Category Archives: Natural Disasters

Earthquake in New Mexico?

Earlier we discussed some of the insurance coverages pertaining to wildfires, which we certainly see enough of here in the arid high-desert Southwest. However, we found out on Tuesday morning that there had been a magnitude 4.0 earthquake affecting the entire northeast quadrant of the state late Monday night September 12th – resulting in a “suspension of binding authority” on homeowners and renters insurance policies for at least a day as long as no aftershocks were experienced.

While a 4.0 magnitude (30,000/year = often felt, but minor damage) Richter scale earth movement may not provoke even a raised eyebrow in some of you considering events that happen elsewhere, there is still the real risk of structural damage and other kinds of “insurable losses,” as well as a possible wake up call that earthquakes can happen whereever you are – and that you should be considering insurance coverage for them!

While residents of California may be commonly aware that a homeowners policy does not cover any loss or damage due to earth movement (including earthquake), that’s likely because they are regularly presented with an option to buy additional earthquake coverage when they get homeowners insurance. If they have a loan on their house and are in any sort of earthquake-prone zone, then the lender would certainly require the insurance in order to close the loan.

Earthquake coverage, like flood insurance coverage, is something not included on a homeowners policy – you have to ask for it and/or buy it on a separate policy. The occurrence of a 4.0 earthquake in New Mexico this week has us all thinking of the possibilities and new realities of the potential for loss.

Some homeowners insurance policies for homes located outside of earthquake prone zones can allow you to consider “buying back” earth movement coverage for a few dollars a month. Other earth movement policies can be purchased separately.

While the chances may be low that this could affect you, this week’s occurrence right here at home should have you considering the risk of not insuring against future possibilities. For details on earth movement coverage available for you, please contact an agent

Wildfires, Binding Authority & Jargon

There are multitude terms specific to any industry that are used by people in that industry. Occasionally the understanding of those terms can have signicant impacts on the general public. “Binding authority,” is a term used in the insurance world to extend the “handshake agreement” to our day-to-day practices. What binding authority allows your agent to do, is for most of the plain-vanilla home, auto and small business policies, once an agent has rated it with a company… you can then go into that agent’s office, sign some paperwork and pay the down payment – and you can be covered immediately at that instant. That “binding authority” is a courtesy allowed by standard & preferred insurance companies to their agents which allows them to immediately transact business and cover individuals.

This of course adds value to the local agent relationship. For policies that have circumstances that warrant further investigation, consideration and discussion between the agent and the “underwriter” at the insurance company, sometimes binding authority will be suspended on a case by case basis.

For the past week, as I get into my car to head into work in the mornings, I have to turn on my wipers to take what appears to be pollen off of my windshield. While there certainly is a good deal of pollen in the air right now at 7,800 feet in Santa Fe, unfortunately most of the “dust” on my car is not actually pollen, but is ash falling out of the air from the multiple wildfires happening in the southwest. This year seems to have been one of freakish “global winding” issues with massive tornados and extended extreme winds.

Santa Fe, New Mexico, which is about 250 miles from the Wallow fire burning on the AZ-NM border has smelled like a campfire and the air is thick with ash & smoke. Sunsets have been brilliant red – beautiful but deadly. The Wallow fire, the largest of several burning at the moment, is exacerbated by extreme high winds, which are causing burning embers to start new fires up to 3 miles ahead of the front lines. Inciweb reports that over 2,000 firefighters are working with 27 hotshot crews, 29 handcrews, 8 dozers, 141 fire engines, 46 watertenders and 20 helicopters. In one week it has burned a third of million acres and is considers 0% contained at the moment.

In the Southwest, we typically have visibility of 60 miles and over 300 days of sunshine a year. The Santa Fe Ski Area and Santa Fe Baldy are only about 15 miles away from my window, easily within viewing distance. For a week now, the air here, again 250 miles northeast of this fire, has still been so thick with smoke that the mountain is completely invisible. It is regular practice for our insurance companies to send us fax and email updates to “suspend binding authority” for new homeowners policies in zip codes that have current wildfires raging in them. Without that suspension of binding authority, an agent would never know, and the insurance company inspector wouldn’t have time to find out, whether somebody was potentially at risk of trying to insure-after-the fact.

Suspension of binding authority for auto policies is much rarer, however this week in our offices we have begun to see that some companies are now suspending binding authority for “physical damage” (comprehensive and collision) coverage for either new or existing auto policies that are within the affected Arizona zip codes. This is just another indication, specific to our industry, of the size & impact of the tragedies made worse by the lack of precipitation this season.

Considering this binding authority on “comprehensive and collision” brings to mind a story I heard just yesterday in a conversation with a friend. It seems that a relative had either seen an ad on television or received a flyer in the mail and decided to switch their auto policy coverage from an insurance agency to writing it themselves with a carrier who would quote and issue a policy online and promise them a discount for doing so. Be wary of discounts, and consider the value of the advice of a licensed insurance agent professional.

In this particular story, the person bought coverage and seemed to save a large amount of money. Not reading the descriptions of coverage on the website, and not examining closely their current “declarations pages” of their current policy (where an agent can understand more of the data than the average person), this couple decided to forego a coverage that didn’t seem to be needed, called “comprehensive and collision.” Their policy premium went down a staggering $50/month per vehicle and they were thrilled.

Thrilled that is, until 2 months later, when their vehicle, which they owned outright but was only about six years old, was run into while driving in a parking lot. Luckily, neither driver was injured, but the car was considered a “total loss.” They called their insurance company to make a claim, and were informed that because they did not have any physical damage coverage (comprehensive, collision — or even uninsured/underinsured motorist physical damage), there would be no settlement by the insurance company.

Stunned and financially impacted from having to purchase a new vehicle, this couple has now returned to having an insurance policy written by an independent insurance agent and is definitely now asking questions about their property to make sure that they are covered.

The lessons here are to speak with your insurance agent. Don’t leave any stone unturned. Go ahead and ask your questions. Your insurance agent’s job is to protect your financial well being, piece of mind, to protect your assets, and to protect you. Their (our) advice is well worth it!

Policy wording: Prohibited Use (evacuation)

When you go into your insurance agent’s office to get homeowners insurance, you’re confronted with myriad questions and options are are likely concerned mostly with getting done as soon as possible and finding a fair price. Your insurance agent talks to you about “value” and “service,” but it sounds like more marketing talk.

It’s not. Your insurance agent really is there to help you. If ever there’s a good time to ask questions, to not stop until you understand everything, this is it! What could be more important than losing your home?

After you’ve written your homeowner’s policy, a few weeks later you get a thick packet in the mail. A document comprising a hundred pages or more gets removed from the envelope and you probably stow it away in a drawer. It might occur to you that some dark night when you’ve got no other reading material, that this long policy might make for some excellent reading to put you right to sleep. You’re right.

However, actually reading that policy can awaken you to a number of things, all of them sooner or later important, about your policy. Many people think that the document is constructed to be obtuse and “legalese” so that the insurance company can have their own loopholes to get out of coverages in court.

Did you know that the state department of insurance approves the types of coverage offered by those companies and will not let them wiggle out of things?

Those long, legalese documents contain plenty of added information about additional coverages that you have, of which you might never have been aware.

With this year’s prolific fire season, and especially the 3 fires surrounding the Santa Fe area right now, and excellent example of reading the fine print pops up: Prohibited Use.
It is a very real reality that thousands of people in our surrounding communities are being evacuated because of encroaching fire. In addition to the severe emotional hardship involved in distilling your belongings down to what will fit in a car, you worry additionally about having to locate to a mass shelter or a run down motel. This coverage is here to help you out in this time.

Prohibited Use, if you have it (which you likely do) is in the Section I – Additional Coverages portion of that long & boring document. Check your sub-sections under Loss of Use. You’ll find Prohibited Use, which from one of our companies reads thus:

We will pay the reasonable increase in living expenses necessary to maintain your normal standard of living and the loss of fair rental income when access to the residence premises is denied by civil authorities because of a loss to a neighboring premises caused by a peril we insure against.

Note that the language in your policy may be different.

To consider this coverage, think about:

    1. Does your normal standard of living include separate bedrooms, both a bath and a shower, a full kitchen and an outdoor entertainment area? Mine does. A small motel does not have that “normal standard of living.” (of course in the event of an evacuation, your lodging options may be limited – consider driving a bit further to have a little more comfort in this time of need)
    2. Access to premises denied by civil authorities. In my world, mandatory evacuation fits that description perfectly.
    3. A neighboring premises… caused by a peril we insure against. Does homeowners insure against fire? You betcha. Is the surrounding forest neighboring premises? You betcha

Nobody is suggesting that evacuating your home due to a fire is a vacation, but your homeowners insurance company is there to help – in the areas in which they specialize or are responsible – to take as much of the problem, discomfort and difficulty away by paying for you to reside in a location as much like your home and standard of living as what you left.

One important difference between policies to pay attention to will occur in the next sentence in your policy – and that is the length of time that coverage is provided for this. Hopefully, after that period of time, you’ll be able to return back to your home safe and sound.

The lesson here is – even though it may look daunting and unfriendly, actually sitting down and reading that long book of legalese can reveal a plethora of coverages that help you, not hurt you.

We really ARE here to help.

Tips to prepare for a wildfire

From our friends at Acuity Insurance comes this information, which we don’t want to have to think about, but it is better to consider this now and be prepared in advance. This summer has shown a preponderance of dry, drought conditions and high temperatures leading unfortunately to terrible fires burning around the Southwest.

Listed here are several suggestions that you can implement immediately. Others need to be considered at the time of construction or remodeling. You should also contact your local fire department, forestry office, emergency management office or building department for information about local fire laws, building codes and protection measures. Obtain local building codes and weed abatement ordinances for structures built near wooded areas.

Find Out What Your Fire Risk Is

Learn about the history of wildfire in your area. Be aware of recent weather. A long period without rain increases the risk of wildfire. Consider having a professional inspect your property and offer recommendations for reducing the wildfire risk. Determine your community’s ability to respond to wildfire.

  • Are roads leading to your property clearly marked?
  • Are the roads wide enough to allow firefighting equipment to get through?
  • Is your house number visible from the roadside?

Learn and teach safe fire practices.

  • Build fires away from nearby trees or bushes.
  • Always have a way to extinguish the fire quickly and completely.
  • Install smoke detectors on every level of your home and near sleeping areas.
  • Never leave a fire, even “just” a cigarette, burning unattended.
  • Avoid open burning completely, and especially during dry season.

Always be ready for an emergency evacuation.

  • Evacuation may be the only way to protect your family in a wildfire.
  • Know where to go and what to bring with you.
  • You should plan several escape routes in case roads are blocked by a wildfire.