As a homeowner, it’s very critical for you to know that you have the proper coverage to get you protected, and today I want to talk to JP Hayes for Farmers, and I’d like to ask you, why is it so critical for you to have the proper coverage, JP?
JP: We’re talking on the auto insurance?
JP: The biggest thing that most people are unaware of is that the liability limits on your auto policy are actually gonna protect everything you own, should you ever be liable for any type of accident.
JP: In California, the liability minimum, that’s required by law, is a very scary $15,000 per person, for all medical injuries. So that covers if an ambulance comes, has to take them, they end up staying a couple of nights in the hospital, any pain and suffering, any missed pay time from work, you have a lot of entrepreneurs, a lot of high earners in California. You hit one of those, you hit a surgeon, and they’re missing pay time from work, if you only have $15,000 to cover all those expenses,
JP: You’re gonna be in a lot of trouble, because they’re gonna come after your personal assets. They can also garnish your wages.
JP: So even if you don’t own any property, you don’t have any assets, they can actually garnish your wages until you’ve paid off all that debt.
Cris: Wow, okay. So if you’re a home owner, what happens if you have the minimum coverage that the estate requires, 15,000, you’re in an accident, what happens to your house?
JP: They’re comin’ after your house. You’re probably gonna receive, what happens, and I’ve seen it and going through it right now with a client, once the insurance company has fulfilled their obligation, they’ve paid the limits that you were asked them for, all right? Your insurance, you were paying them to cover you $15,000 per person. Once they’ve paid off the injured party from that accident that you’re liable for, that injured party will most likely seek legal counsel. They’ll hire a trial attorney, someone who deals with accidents.
JP: And that attorney is most likely gonna send you a letter, letting you know “hey there’s still an outstanding balance “of 40, 50, $60,000.” Your insurance company, this is the real awful letter that I’ve seen insurance receive, they will send you the letter, they’ll say “Dear Mr Jones, “we have fulfilled our requirements, “we’ve paid out $15,000 total, “we’ve received this letter from xyz trial attorneys, “and they’re letting us know “that there’s still an outstanding balance of 50 grand. “We wish you the best of luck, “we recommend you seek an attorney” We’re done.
Cris: That’s it.
JP: We’ve paid off.
JP: That thing that we agreed to pay.
Cris: Absolutely, so at that point you’re on your own to come up with that difference, right? Whether that’s selling your house, selling cars, and then–
JP: Exactly, exactly.
Cris: Okay. And what’s the best way, people are looking just to save on their monthly payment for car coverage, so what is the best way for them to save. I know the deductibles is huge, right?
Cris: So what do you recommend will be the best deductibles and what’s the reason behind it?
JP: Most people like to go with $500 deductibles. Usually insurance companies are gonna make more money, if you choose a $500. There’s gonna be more premium coming in, right?
JP: If you just bump that collision deductible, okay, so the collision deductible is used when you collide with something, someone collides with you, bump that up to 1,000 because that actually has a huge impact on your premium, it will actually save you quite a substantial amount on a monthly basis. I usually recommend keep the comprehensive at 500, those are for the things that are out of your control.
Cris: Right, right.
JP: And it’s usually not as expensive to keep that $500 deductible on the comprehensive, versus the collision. So that’s one really good way, and what you’ll find is that for the people who are trying to up the liability coverage, but are finding it difficult to increase that monthly premium, you’ve just bought a house, you’ve got all these extra fees,
JP: There’s a mortgage, you now have home insurance, and now wait, some insurance agent’s telling you, “Hey we gotta increase your auto insurance as well.” Increase the collision deductible, bump that up to 1,000, that’s usually a good spot. I don’t usually recommend going any higher than that.
JP: But that’ll bring your premium down enough to be able to combat that increase in raising your liability limits.
JP: Make sense?
Cris: Absolutely, and personally, I’m following his advice, and I see quite some savings on my monthly payments. And last but not least, JP, let’s talk about umbrella policies.
Cris: Why are they so important when you are a homeowner?
JP: An umbrella policy is going to give you excess liability coverages, for those real catastrophic examples, where the liability limits either on your auto policy, or on your home policy have been completely used up. All right? There is one new case I’d like to give you, where it was used in a home insurance policy, where there was this gentleman. He was just, it was on a regular Sunday, he’d been out cleaning his yard, the front lawn, he’d been raking up the leaves, it was just him and his dog. He went inside and he was watching a football game, and there was a neighbor’s kid running around in the neighborhood. And I think they were only four years old, five years old. They ran into this gentleman’s neighbor, or into his front lawn. Tripped over, and fell on the rake. The rake had the prongs sticking up.
Cris: Right, yes.
JP: And that kid fell face-first, eye went right into one of those, okay?
Cris: Oh, okay.
JP: That gentleman is inside, minding his own business, watching a game, dog by his side, but he is liable because it happened on his property.
JP: He only had $300,000 on his home insurance policy. That kid’s damages, going in and out of the hospital, taking care of all the surgery, $950,000 is what everything came out to be. Okay?
JP: So that $300,000 on the home insurance policy, gone like that.
JP: He did have a million dollar umbrella policy, okay? So the home insurance, the 300,000 liability is gone, but he has this million dollar umbrella covering it, so that million dollars kicks in, taking care of the excess 650 plus. That make sense?
Cris: Yes, absolutely.
JP: As a homeowner, especially here in Southern California, it is absolutely essential that you seek out the coverage and you get at a minimum, million dollar umbrella policy.
Cris: And usually those are very affordable, right, when you buy your car, home, and then you get umbrella, those become really affordable.
JP: That umbrella policy itself is usually about, if you were to get a million dollar umbrella, you might be looking at about two to 300 a year, for that extra million dollars. And if you do have requirements, you have to bump up your bodily injury,
Cris Right, okay.
JP: On your auto insurance to 250,000 per person,
JP: 500,000 per occurrence.
JP: You have to have property damage at 100,000, and then your home insurance, of course, has to be 300,000, but once you meet those limits, the extra million dollars on top is only about two to $300 a year.
Cris: A year.
Cris: And that’s pretty affordable. And also those guidelines, they change based on the insurance carrier right?
Cris: So right now we’re talking about Farmers.
JP: We’re talking about Farmers, we’re also talking about just the average household, maybe two cars, two drivers and a home, but of course you have, if you’re throwing in younger drivers, if you’re throwing in a few more cars, maybe you got a motorcycle, maybe you got rental property.
Cris: Right, rental property.
JP: That’s another good time to also have an umbrella policy, because the umbrella will extend coverage to not just your auto, motorcycle, home, it’s gonna go over your rental property as well, so should anything happen where you’re liable, that million dollar umbrella policy, two million, three million, is gonna kick in and take care of the loss there as well. Know that I have some clients, and they have six plus properties and their personal umbrella’s covering it.
Cris: Oh, okay.
Cris: And does that matter where those properties are physically located?
JP: As long as it’s in the US, but as far as Farmers is concerned, they can extend coverage anywhere in the US.
Cris: Great, awesome. Well JP, I wanna thank you for your time today, and I hope this has been very useful for you. If you want to know more, JP is a Farmers agent, and what’s your contact info?
JP: So office number 760-681-0023, and then email, you can just reach me at email@example.com.
Cris: Thank you guys. This is Cristobal, Coldwell Banker.