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Lowering the Cost of Home Insurance
August 2007
With the cost of home insurance skyrocketing, especially in coastal areas vulnerable to hurricanes and flooding, second homeowners are facing even higher premiums. But there are ways for them to trim their monthly premiums.
Several states now require insurance companies to sell discounted premiums to owners who take extra precautions to reinforce their homes.
Discount policies vary by state and insurance company. A homeowner can figure out which improvements to make by working with a local insurance agent and getting an inspection to secure the savings.
While some states have grant programs for adding hurricane protections to homes, those are generally limited to primary residences. Vacation homeowners, however, have access to other discounts in insurance premiums or hurricane deductibles.
FLORIDA
Vacation homeowners qualify for discounts if they add hurricane protections to their homes, said Teri Johnston, the president of Fair Insurance Rates in Monroe, a consumer advocacy group based in the Florida Keys.
Hurricane shutters and improvements that help strengthen roofs are on the checklist of “hurricane mitigation additions,” or improvements that can shore up a home and trim insurance costs. By taking those measures, Ms. Johnston said, “you can lower premiums by 45 percent” off the highest rates.
OTHER WAYS TO REDUCE PREMIUMS
Vacation homes typically carry higher insurance premiums because they aren’t occupied full time. “The risk for insurance on vacation properties is much higher,” said Jeff McCollum, a spokesman for State Farm Insurance. “People may not be there that often, so there is the risk of fire and theft.”
One basic strategy for lowering out-of-pocket premiums without making improvements is to raise the amount of a deductible.
For shoppers considering the total expense of maintaining a second home, a house’s location can also affect the insurance rates: A home in a gated community will probably secure a lower premium; new homes, with strict building codes, will also secure better rates than older ones.
Other ways to cut costs in the long run include installing security systems that can alert the local police, or installing a fire-resistant roof, if you live in a wildfire-prone area.
Discounts from State Farm, Mr. McCollum said, can range anywhere from 5 percent to more than 20 percent off of a premium.
There are many other improvements that might help. The Institute for Business and Home Safety (www.ibhs.org) provides tips on how to best protect a home from natural disasters, including wildfires, floods, high winds, hailstorms and even earthquakes. While the group does not spell out which improvements may result in an insurance break, a call to an insurance company can determine the potential savings.
Whether such improvements are worth making comes down to doing the math, and looking at how long it will take to recoup the cost of the project in savings, said J. Robert Hunter, the director of insurance for the Consumer Federation of America.
While savings vary, he said, such mitigation discounts from insurance companies are one bit of good news to come from an industry that has been widely criticized for double-digit rate increases and pulling out of some coastal markets altogether. “It’s a good insurance industry response to making homes safer,” Mr. Hunter said.
The New York Times.
Finding a Property Manager
August 2007
Managing a second home from afar is almost impossible without local helpers to handle rentals or check up on the house in the event of bad weather.
Owners who decide they need more than a housekeeper or neighbor to keep an eye on the place can turn to professional property managers, part of an industry that has boomed right along with the second home market.
These companies promise to do things like rent out the property on a short-term basis, provide cleaning services, schedule maintenance and even shutter the house when a hurricane is forecast.
John Malam lives in Cheshire, England, so two and a half years ago, when he bought a five-bedroom house in Davenport, Fla., near Disney World, he decided he needed a local property manager. He wanted someone to seal the house in the event of a hurricane, and to handle rentals, but most of all he wanted a company he could trust. He said he had heard horror stories from fellow property owners, including tales of management companies renting out homes and not telling the owners.
“Those are called ghost bookings,” he said. “And owners never see the income.”
He looked at three local management companies, visiting them in person when he was in town, and decided on Florida Spirit Vacation Homes in Champions Gate Fla., because the firm had a robust advertising budget and maintained a Web site that allows an owner to log on and see when the house is booked for renters and when it has vacancies.
Still, he knew there could still be problems like storms or thefts, even with a good property manager. “If you buy a home and think there are never going to be any issues, you are living in a dream land,” said Mr. Malam, who visits his house four to five times a year. “But the key is how does the management company handle issues when they arise?”
He said he has had few problems, and the company addresses them quickly. For instance, twice when he arrived for visits he found that the house was not cleaned to his standard. He called the company and it “jumped up and sorted it out,” he said.
One way to find a company is to ask neighbors and real estate agents for feedback on local firms. Searching for a management agency’s name on a Web site like TripAdvisor (www.tripadvisor.com), where guests review both hotels and vacation homes, may also yield feedback on the quality of the company’s service from the perspective of a vacationer. It is also prudent to verify that the management company is in good standing with the local Better Business Bureau.
Expect to pay anywhere from 25 percent to more than 40 percent of the rental revenue to the company for its services. While that will cover the cost of booking rentals, screening renters, advertising and perhaps cleaning, owners also need to ask about extra fees, said Marie Ferguson, an owner of a vacation home in West Palm Beach and the author of “Breaking all the Rules: How to Rent Your Vacation Home,” published this year by BookSurge.
“Will they answer questions from the renter or will renters call you? And if they do call the management company with an emergency, are you going to get charged for that?” Ms. Ferguson said. Pest control or basic maintenance such as replacing an air conditioning filter may also result in a charge.
Also ask how long the company has been in business, how many homes it manages and how many staff members are devoted to watching over the properties to determine if staff membes are stretched too thin to handle the houses under their care. Also ask how the company markets its rentals and if it has some of its budget dedicated to advertising.
Tahoe Luxury Properties manages 130 homes in towns north and west of Lake Tahoe, Calif. The homes are handled by a staff of 30 caretakers so that each is responsible for no more than five homes, said Kelly Dietz, the owner of the company, which charges a fee of 35 percent of the rental income.
That level of staffing, she said, insures that a caretaker can go to each house immediately after the renters depart and a second time after the cleaning staff is finished, a strategy that can prove critical for homes in the woods. “We had house once where the tenants literally left every door wide open,” said Ms. Dietz . “We have bears here. A bear would have gotten in the house.”
In many parts of the country, storms are a more pressing concern than errant wildlife. “For owners in Florida especially, they should ask if the company has procedures in place for dealing with hurricanes,” said Brian Brannigan, the president of Florida Spirit Vacation Homes.
In addition to insuring that homes are boarded up, he said the company has all of its data backed up at a remote site so that business can continue and homeowners can be reached. “We can move Florida Spirit out of town and still run the company,” he said.
Of course, property managers may have their own demands. Ms. Dietz’s company will take only certain kinds of houses. “We want professionally decorated, high-end houses,” she said. “They work better for our clientele.”
“In fact, we eliminated 20 houses in the last year that weren’t to our standard.
The New York Times
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