What you need to know about Home Insurance

Introduction:

Welcome to the True Wealth podcast, where we explore essential financial topics to empower our audience with knowledge. In this episode, our esteemed guest, Kumssa Hassan, an experienced insurance expert, joins our host, Seun Adeyemi, to delve into the intricacies of home insurance. As more homeowners prioritize finding the best insurance rates, it is crucial to emphasize the significance of comprehensive coverage to safeguard their properties adequately.

Meet Kumssa Hassan:

Kumssa Hassan introduces himself as a seasoned insurance professional with seven years of experience in the industry. Having handled a diverse range of insurance matters, including home, auto, and commercial policies, Kumssa brings valuable insights to the table.

The Pitfalls of Focusing Solely on Competitive Rates:

The conversation kicks off by discussing the common misconception that insurance is merely a requirement for mortgage closing. Kumssa stresses the importance of looking beyond competitive rates and prioritizing quality coverage. Cheaper insurance options may leave homeowners vulnerable during unfortunate events, underscoring the need for a balance between affordability and adequate protection.

Key Considerations in Selecting Home Insurance Coverage:

Accurate Building Valuation: Kumssa highlights the significance of accurately assessing replacement costs for buildings to ensure appropriate valuation, discouraging settling for lower values solely to reduce premiums.

Water Coverage: Prioritizing sewer backup and overland water coverage protects homeowners from potential water-related claims and aligns with the information provided in the insurance application.

The Role of Deductibles: Seun and Kumssa discuss the importance of evaluating deductible amounts and when to file a claim. Kumssa recommends a $3,500 threshold for considering filing claims and emphasizes the need to balance affordability and potential claims scenarios.

Long-Term Perspective: A long-term approach to insurance can lead to discounts based on a homeowner’s claims history. Exploring various insurers allows homeowners to find favorable terms and make informed decisions.

The Importance of Honesty in the Application Process: Kumssa shares instances where claims were rejected due to a lack of honesty in the application. Providing truthful and accurate information is crucial to maintaining a reliable relationship with insurers.

Converting Primary Residence to Rental Property: When converting a primary residence to a rental property, homeowners must notify the insurance company to update coverage accurately. Premiums may change as the risk profile of the property evolves.

Understanding Underwriting in Home Insurance:

Kumssa delves into the underwriting process, where insurance companies have their guidelines and appetites for risk. Honesty and transparency are essential during the application, as discrepancies may raise red flags during the claims process. Underwriting considers factors like roof age, wear and tear, and home conditions.

Confirming Tenant Insurance and Additional Named Insured:

To begin with, Kumssa emphasizes the importance of confirming that tenants have insurance coverage. He recommends having a conversation with tenants at the beginning of the lease agreement and requesting to be added as an additional named insured on their policy. This way, landlords receive notifications if the policy gets canceled, ensuring continuous coverage and protection. While landlords cannot legally make tenant insurance mandatory, it is advisable to discuss the importance of maintaining liability insurance to protect both parties in the event of unforeseen incidents.

Protecting Rental Income:

Kumssa suggests that landlords add rental income to their rental properties. By doing so, if tenants need to vacate temporarily for repairs due to covered damages, the insurance company can supplement the rental income during that period. This allows landlords to cover mortgage payments and avoid financial losses. It’s essential to provide the insurance company with lease agreements and proof of rental income to ensure a smooth claims process. Maintaining honesty throughout the claims process is crucial, as insurance companies have the means to verify information and any dishonesty can lead to unfavorable outcomes.

Guaranteed Replacement Costs:

Another aspect Kumssa highlights is the importance of considering guaranteed replacement costs for rental properties. While only a limited number of insurance companies offer this feature, it can be beneficial. With rising construction costs, having guaranteed replacement costs ensures that landlords can rebuild their property without incurring significant financial burdens in the event of a covered claim. Alternatively, it’s essential to regularly evaluate property values and ensure that the insurance coverage accurately reflects the current replacement cost.

Communication and Notes:

During the discussion, Kumssa mentions the importance of maintaining open communication with insurance brokers and agents. Insurance companies have systems and portals that allow them to track claims history and property details. Honesty and transparency throughout the relationship with the insurance company and brokers are key to ensuring a smooth claims process. Any discrepancies or attempts to take advantage of the system can have long-term consequences, jeopardizing the support and defense landlords receive in the event of a claim.

Conclusion:

Insurance is a vital component of protecting rental properties and minimizing financial risks for landlords. By confirming tenant insurance, adding rental income to policies, considering guaranteed replacement costs, and maintaining open and honest communication with insurance providers, landlords can navigate insurance requirements effectively. It is crucial to stay informed about policy details, regularly update coverage, and adhere to the claims process’s integrity. By following these tips shared by Kumssa Hassan, landlords can ensure peace of mind and secure their investment against potential damages and liabilities.

For more information or to connect with Kumssa Hassan, visit his LinkedIn profile (Kumsasan) or email him at kumsasan@thebig.ca.