Vacation Rental Property Insurance for Short-Term Rentals

Do you own a vacation rental property or short-term rental?

Rockingham Insurance recognizes coverage for vacation rental properties as its own insurance product called a Short-Term Rental Policy. Unlike the competition, they’ve designed this vacation rental property insurance for individuals who have rental properties advertised on websites like VRBO (Vacation Rental By Owner), Airbnb and other online rental sources.

What Qualifies as a Vacation Rental?

A vacation rental is a property rented to others when the owner is not present. A vacation rental is different from a Bed & Breakfast. Breakfast is not provided. In fact, B&Bs do not qualify for this short-term rental policy since the homeowner is living in the house. However, it is not restricted to a specific property type. A vacation rental could be a home, condo, apartment or even a group of homes.

The length of stay could be anywhere from a weekend to 2-3 months. If it’s less than a year, this policy is created to cover it.

Protecting You and Your Vacation Rental Property

Our short-term rental policy offers outstanding protection that would replace your home and contents should you suffer a loss.

Liability Coverage – Accidents happen and our policy provides protection should someone get hurt while on your property.

Protecting your Lifestyle – We provide protection for damages to or loss or your furnishings, both in the home or in storage buildings on site.

If you own a vacation rental property, contact us today for a free Short-Term Rental Policy quote.

But I already have a secondary home policy…

The activity of your property needs the correct insurance coverage. A second home can be a great source of income when used as a vacation rental. But the typical homeowners insurance policy requires the homeowner to be living in the home. A secondary home policy would have the homeowner visiting the home for short stays.

If you use your second home as a vacation rental property and source of income, it is best to have a short-term rental policy that matches the activity of your property.

Are you unsure whether or not your property would qualify for this type of insurance policy? Call us at 540-463-6702. We’d be happy to assist you in making sure you have the right coverage for your property.

Replacement Cost vs. Actual Cash Value Coverage

Homeowners insurance policies offer two types of valuation of your personal property. One is replacement cost and the other is actual cash value. If your property is destroyed, your insurance policy will follow one of these two methods to replace that property.

  1. Replacement cost is what you would pay for the item if you went out to the store and bought it brand new today.
  2. Actual cash value is what you paid for the item when you bought it minus the depreciation.

Depreciation is a decrease in value due to wear and tear, which is the aging process.

Replacement Cost vs. Actual Cash Value

What does it all mean? Let’s say your home and the furnishings inside it were damaged by a fire. You make an insurance claim to your company and then pay the deductible amount associated with your coverage. Now you must replace the damaged furnishings. How much money will you receive from your insurance company to buy new furnishings? This depends on if you have replacement cost coverage or actual cash value coverage.

For example, last year you bought a sofa for your living room for $2,000. This year the same sofa now costs $2,100 at the store.

If you have replacement cost coverage, your insurance company will pay you $2,100 (less your deductible).

However, if you have actual cash value coverage, your insurance company might pay you $1,800 because that is the amount you paid for it ($2,000) minus the depreciation of the sofa over one year.

Calculating the Depreciation Rate

Depreciation is calculated based on the expected life of the item divided into the cost. This comes up with a per year depreciation rate.

In our case, the expected life of your sofa is 10 years.

$2,000 / 10 = $200 per year depreciation rate

Calculating the Actual Cash Value

The amount you paid for the item minus the depreciation rate for however many years you owned the item is the actual cash value.

One year has gone by since you purchased the sofa

$2,000 – $200 = $1,800

The actual cash value of your sofa after one year is $1,800. If you owned the sofa for two years before the fire, you would receive $1,600 actual cash value.

*Please note: For replacement cost coverage, most insurance companies will initially give you the actual cash value of an item and then require a receipt for the new item before paying you the remainder.

Why have Actual Cash Value Coverage?

Generally speaking, you’ll receive less money from the insurance company to replace your furnishings if you have actual cash value coverage. So why have it? Actual cash value coverage is less expensive on an annual basis than replacement cost coverage. It’s a way to save money on your insurance policy.

Record Your Personal Property

Remember, you need to have proof of your belongings for your insurance company. We recommend taking pictures of every room in your home from each angle to record your personal property.  Save the photos in two places so you have a backup copy. Do this every year or after a large purchase or renovation in your home.

For actual cash value coverage, your household financial system will be important (i.e. receipts, tax forms, etc.) because it shows the value of your personal property.

Know Your Coverage

It’s important to know your homeowners insurance coverage before you need to use it. You don’t want to be expecting to receive one amount and end up receiving far less. Know now if you’ll have to pay more out-of-pocket to replace your furnishings if they are damaged or if you’re paying more annually. This can also help you plan your savings for an emergency fund accordingly.

So take a look at your current homeowners insurance policy to see if you have actual cash value or replacement cost coverage for your personal property.

Contact us if you want assistance reviewing your current homeowners insurance policy or if you want to get a comparative quote.

Do You Need Flood Insurance?

What is Flood Insurance?

Flood insurance covers your home and belongings in the event of a flood. It protects you against damage caused by flooding due to heavy rains, a dam break, etc.

Isn’t water damage covered under your home insurance?

You might say “I already have insurance for my house,” but the type of perils covered in a home insurance policy are split into 3 groups: fire, fire and extended coverage, and broad. There’s also a special form.

  1. Fire (FL-1) covers fire, lightning, and explosion. Fire and Extended Coverage Residence Perils Insured Againstcovers those plus windstorm, hail, vehicles and a few others.
  2. Broad (FL-2) covers 17 different perils including fire, freezing plumbing, sink hole, the weight of snow and ice, aircraft, and windstorm, to name a few.
  3. Special Form (FL-3) covers against all risks of physical loss with certain exceptions.

In all of these traditional home insurance policies, water in relation to flooding is not covered.

2017 Flood Map Changes

This year, they’ve changed the 100 Year Flood Map. Now a number of homes are within the 100 year flood zone that were not before. Mortgage lenders are paying close attention to the map changes and sending out notices to their mortgagees requiring flood insurance.

In most cases, the map is correct. There is a process to look at the elevation of your house in relation to the map and have it reconsidered, which might or might not place your house outside the flood zone.

However, even if you’re not required to have it for your home by your mortgage lender, it’s worth getting a flood insurance quote.

Even If You’re Outside a “High Risk Flood Zone”

Wright Flood Insurance reports, “One in 4 low-to-moderate risk flood zone areas will flood. Low risk doesn’t mean no risk. Nearly 25% of all flood claims and ⅓ of flood disaster assistance is for properties outside of the high risk flood zone.”

We are experiencing unpredictable and progressively more severe weather. When you look at the news you see severe fire events in the Midwest and rain events in the South. Living in Rockbridge County, Virginia, our last major rain event was Hurricane Camille in 1969. That severe rain event caused water to flow over the top of East Lexington Bridge.

But just because it happened that long ago doesn’t mean it won’t happen again this year, or the next, or the next.

Ultimately, you buy flood insurance to protect what is yours from the unpredictability of the weather.

Disaster Assistance Only Goes So Far

“Disaster Assistance is a loan, but longer-term rebuilding and repair work is not covered by the federal program. However, flood insurance gives you the ability to rebuild, repair, or replace your possessions.” (Wright Flood)

What would it cost you to rebuild, repair, or replace your home and belongings without flood insurance? Having flood insurance now could be a minimal cost in comparison. Learn more about how flood insurance works, and see if it’s worth it to you.

Contact us to get started on a no obligation flood insurance quote.

Homeowners Insurance Tips for Home Buyers

Buying a home is often a chaotic period of time, but you want to make sure you have the appropriate homeowners insurance coverage. Whether it’s a mistake on your policy or you’re trying to save money, you don’t want to end up with partial coverage.

Homeowners Insurance Mishaps

Mistakes can happen, so please double check the numbers on your insurance policy after you close on your home. Especially check the insurance value of your home and your personal property.

A lot of times, people reduce the insurance coverage on their house to get it in line with their other credit card payments and monthly expenses in order to qualify for a home loan. But it is possible to reduce your insurance coverage to the point that it only covers the mortgage and not the true replacement cost of the house.

Remember, replacement cost is a future value to rebuild the existing house. You need to know how much will it cost to rebuild your house, and who’s going to pay for it.

For First-Time Home Buyers

If you’re a first-time home buyer, the closing process can seem a little confusing. You know you’ll need to have homeowners insurance to cover the house or mortgage. Don’t forget about the value of your personal property inside the house.

We recommend you get a competitive insurance quote a few months after closing. Make sure your competitive quote compares the same home values and personal property values. Make sure you have an insurance company that provides good value coverage.

Get a Competitive Insurance Quote & Know Your Coverage

Getting competitive insurance quotes and knowing your coverage are important. We recommend getting competitive insurance quotes every 5 years or so. And when you compare, make sure you’re comparing the true value of your house and your coverages are the same, otherwise, it’s not a true comparison.

We have heard of people thinking they’re saving a tremendous amount of money on their insurance policy only to realize that their 12 month policy was compared to a 6 month policy. That’s not a true comparison.

If you do decide to change insurance companies, don’t worry! It happens every day. It’s understood by insurance companies that people will shop around, get competitive quotes, and look to save money on their coverages. Here are a couple things to remember…

You Could Get a Refund

Recently, we had a new client ask, “Will I get my insurance premium back if I change insurance companies?”

Yes! One of the laws in the state of Virginia requires insurance companies to refund unearned premium when a client leaves.

If you decide to switch insurance providers, the date your new homeowners insurance coverage takes effect is the end date of your previous policy. Any monies that you have already paid for future coverage (after the end date) will be refunded back to you.

What If Your Escrow Account Pays For Your Insurance?

If you’re paying your homeowners insurance through your mortgage escrow account, you need to deposit your refunded money back into your escrow account.

Usually, the insurance refund checks are made out to you, the client, and not the original source of the payment (i.e. the mortgage company). So you need to put the refunded money back to where it first came from. This will help to keep your mortgage escrow account in balance because the mortgage company recalculates all the costs that need to be paid on an annual basis.

We at Bruce Gardner Insurance Agency are happy to work with home buyers or to give a competitive quote a few months after you’ve closed on your home. We explain our policies, explain how the coverage is determined, and answer your questions about your homeowners insurance.

Contact us to get started with a free homeowners insurance quote.

What’s Your Personal Property Worth & Is It Covered?

Do you know your personal property worth? We all accumulate belongings over time. For insurance purposes, we call this “personal property”. If you’re renting, we recommend having a renter’s insurance policy to protect your personal property. You need to estimate the value of your belongings to make sure they are all covered in case of a catastrophic loss.

How Much is My Personal Property Worth?

To calculate your personal property worth, first, you need to inventory your belongings. Start by taking pictures of your belongs like a snapshot in time. This would be supporting documentation in the event of a  loss. Remember, a picture is worth a thousand words.

Second, you need to assign a value to each item in the pictures. When you assign a value to an item, it be the original purchase price. This includes TVs, chairs, pots and pans, plates, glasses, jewelry, etc.

Look at your closets too. Are they packed or do they have some space? I have some closets that are pretty packed. I like to go through them and put a value on each hanger – suit, sport jacket, dress shirt, etc. You’d be surprised at how much money you have in one closet of clothes.

Don’t forget the garage, attic, and other storage spaces. Items in off-site storage facilities should be recorded separately.

Bonus tip: As you are completing the inventory of your belongings, you might want to consider where you’re storing them. Is it damp? Is there a potential for mold? While you’re doing your inventory, note if everything is dry or if it smells mildew-y or moldy. You might uncover a problem lurking in your closet.

Learn more about how to document the value of your personal property in this other article.

It all adds up to a number. That number is the value of your personal property for which you need insurance coverage.

Why Do I Need Renter’s Insurance?

It’s based on who owns the home (dwelling: the place where you live). If you’re a homeowner, you have homeowner’s insurance on the structure (your home) and everything inside it (your belongings). If you’re renting, your landlord has a dwelling insurance policy on the structure (the home) but NOT on anything inside. If you’re renting, your belongings are not covered under your landlord’s dwelling insurance policy. You need to get your own insurance policy to cover your belongings, which is a renter’s insurance policy.

Our Rockingham Group renter’s policies at start at $15,000 coverage for around $9 a month. That way you’re protected. In some cases, your landlord will give you a discount on your rent if you have a renter’s insurance policy. I’ve heard of it happening, and it doesn’t hurt to ask.

Now that you’ve done all this work and added up the value of your belongings in all these rooms, closets, and storage areas, you might be surprised at the total value of your personal property.

Contact us at Bruce Gardner Insurance Agency for a free quote on a renter’s insurance policy.

How to Save Money on your Auto or Homeowners Insurance

A customer says, “I’d like to save money on my insurance.” That’s a very broad statement. To save money on your current auto or homeowners or insurance policies, you generally have 3 options: qualify for a discount or endorsement, identify a safety precaution that’s been added to your property in the last year, or give up some coverage.

1. Qualifying for Discounts and Endorsements

Insurance companies offer discounts and endorsements that can save you money on your insurance policy. Discounts are offered if you meet certain criteria. An endorsement is a clause under which the stated coverage of an insurance policy may be altered. Choosing certain endorsements could mean savings for you too.

Some of the discounts we offer at Rockingham Group include a multi-policy discount for combining your home and auto insurance with us, an auto insurance discount if you have a child age 6 or under, and a homeowners insurance discount if you are first-time financing your home. You can also get a discount simply because you work for certain local employers.

These are just a few examples. Have your insurance company check your policy to see if there are any discounts or endorsements you can take advantage of to save you money on your insurance.

2. Identifying Added Safety Precautions

There are safety precautions you can add to your property that could reduce the cost of your homeowners insurance.

For example, you can add a central alarm system to your home that identifies a fire, burglary, smoke, or “live hazard” and notifies the fire department or police department automatically. This is an easy way to receive a discount on your homeowners insurance policy. There’s a trade-off cost because you’re paying for the monitoring system, but it does make your property safer.

You could also receive a discount for adding lower cost safety precautions, like deadbolt locks, smoke detectors or carbon monoxide detectors, to your home.

Or maybe you have a surcharge for a trampoline, above ground swimming pool, or wood burning stove that you’ve since corrected or removed. For example, adding self-closing locks and a gate to your pool. If you have removed these items, you no longer need the surcharge because the added risk is no longer on your property.

3. Trading Coverage for Cost

For homes and automobiles in the state of Virginia, insurance companies are required to annually file insurance rates for all different rate classes with the state. This is monitored by the Bureau of Insurance and eliminates any form of discrimination or bias by insurance companies towards members of the general public.

How does this apply to you?

Auto Insurance:
If you’re looking for coverage for your automobile and you’d like to have $100/300/100, your rate has already been determined. However, you can change your coverage options for more or less coverage. The price or cost is directly reflective of your coverage. If you change to $50/100/ 50, you will pay less, but you will also have less coverage. You have to determine what’s best for you.

Homeowners Insurance:
Similarly, for your homeowners insurance, you have to determine the value of your home and what type of coverage you want. Would you like replacement cost or a simple fire policy? Each cover your home, but for different risks…and different dollar amounts.

Even the replacement cost calculation for your home could be different from one insurance company to another. This factors into the price you pay for your coverage. We at Bruce Gardner Insurance Agency use a third-party, nationally-used software program that determines what a future cost to replace your entire house would be. As the homeowner, you need to determine which value you trust more.

So you could ask for a comparison quote from another insurance company to see if they come up with a different value. For more information about how property values are calculated.

4. Get a Comparison Quote:

Ask another insurance company for a comparison quote of your current policy.

When we do comparisons to other auto insurance policies, we like to do an apples to apples comparison, meaning we quote you our rates for the same coverage, plus discounts and endorsements, of course.

When it comes to your home, we always do our own estimate using the software program mentioned above for a replacement cost value, because it could be different from the one your provider is using. This is important because that’s the value of your home and your personal property and will become the focus of any loss recovery.

So if you want to save money on your auto or homeowners insurance, ask your current provider about discounts and endorsements, add safety precautions to your property, consider changing your coverage, or get a comparison quote.

If you live in Rockbridge County, Virginia or the surrounding area, contact us a Bruce Gardner Insurance Agency to receive a free comparison quote today!

Beginning or Canceling Your Virginia Auto Insurance

Buying a New Car:

For Virginia auto insurance, you have a grace period to get your new car registered with your auto insurance company. However, it’s best to talk to your insurance company beforehand and insure the vehicle as soon as possible after your purchase. Then, with insurance card in hand, go to the DMV to register your vehicle and receive the license plates.

Learn more about the auto insurance requirements in Virginia for registration. You can also view the Virginia Auto Insurance Consumer Guide (PDF)

Local Property Taxes:

If you are a resident of Rockbridge County, Virginia, there is a local ordinance that requires you to report the purchase of a new vehicle to the county within 30 days for property tax purposes.

If you don’t, you will have to pay a late filing penalty, which is a percentage of the property value. The DMV periodically sends an updated file of this information to the county, but you need to call yourself to ensure timely filing and avoid the late fee.

Call 540-463-3431 to report your new vehicle to Rockbridge County, Virginia.

Canceling Your Virginia Auto Insurance:

When you want to cancel your Virginia auto insurance coverage, you need to turn in your license plates to the DMV first.

Behind the scenes, your insurance company will notify the DMV when you cancel your insurance. The DMV, on a random selection process, looks for a match between cancelled insurance coverage and surrendered plates. If you have not surrendered your plates, you could be fined by the state or asked to prove you had insurance coverage for that vehicle.

Transferring Coverage:

Alternatively, you could transfer your plates and auto insurance coverage to another car through the DMV.

Not Driving a Vehicle for a While:

If you’re not going to be driving your vehicle for a while, do you need to have auto insurance on that car? That depends on if you lease or own your car.

If you lease your vehicle, then you have to maintain auto insurance coverage and valid car tags regardless.

If you own your vehicle completely (not financed), then you can cancel your Virginia auto insurance coverage for that vehicle. But you want to make sure to turn your tags into the DMV first (see above). And remember, if something happens to the vehicle (e.g. a tree falls on it, or it rolls out into the street and causes an accident), then you’re not insured.

If you have valid car tags, then you must have auto insurance for that vehicle. Just because you’re not driving it does not mean you can let your Virginia auto insurance lapse.

Why Does My Insurance Company Ask So Many Questions?

I recently drove past a building the day after a large fire, and it caught me by surprise. I knew the building had been beautiful, but I was now looking at a pile of ashes. I wondered what the cause was, and if it was preventable.

It made me think of the many underwriting questions we, as an insurance company, ask during the underwriting process for insuring homes and other structures.

Underwriting Questions

Is your furnace propane or natural gas?
When was your furnace last serviced?
What kind of wiring do you have?
Has any wiring been replaced?
How old is the roof?
How do you heat your home?

When we ask these underwriting questions, in many ways, it is like a safety check of your house. What we’re trying to do is identify any hidden (lurking) problems or conditions for you, the homeowner.

All the answers you give could point to a condition that might start a fire or cause a loss. Additionally, if our questions prompt a service call or an overdue repair, then a safer living condition has been created for you.

Agent Visit to Your Home

As an insurance agent, when I go to look at a home that we might insure and talk with a homeowner, I’m looking for things like places where people could fall or have an injury.

Just last week, I visited a house that was listed for sale. I walked up the front steps to a deck and rang the doorbell. After a short conversation with the homeowner, she asked if I noticed any insurance concerns.

The house and property were very well-kept, clean and neatly painted. But the front entrance deck had another set of three-step stairs that didn’t have a handrail, which was a “trip or fall hazard”. I explained why it was a concern and how easy it could be to fix by installing a handrail.

She thanked me for visiting and pointing out the simple repair that would make the home safer for its current and future homeowners.

Taking Pictures of Your Home & Property

Your insurance agent will also take a number of pictures of your home and property during the underwriting process. A picture is worth a thousand words, and it can be useful in identifying potential hazards.

Your insurance agent, in-office agent, and several other people look at the insurance application and pictures of the property to make sure that any potential hazard is communicated to the homeowner so it can be corrected.

With the underwriting questions, an insurance agent’s view of the property, and pictures of the property, there’s a focus on safety and trying to prevent an accident or loss. I’ve only touched on the questions asked during the underwriting process for home insurance.

Please understand, when we ask all those underwriting questions and take all those pictures, it’s all about your safety.

How to Document Your Personal Property for Insurance Coverage

Personal property is everything inside your home. Your belongings.

According to a recent news article about the aftermath of the devastating tornado that hit Southern Virginia earlier this year, the destruction of homes and the belongings within them is causing a problem for homeowners trying to file claims with their insurance companies. It was reported that the companies are denying claims because there aren’t photographs of the personal property.

So how do you prove the ownership and value of your personal property? Here are our recommendations.

Document Proof of Ownership

In some way, you have to show what you own, or make an inventory of your belongings. We recommend taking four photos of every room in your house. Stand in one corner, take a photo of the opposite corner, and repeat this in each of the four corners of the room. You should be capturing all the contents of that room in those images. If a room has a closet, take a specific picture of the closet’s contents too.

Now that you’ve taken your pictures, you want to store them in at least two locations. One at home and one back-up that you can access outside your home. With cloud technology, that’s very easy. For example, Dropbox, iCloud, Google Apps, etc., can all store photos that are accessible from any device with an internet connection.

Calculate the Value of Your Personal Property

After documenting ownership, it’s time to calculate the value of your personal property. Consider what it would cost to buy your belongings brand new. Keep in mind, if you have many expensive items, such as electronics, artwork, and furniture, you’ll want to make sure you add it up correctly. Even the items hanging in your closet have a value.

The goal is to have a ballpark figure of what your personal property is worth to ensure you have proper coverage under Cov-B on your homeowners insurance policy.

Verify Your Current Personal Property Insurance Coverage

On your initial homeowners insurance policy, Cov-B, your personal property coverage, is calculated automatically at 70% of Cov-A (Home Replacement Value). However, you can always increase Cov-B to better match your personal property value.

You want to compare the value you attribute to your personal property to what your insurance company has for Cov-B. These two figures should be close. Having a little extra coverage is preferred. Better to be covered than be exposed.

How Often Should I Update My Documentation and Coverage?

We all collect belongings over time. Anytime you make a large ($) purchase, or refurbish a room with new furniture, these are significant personal property items that you want to have listed and photographed. You might even want to keep the sales receipts.

Whether you just bought a home or have had the same homeowners insurance policy for several years, it’s important to reevaluate the value of your personal property and double check that with your current insurance coverage.

Consider taking some time once a year to take new photographs and see if there has been a significant increase in the value of your personal property. In that case, you’ll want to check your homeowners policy and notify your insurance company if you think you need to increase your personal property coverage.

It’s much better to spend some time doing this now, before you are in a position where you need to file a claim.

How is Replacement Cost Calculated for Home Insurance?

Although your homeowners insurance is being written today, the coverage you’re purchasing is for tomorrow and beyond. When we determine replacement cost for insurance purposes, we’re looking at the cost of rebuilding your home with new materials at that current labor cost at that point in time, which is in the future.

How is Replacement Cost Determined?

When we go to insure a home, we’re looking at the structures only. To be fair to all parties, we use an evaluation software called E2Value, which is used by insurance companies across the nation. This software takes the size, shape, and main characteristics of the home, or building, and assigns a cost to rebuild it using “future” values (of materials, labor, etc.).

Comparing Assessed Value, Purchase Price, and Replacement Cost

Comparing different values on the same structure is like comparing apples, oranges, and bananas. The apple is the assessed value, the orange is the purchase price, and the banana is the replacement cost. All three are values of the same property at different points in time.

Assessed Value: For the apple, your assessment is determined by the local government and is updated on a periodic basis (approximately every 5 years). Most people would like a low assessment for reduced taxes.

Purchase Price: For the orange, your purchase price is negotiated between the buyer and seller. It factors in a current property appraisal and real estate market.

Replacement Cost: For the banana, your insurance replacement cost, or rebuilding cost, is used when there has been damage to the property by a covered event, such as a fire. If the building is destroyed, then it would need to be completely rebuilt at the construction costs at that point in time. Again, you have to remember we’re looking into the future. Your replacement cost is what it would take to completely rebuild the home in the future.

Hopefully this comparison helps you to understand why these three property values of a home are all different, and why the insurance replacement cost value for your home can be more than the purchase price.

Is your current homeowner insurance replacement cost up-to-date?
Let’s make sure you have accurate coverage for your home.
Contact us to get a quote from Bruce Gardner Insurance Agency.