I Just Bought a House in West Des Moines. Who Can Get Me Homeowners Insurance Fast?

Mike Downer: Hello, everybody. I’m your host, Mike Downer, and welcome to Do You Want Cheap Insurance or Do You Want to Just Be Insured? This is brought to you by Absolute Insurance Agency. I’m here with Jeff Eastvold, the president, and his trusty right-hand man, Dan Bell, the vice president. How are we doing today, gentlemen?

Jeff Eastvold: Doing great.

Dan Bell: Doing awesome. How are you?

Mike Downer: I am doing great.

We’re going to be covering some timelines here, gentlemen. I know that buying a house is honestly the biggest purchase most people make in their lives. That’s probably true for 95 percent of the population. It’s our biggest thing.

When you get that home and you’re making such a huge investment in what will hopefully be your forever home, you want to protect it.

So let’s just say I bought a house in West Des Moines. We’re going to be talking about who can get me homeowners insurance fast. I want it quickly because I want to be covered.

Let’s jump right into this. Let’s say someone closes on a house in West Des Moines in ten days and has no homeowners policy. What happens now?

Dan Bell: Well, they’d better give us a call. That will be the first thing they need to do. Contact Absolute Insurance Agency here in Clive, and from there, we’re going to collect a lot of information and get that policy put together for them.

In a lot of cases, if someone is buying a house in ten days and has no previous insurance, that probably means they haven’t been a homeowner before.

Mike Downer: Correct.

Dan Bell: They’re going to have a lot of questions. They have no idea what they’re walking into, and they may not understand all the different variations and coverages that are out there. That’s where we’re grounded.

Now, granted, there is a timeline here. There’s a deadline that needs to be hit. But even in this scenario, we still want to go through everything and make sure the future homeowner’s biggest asset is covered to a point where they understand what is and is not covered.

There’s still an educational portion that has to happen with first-time homebuyers.

Mike Downer: You bet. So you’re able to handle that, which is really nice.

I saw you cringe a little bit when I asked that question, but if it’s one of those quick-close, ten-day deals, or if there are people in this world who procrastinate, which is just a fact of life, they might say, “Oh, I’d better do this,” or their mortgage company might be asking, “Where’s your homeowners policy?” Those are the scenarios where that would happen.

So let’s say I am that first-time homebuyer. Maybe I’m younger, or maybe I’m a procrastinator, and I come to you and say, “Oh shoot, I need to get this done quickly.” What do you need from me, the homebuyer, to be able to quote it?

Jeff Eastvold: Personal information, obviously. We’ll also need some details about the house. The roof year is a big factor. The newer the roof, the better the price and the more carriers are open to it.

We’ll look at whether the basement is finished or unfinished, the exterior of the house, and a lot of different underwriting factors.

Obviously, with the basement, people don’t always think about water backup from a sewer or drain. The time to find out that you don’t have that coverage is not when you have two inches of water in your basement and you’re sloshing around in your carpet.

So we try to take the extra time, especially with a first-time homebuyer, to go through a lot of these endorsements and options because they don’t know.

Mike Downer: Absolutely. I remember when we bought our house for the first time, I really had no idea. I just said, “Okay, the house is worth this much. I guess that’s the coverage.” I didn’t know.

Dan Bell: You get into scenarios, too, where the lender says, “Your insurance should run you about $100 a month.” So in the buyer’s mind, they’ve already been told it should run around $100 a month.

Well, that number is probably not accurate. That would be like me quoting an interest rate. I don’t have the authority or knowledge to say that. It’s just not in my wheelhouse.

Going back to what Jeff said, when we get this information, first-time homebuyers are looking at what it costs to buy the house versus what it costs to replace the house. That’s what matters. We want to know what it’s going to take to replace the house.

You have three different values on your house that, as a property owner, you should be aware of. You have your market value, which is what you can sell it for. You have your assessed value, which is what you’re taxed on. Those things are not always identical.

Mike Downer: They’re usually not even close.

Dan Bell: Right. The assessor would like it to be at market value, and we don’t want that.

For us, there’s only one real number that matters, and that’s replacement cost. We’re not here to sell your house. We’re not here to tax your house. We’re here to rebuild your house at your worst moment. That is what we have to do, and that is what we have to explain to the homeowner.

Sometimes they’ll purchase older homes where the cost to buy the house is actually less than the cost to rebuild the house.

Mike Downer: When I asked what you need from the homebuyer, what kind of documentation should they be prepared to give you? Again, this scenario is that whole ten- or twelve-day turnaround. What kind of documentation should that homeowner be prepared to bring in, fax, email, or send to you?

Dan Bell: The primary things we really need are personal information: name, date of birth, Social Security number, marital status, the names of the other titleholders on the house itself, occupations, and education level. All of this gets built into algorithms that produce rating factors.

Primarily, we’re going to pull a lot of information from public sources, like Zillow. A lot of times, there are disclaimers from the realtor, and we have to go through the fluff on that because it’s there to sell the house.

County assessor pages are also very valuable pieces of information for us. But we still need to address information that may not be listed there. For example, maybe something has been done to the house, such as a finished basement, but no permit was pulled. Or maybe there were changes to the deck. The assessor’s information is not necessarily adjusted annually.

The roof year is the number one documentation piece we would need. If it’s an older house and the roof was replaced in the last two or three years, either the seller disclosure would state that, or they may have copies of the roof invoice. We’ll need something to that effect because roofing doesn’t require a permit to be pulled, so it wouldn’t necessarily be noted on the county assessor pages.

Mike Downer: Perfect. That clears that up.

Jeff Eastvold: We also look at whether it’s a rated roof, hail impact-resistant, or if some carriers give a discount for UL 3 or UL 4. We try to get that information because it does make a difference.

Mike Downer: That makes sense.

Jeff Eastvold: It could save dollars a year. Sometimes that UL 4 or UL 3 discount will get bigger and bigger as the roof gets older. Over ten years, that can be a lot of money.

Mike Downer: That makes perfect sense. I do these podcasts with roofers, too, so I know that’s huge.

How much homeowners coverage does a West Des Moines buyer actually need? I know it’s a broad question, but give us the formula.

Jeff Eastvold: It’s the cost to rebuild their home.

We’ll go through a replacement cost estimator. It takes the square footage of the home, the year it was built, the features, the number of bathrooms, the exterior, and it calculates the cost to rebuild the house.

It’s the cost to build a new house with deductions for excavation, the basement foundation, the driveway, and running the sewer from the house to the street, because those things are still there.

If a tornado came and took the house away, the lot would still be there, the driveway would still be there, and the sewer would still be buried. We’re talking about rebuilding on that same land.

That’s where we get into problems with acreages or lake houses. The land may be worth a lot of money, but the land is not going anywhere.

Mike Downer: Right.

Jeff Eastvold: Think of it this way: building a house on a lake where someone paid $700,000 is the same as building it in town on a normal lot. They might have paid $300,000 in town, but the difference is because they’re paying for the land.

Dan Bell: It’s also a good idea to have these values reviewed periodically. When I started doing insurance back in 2005, anywhere between $120 and $150 per square foot was appropriate for most housing. Now you can’t build anything for $120 or $150 per square foot. You’re in the $250 to $325 range for most houses in this area.

It’s important to keep up with that and make sure your homeowners policy has an inflation guard built into it, and that the inflation guard is staying in lockstep with the actual cost of materials and labor in today’s world.

Mike Downer: That makes sense.

Let’s say I am a first-time homebuyer. What’s the biggest mistake first-time homebuyers in Iowa most often make when it comes to insurance?

Dan Bell: They worry about cost over coverage. That is the biggest mistake they make.

They don’t understand the coverage. There’s an old saying: if you don’t understand it, don’t buy it. They’re not understanding that there are carriers out there that will offer a stripped-down policy, and that stripped-down policy can have very negative impacts on the homeowner.

For instance, a lot of times, it could mean they don’t have replacement cost on their contents. Maybe the roof is still relatively new, but the policy reflects an actual cash value basis on the roof, a roof payment schedule, or something to that effect.

They might not have any endorsements that provide coverage for water in the basement from sump pump failure and things like that. These are big deals. When all they’re doing is looking at the bottom line in order to get the mortgage and get into the house, it can become highly problematic in the first couple of years when a claim presents itself and they’re not covered for it.

Jeff Eastvold: We also see people with really high deductibles, or the house is just underinsured.

I had someone whose house was hit by a tornado a few years ago. It was a two-story house, and they had nowhere near enough coverage to rebuild their home. They went from a two-story house to a modular home because they didn’t have enough coverage.

Dan Bell: The other agent was basing it off the market value of the home instead of the replacement cost.

Jeff Eastvold: Those are the people you see on TV who don’t have enough insurance. They’re buying the wrong policy, or they’re not buying a policy with 150 percent guaranteed replacement cost.

Mike Downer: When you were talking about deductibles, I think that was one of the biggest mistakes my wife and I made in the beginning. We saw that we could save a certain amount of money, and this was so long ago that I don’t remember the exact amount, but I do remember our deductible was higher than what we would have ever been able to afford.

But we did it to “save money.” Then we had a kitchen fire, and I ended up having to do a lot of the work myself because our deductible was so high. We got that switched right away, realizing that “saving money” ended up costing us a bunch.

Dan Bell: At least you could do the work yourself. There are other people who are not going to be in that scenario.

Mike Downer: Well, me and friends. I had friends come over, and I had to take the insurance check, go buy stuff, and do it.

It wasn’t a bad kitchen fire. It wasn’t devastating, but it was enough that I had to do a lot of it and not hire somebody to get it done the way I wanted because we didn’t have the money. We just didn’t.

Dan Bell: Fire is wild because the fire does a certain amount of damage, but then the smoke does a lot of damage. Then water can come into play, and that does a significant amount of damage.

Mike Downer: The fire didn’t ruin the fireman’s hose. I didn’t have to have the fire department, so it wasn’t one of those fires. It was a small kitchen fire, but that almost made it worse. It would have been better if it had been a huge fire because then I could have found a siding company to maybe do the work cheaper and try to get some of that done.

Since it was a small fire, there was only so much. I’m not going to get into dollar values here, but my deductible was bigger than what I wanted it to be because it wasn’t that much damage. My insurance check was fairly small because of my high deductible and because it was a small fire.

So I’m kind of on your side here. If these guys say, “Hey, you need this, and only do a $1,000 deductible,” don’t put a $5,000 deductible on your homeowners insurance. Take it from a guy who has already made that mistake. Listen to these guys. They know what they’re talking about.

Dan Bell: There’s a diminishing return on increasing that deductible. At some point, you look at it and say, “If I do a $1,000 deductible versus a $2,500 deductible, how much money am I saving? What are the chances of a claim? What’s my recoup period if I had a claim in the first three years? Does it make sense to have done that?”

Mike Downer: Right. The thing about this is, those numbers don’t matter if you don’t have that deductible amount in your checking account. I can pay a little bit over time, even if it’s more than that dollar amount. Making the payments is almost like interest. That’s fine.

Listen to these guys. I’m telling you, when they give you advice, if you don’t have that dollar amount at all times in your checking account, do what they tell you to do. That’s just my unsolicited opinion.

Jeff Eastvold: You also have problems if you don’t fix that damage. The insurance company is only going to give you so long to get things repaired.

Mike Downer: I had to send pictures.

Jeff Eastvold: Especially if you’re talking about the exterior of your home. If you have a hole in your roof and don’t have the money to cover the deductible, they’re not going to keep insuring a home with a big hole in the roof. Now you’re going to have water damage and more problems and claims.

Mike Downer: So when these guys are asking you to give an honest assessment of your financial stability, give them an honest assessment and do what they tell you. It’s going to be better that way.

Jeff Eastvold: One place we see a lot of people being underinsured is townhouses and condos, where there’s an association that insures the exterior. The homeowner or buyer is responsible for the inside, basically studs-in or drywall-in.

I just had one where someone bought a two-story condo and had $30,000 of interior coverage. That could just be the kitchen.

Mike Downer: Yep.

Dan Bell: The way that form works on the insurance side is that it’s a following form. It’s a homeowners form six, or HO-6, and it follows the master policy to pick up where the master policy ends.

You have to pull a copy of that master policy and figure out what the insured’s responsibility is at the time of loss. A lot of times, you’ll see that there is no way you could cover the drywall, fixtures, trim work, and carpet.

A lot of these places are anywhere between 1,000 and 2,500 square feet. If you see something like $200,000 on a 2,500-square-foot condo, it might still be underinsured, depending on what the master policy says.

Mike Downer: So you’ve sat down and talked to your homeowner. They’ve listened to you. They’ve listened to our podcast. They said, “These guys know what they’re talking about. Let’s do this.”

What kind of turnaround time are we looking at from when they give you the call? You said sometimes you can get back to them that day or the next day. How fast can you turn all this around and get the policy active?

Dan Bell: Same day or next day in most cases, outside of circumstances like underwriting concerns or prior claims.

In a scenario where it’s a first-time homebuyer, they don’t have prior claims, so we don’t have to worry about that. But they could be buying a house that has wood-burning stoves or other extracurriculars that would make it more complicated.

For the most part, though, you’re talking within the same day to the next morning.

Mike Downer: So if you are a procrastinator, you’ve got them covered.

Jeff Eastvold: Yeah. When we get done with our quotes, we’re pretty much ready to issue the policy. I’ll just finalize a few details, like who the mortgage is with.

When we get our stuff done, it’s done. There’s no lead-in number, like, “Hey, this is the number we can get you.” You get that in the mail all the time: “You can get your homeowners for $400.” Can you really? No, you can’t.

We’ve done all the work and run all the reports. It’s ready to go. We’re not trying to hard-sell somebody by saying, “Oh, you had this or that, and now it’s another $300,” or, “We didn’t see this claim, so now it’s another $200.” We don’t do that at the time of sale. It’s done ahead of time.

We want to respect their time and our own. So we say, “Here are your options: A, B, and C. We recommend this one. What do you think? Let’s write it up and get it in.”

Mike Downer: So even if I am a procrastinator, I can call you guys, and you’re prepared. You’re ready, and you can get that taken care of so I can get into my house.

Dan Bell: Absolutely.

Mike Downer: Awesome, guys. Perfect.

Let’s say I’m that procrastinator. If you are looking for homeowners insurance and you’re thinking, “Uh-oh,” these are the guys to call. They’ll turn your “uh-oh” into “oh, yeah.”

Dan Bell: That’s what we do.

Mike Downer: All right, guys. Thanks again for clearing it up. I look forward to the next time we talk. Jeff had few words, but every one of them is gold. That’s what we love about him.

Dan Bell: Thank you so much for having us.

Mike Downer: Thanks, guys. We’ll talk to you on the next one. Bye.