Homeowners Insurance Explained - Deductibles, Claims & Coverage Mistakes - Ep

Captive basically means you sign a contract with a certain company. For me, I'm with Farmers, so I have to sell Farmers. I can't sell any products outside of that. Whereas independent, you have the ability to partner with multiple companies and at that point you're more of a broker where you are looking at shopping around with different companies. Within AllRisk, we cover what's called Phillips of your sewer drains. So anything that originates within the foundation and then overflows through your toilets, sinks, bathtubs, that's covered with an AllRisk policy because it's not excluded. Whereas with the named perils, you have to add the backup of sewer and drain endorsement for them to cover. And typically that's going to have limitations, $5,000, $10,000, where with the AllRisk, it's up to you. I am John Roberts with the J. Roberts Insurance Agency. Welcome to the Working Class Roundup. Saddle up. Punch that clock. Let's ride. Welcome to the Working Class Roundup. I'm your host, cowboy Jody Collins. And with me today, I have a very, very special guest, a fellow insurance geek in the industry, Mr. John Roberts. How are you doing, buddy? I'm doing great. Glad to be here. All right, John. Thanks again for being here today. I really appreciate it. Again, I'm going to geek out with you because we speak insurance fees and I love that. But I do want to know your story. How did you get into the insurance industry? Yeah. You could say I was born into insurance. So my mom, she's been with State Farm for over 40 years now. So before I was born, she was in the claims department. For a while, she's now an agent with State Farm and has been for 25 years now. But funny little story on that, when she was pregnant with me, she was in the claims department and they had a conference up in Vail, a couple hours. I grew up in Denver. And while she's up there, a storm rolled through and she went into labor with me at this insurance conference. So yeah, it was kind of meant to be from there. Yeah. You came out of the womb. Denied. Denied. Yeah, exactly. Yeah. Yeah. That's awesome. Yeah. Cool. Yeah. So I just grew up around it. Fast forward 25 years, I was living up in Fort Collins at the time, but wanted to move back down to Denver, closer to family. And my mom always said, if you ever move back, I've got a position open for you. So decided to call her up and started working for my mom and her agency. And it's history from there. That's awesome. See, it's a legacy. That's cool. Yeah. That's kind of cool. What is it about the insurance industry that you love? I mean, because obviously you stayed in it, right? You saw your family in it and you decided, this is for me, this is my passion, this is my career. What was that? So, I mean, going back to when I first started with my mom, one of the first things I remember, she was dealing with a claim for one of our customers, Steve. So it had been about six months before his house caught fire and he lost the entire house, all the belongings. Him and his family had to be in a place for a year and a half while they rebuilt the home. And just seeing that whole process, seeing my mom when it happened, she was there that morning with them to help out as much as possible. And then just seeing how appreciative they were of the fact that State Farm at the time just took care of them, got them back to whole. And they were forever grateful for that. And they did have to leave State Farm temporarily because of the claim, but the moment they could, they immediately came back because of just how much they helped in that situation. That's cool. That's what drove me to it too. I can press that. I've always been good at sales. Anything I did, I used to sell Christmas trees and things like that. My wife bought Eskimo and ice, right? I could do that. But the thing I love about insurance is it was actually helping people. It was a thing that it's not something you want to buy, it's what you needed. Exactly. Yeah. And I love that. I love that. Here at the Working Class Roundup, what we do here is we interview small and medium-sized businesses in the great state of Texas and have them tell what their passion is, what their loves are, what inspires them. And then on the flip side, we talk about the nightmares and the horror stories that can happen within that industry. So now to our interview. Also what we like to do here is sometimes I Google the top 10 questions asked about your industry, my industry, right? And so this is the first question I want to ask you. And again, it'll help the working class audience, the nation out there, understand. Captive agent, independent agent, what's the difference? Yeah, that's a great question. So captive basically means you sign a contract with a certain company. For me, I'm with farmers, so I have to sell farmers. I can't sell any products outside of that. Whereas independent, you have the ability to partner with multiple companies. And at that point, you're more of a broker where you are looking at shopping around with different companies. So yeah, that's the main difference there is who you are contract with and able to write. Right. Now, this is also an important follow-up question to that. What is the benefit? Because I used to be captive too, so I know this answer as well, but I'm asking you for the nation. What is the benefit of going to a captive agent as opposed to a broker or an independent? The name, notoriety. Captive agents are typically the state farms, farmers, all states. So you have that built-in infrastructure there too with their systems and everything where when you're a broker, there are systems that you can get, but you have to go and get that on your own. And yeah, with captive, they provide the service. A lot of times they've got their... And I'll pause for a second. Because I'm not a broker, I don't know the entries. That's okay. You can ask me back. I can tell you what that is. And we, I mean, as farmers, we are captive, but we do have the ability through our contract to be able to go and shop around. Right. That's more of a recent change though. Same thing with where I used to work as a captive agent. They've adapted and allow it until a little bit because the market has changed a little bit. Yeah, exactly. It's be one company with all the changes going on. Yeah. State Farm's not number one anymore for a reason, right? Yeah, exactly. Yeah. So it makes sense. Yeah. What would you say, John, is your specialty, right? Because every insurance agency typically has specialties, what they know, like this is my bread and butter, this is what... You ask me on the street, I'm dropping a dime. What would that be? Definitely personal homes there is my specialty. And I would say farmers in particular, because of some of the things that we offer versus other companies where all risk, for example, versus name perils. Okay. You just dropped some serious insurance knowledge there that they test on. So explain what that means to the working class nation so that they understand. What is that first phrase you said? All risk. All risk. Define that for them. Yeah, exactly. So all risk basically means in the contract, we are going to cover everything unless we exclude it in the declarations page. Right. And that contrasts that to name perils, which is just that they named the perils in the declarations page and that's what they will cover. So with the all risk, you naturally just have a broader coverage because we have to show that that's specifically excluded for us to not cover. Where, yeah, with the name perils, a lot easier to prove and then you as a customer have to go in and try to show in this 50 page declarations page where they list that coverage. Perfect. So now I'm going to try, because I'm just a simple cowboy, right? So I'm going to translate what you just said. You're still using... You're still driving that industry lingo. So basically, working class nation, an insurance policy is a piece of paper with a promise on it. That if something bad happens or any of these items that are bad, it's going to be protected. And it also has on that piece of paper, all the things that it's not going to cover. And those are the exclusions. And so that's what we're talking about here, right? So now let's flip over to the other side. So what is the downside of that secondary contract that you don't offer? The name perils? That's the one. Mainly on a home, you're looking at specific coverages and that's where they usually lack. Right. Unless you have endorsements, which is just an added coverage on that policy. So for instance, like backup of sewer and drain. Okay. Great example. With an all risk, we cover what's called Phillips of your sewer and drains. So anything that originates within the foundation and then overflows through your toilets, sinks, bathtubs, that's covered with an all risk policy because it's not excluded. Whereas with the name perils, you have to add the backup of sewer and drain endorsement for them to cover. And typically that's going to have limitations, $5,000, $10,000, where with the all risk, it's up to your dwelling. See, in my household, I know. Well, that's funny because the best way I like to describe it, if you have a better way, please let me know, but we cover your poo. But if it's other people's poo, you need that endorsement. I wasn't going to say it like that, but okay. Then you went there. It's cool. All right, John. Well, hold on a second. We're going to go real quick to our sponsors and our partners for the show. And we'll be right back. Hey there. Working Class Nation, Jonathan with LeafyLink, your marketing geek in green. Are you a person that's not getting results from your social media and you're kind of getting tired of it or you're doing it yourself or you haven't someone else doing it? Well, that's something that we focus on. We strictly focus on video content for social media. Kind of like this podcast. This podcast is going to be blasted out to all different types of platforms and be seen by millions of people. So if you're interested in learning more, please click on the link in the description below and we'll see you on a Zoom call. Hey, Working Class Nation. Let's talk about general liability. It means if you walk into an office or somebody goes to the job site, not your employees, but just the average spectator or somebody walking by and they slip, trip, fall, or get poked with something, you're liable for that. And that's where general liability kicks in. Also can kick in if you provide a service that leaves the premises, like a product or something, you can have general liability to protect you that way. If you have a business like that, or if you have a startup like that, give us a call today. Link down below so we can help guide you through that. I'm Cowboy Jody Collins. Happy sales and happy trails. All right. Welcome back to the Working Class Roundup. We're here with John Roberts of the insurance agency side. I love this. So now we're going to talk a little bit more about insurance again, but from a different angle and a perspective, right? So what do you think is one of the biggest fallacies about insurance? Fallacies? Yeah. That price is important. Okay. Well, explain. Why is that a fallacy? Yeah. I mean, it's everybody, and obviously price needs to work within your budget, but if you're going solely based on price, just like I had mentioned, there's things, endorsements, lack of coverages that might be there that really, when it comes down to the important times when a claim happens, may not be covered. So yeah, it's great to save on the front end, but that can drastically affect you on the back end, thousands of dollars out of pocket if you don't have that properly covered. That's a very good one. I like the one, the fallacy that I always like to address is the, we're paying you premium, so you're making money on us. And I always like to clarify to people how insurance companies make money, right? Carriers, not agents, but carriers, right? Because I ride several carriers. And the reality is when you give, let's say you're making your premium, let's take $1 of that premium you paid that company, right? Most carriers, most carriers take 70 to 75 cents of that dollar and immediately put it in the bank for claims. That's the reality. They're reserved. Right, right. And then they take that quarter or 30 cents that's left over. And now they have to divide that into salaries, into paying claims adjusters, paying agents to sell the policies, renewals, their staff. And at the end of the day, they're hoping to make between 8 cents and 1 cent off of every dollar that they take that money and they invest it. And that's how insurance carriers make money is they invest all those 8 to 1 cents and they try to make money on it. Now there's two things that impede that. And that's why insurance rates go up is that one, if they write somebody and they're paying a dollar for a premium, but they're making a lot of claims, that means that they're not getting 8 to 1 cent. They're paying out 30 cents for every dollar, right? So they lose money there. The other thing is, is that if the stock market is not returning the percentages that they're expecting, now they're not making the money to offset the losses. And so that's why the rates have to go up. And so what advice would you give to a person that has a homeowner's policy or has an auto policy? Should they shop? I know the State Farm model was, hey, when I was a kid, my parents were with State Farm for 18 years. They never moved anything. Is that the way they should be doing things now? Or what's your opinion on that? So when looking at rates, a lot of factors go into it. But one of those factors is your insurance history. So how long you've been with the company, claims. So that is a factor. So you can shop, you know, every year. Doesn't necessarily going to make a huge impact, but mainly, you know, you got to make sure you're with a good company first and foremost. And then, yeah, if you can stay for a couple of years, that's probably the best time to then shop because you've built a consistent basis with this company. That looks good in another company's mind that you stay with the company for a couple of years before switching. You're not a frequent six month shopper. And because that does actually impact a lot of people don't know that. Yeah, it does. Yeah. There's a longevity discount. A lot of carriers are looking at how long were you with your prior carrier? And if it's every year you're moving, that actually could be a detriment, especially if you make a claim. It's even more of a detriment. Yeah. So I'm glad you brought that up. One more question. Really important that I want to address because it's the Texas market. We're talking Texas. And I think Texas really could be three different states, right? There's West Texas. Very true. There's North Texas. And there's there's the Houston market. Yeah. Is the hurricane windhill deductibles. A lot of people are getting culture shock when they move from California, from New York into Texas. And they're being told by insurance agents on homeowners now, not my business, but homeowners insurance. Oh, you have a two percent windhill deductible or you have a three percent windhill deductible. Yeah. You want to enlighten the nation on how that why that why is that applicable here in Texas? Why do you why that is why we have a higher. Yeah. Then where they came from, like in California, where it was a thousand dollars. Yeah. Yeah. Well, and like you alluded to, there's the Texas is huge and we have North Texas. We have Houston and then, you know, middle of Texas. And I would even say, you know, you've got West Texas, too. That's its own region. But insurance looks as Texas as a whole. And so we get a lot of hail up in North Texas area. You know, we're part of the tornado alley. Houston, you get all the the storm coming up from the Gulf. You have that West Texas. You still get hail out there a lot. So it's just accumulation of all these storms that we have. Wind and hail is definitely the most prevalent. We have the highest paid out claims for wind and hail in Texas. So that is insurance way of one, making sure that they can stay profitable by giving a little bit more self-insurance to the customer, just a little bit more that they are deductibles. The way you retain that. Yeah. Yeah. Deductible is the insurance way of forcing more self-insurance in that sense. And that's that's basically, yeah, they just because of what's going on with the amount of claims and stock market having this bad covid, all that this was an adjustment Texas had to make to be able to stay profitable, offer decent rates still and keep keep everything in line or close to in line as it was before. Yeah. You and I, we live in North Texas. And one of the things that you hit on earlier is that your policy has language that's full replacement costs, meaning that it's going to whatever it costs to replace that roof, they're going to pay it to make a brand new roof. Right. And I'm sorry to tell you, but another fallacy that I think is good to talk about is that replacement costs on a roof that is actually in the definition of insurance. We are about indemnity, making you bringing a whole to where you were before the loss with a replacement cost roof. We are actually putting you in a better position than when you were at that loss. So that in itself, from an insurance standpoint, was actually incorrect from the start. Now, the cat's out of the bag. We can't go back. But, yeah, that's another fallacy I think people have is the insurance was set up in a way that was a losing proposition for insurance with that for replacement costs there. Yeah, I agree. I agree. They came in. They said, oh, we've got this slick marketing thing. We're going to give you a new roof. Yeah. And then they didn't realize that sometimes that new roof comes every two years in certain markets. Yeah. I know people in Moore, Oklahoma, they had like, what, four tornadoes in a five, six year period. So, yeah, it's one of those things where the frequency that's one of the buzzwords and claims frequency and severity, which is the other one, how much they're paying out. And then with inflation, the way things have gone up recently. Yeah. Insurance are like, wait, we're buying new materials. So that's why they said, you know, you're going to retain a little bit more because, again, insurance really is for catastrophic loss. Right. It's not a little dings in this. It's not a warranty policy. Correct. I think that's that's one of those big fallacies that everybody, everybody in the nation needs to know is that it's not it's not a warranty thing. Don't don't make the claim if it's a dollar. I encourage my customers on small claims to try to do it out of pocket if you can, because that's going to impact you three to five years down the road. Eligibility with other companies. There's a lot surcharge when it comes to frequency. Yeah. So those small, frivolous claims, I do actually advise my customers to not file a claim in a wise counsel, wise counsel. I hope you guys are listening out there. This is the working class roundup. I really want to say thank you, John, for joining us today. It's been amazing knowledge. We'll definitely be bringing you back because there's a lot more questions always that we want to cover for that. But again, thank you for joining us. We wish you well. Happy sales. Happy trails. We're out.