  • Umbrella coverage for a pool or other high-risk items
  • Special riders for jewelry, collectibles and expensive items
 Explain: You may choose to ask about additional coverage in your homeowners insurance policy. Some things to consider include:
Instructor Note: Highlight additional coverage considerations on Slide #8. Transition Statement: There are some risks that are not covered in home insurance policies, such as floods, earthquakes and windstorms. To cover damages from these risks, you must purchase additional insurance.
Let's discuss these additional policies.
Slide #9: Flood, Windstorm and Earthquake Risk
Flood Insurance
  • Provided by National Flood Insurance Program
  • Flood Hazard Zones require Flood Insurance
 Explain: In New Mexico, rainfall usually does not occur in amounts that cause flooding; however, floods can occur. Flood insurance is available through private insurance agents, but the insurance is funded by the Federal Emergency Management Administration, which administers the National Flood Insurance Program.
When you buy property, the realtor can check with the city or county government to determine if the property is within a flood hazard boundary and whether you need to purchase flood insurance.
Windstorm and Hail Insurance
  • Included in most policies
  • Deductible varies due to location and susceptibility
 Certain areas of New Mexico are more susceptible than others to windstorm and hail damage. Windstorm and hail damage coverage is usually included in the most common insurance policies; however, depending on the location and susceptibility of your house, the deductible can vary.
Earthquake Insurance
  • Expensive
  • High deducible
 Private insurance companies offer earthquake insurance. If you live in an area where there are earthquakes, coverage is available through state programs, as well as the private market. It can be expensive and comes with a high deductible.
Depending on where you live and what your risks are, you may want to consider purchasing these additional insurance policies.
Transition Statement: No matter what coverage you are looking for in an insurance policy, remember that it pays to shop around.
Slide #10: Customer Service
Explain: The last thing you want to consider is a company whose representatives will answer your questions and handle your claims fairly, efficiently and quickly.
You can get an idea of customer service satisfaction by talking to other customers who have used a particular company or agent.
Also, make sure the agent will be easy to reach if you have a question or need to file a claim. Call the companies you are considering and talk to a customer service representative.
Finally, there are several groups that provide valuable information for insurance customers. Nationally, the Insurance Information Institute (I.I.I.) works to improve the public understanding of insurance -- what it does and how it works. Information is available via their website at http://www.iii.org. At the state level, the New Mexico Insurance Division (NMID) is responsible for regulating the business of insurance in accordance with the New Mexico Insurance Code. Contact the Insurance Division at http://www.nmprc.state.nm.us/
insurance/inshm.htm.
Activity: Use this Insurance Comparison Work Sheet to help you compare different coverage options as you shop for homeowners insurance. Activity: Distribute the Insurance Comparison Work Sheet
Slide #11: Summary
  • Defined Homeowners Insurance
  • Discussed the Stability of Insurance Companies
  • Determined the Cost, Coverage and Services Provided by Homeowners Insurance
 Lesson Summary: Congratulations! You have completed Insurance in this Home Buying Process series of classes.
Today we have defined homeowners insurance, discussed the stability of insurance companies and determined the cost, coverage and services provided by these policies.
Question: Are there any questions? Participant questions.

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