Real Estate Investing

The fire departments of Detroit and other cities have been investigating more arsons lately. Coincidence? Perhaps, or perhaps not. But the Detroit Fire Department has noted that they issued twice as many arrest warrants on arson charges in 2007 than they did in 2005. Also, since 2004, the median home price in Detroit has dropped more than 17 percent to $145,173 and foreclosures increased more than 65 percent, according to MSN Money.

“Things were going great,” Detroit Fire Capt. Steve Varnas recalled of the local economy just a few years ago. “There were fewer desperate people in 2004 and 2005.”

Motives, according to lawyer David Brisco, include anger and bitterness over losing the home and also basic financial desperation. Many arson cases involve people who were very wealthy, but perhaps are no longer able to fund that lifestyle. Brisco investigates suspicious insurance claims for companies in five states.

“These are not necessarily lower-middle-class people,” Brisco tells MSN Money. “This is all over the place…”

The Economics of Financial Arson, a data compilation by two Baylor University professors from a 30-city study from 1991-1995, shed some light on the topic:

“Economic incentives do appear to matter for arson. We conclude that arson activity increases significantly when houses are insured for larger amounts and when homeowners encounter financial distress (as reflected in a rise in the local unemployment rate).”

Despite some debate as to whether there is a link between arson and impending foreclosure, MSN Money cites some recent examples of cases with suspicious timing.

• A Woodland Park, Colo. homeowner allegedly burned his home just before foreclosure eviction occurred.
• A Houston man allegedly faked a racial hate crime as a cover for arson on his home.
• A Russellville, Ind. woman allegedly offered her neighbor $5,000 to help torch her home and cover it up as a means of cashing in on an insurance policy.

So for people considering arson, just don’t. You should certainly make sure you have adequate insurance coverage, but don’t be in a rush to cash it in. You have other options to avoid foreclosure.

If you’re interested and have spare time, this is enlightening - a list of the average homeowners and renter’s insurance premiums by state. I was pleased to learn mine lined up with the average in my state. While you’re at it, you may want to check out Consumer Action’s tips on how to lower your premiums:

Higher deductible: As with anything, a higher deductible means a lower premium. Consumer Action says a higher deductible of even just a few hundred dollars can make a significant difference.

Buy sufficient insurance: It’s best to make sure your coverage amount is sufficient before you actually have to file a claim.

Ask: Simply asking your agent for a discount may open up some doors you didn’t even know existed. Furthermore, it could shed light on some additions you can make to your home in order to be eligible for said discounts. Anything from deadbolts on the doors and a home security system to your age and length of time as a customer with that particular company can actually save you money on your monthly premium! And a penny saved is truly a penny earned!

One can hardly think about real estate today without considering San Diego, where “Witch Fire” has consumed over 1,000 homes and businesses in the city alone. That’s not to mention the surrounding area to which the fire has rapidly spread, fueled by extremely dry conditions and Santana winds.

In the midst of such a horrible natural disaster, you can only watch, wait and hope that everyone gets out safely and is able to get back on their feet in time. Not to preach or trivialize the current disaster on the west coast, but today’s post will focus on the different types of insurance available to homeowners and what it all means. Do you know what your fine print says?

Homeowners insurance is an invaluable safeguard in a crisis such as the current one in California. An acquaintance whose family recently lost nearly everything in a house fire commented repeatedly on what a godsend the insurance company was. The company offered restoration services, not only for the structure itself but for the family’s personal belongings like clothes and furniture. It reconstructed the home’s extensive damage and helped pay for a hotel room to house the family temporarily.

There are several types of homeowners insurance available. Following natural disasters, horror stories often surface about insurance companies refusing to pay up on the basis of technicalities. So the best advice is to cross your t’s, dot your i’s, know what the fine print reads and keep your insurance paperwork in a fire-proof safe. The following is an explanation of the different types of homeowners insurance available, to help you prepare now rather than in hindsight. Individual homeowner’s policies may vary slightly from those listed below, so individual assessment is appropriate.

HO-1: “Basic coverage” that insures against fire, damage from lightning strikes, broken glass, rioting, theft, vandalism, etc.

HO-2: “Broad coverage” that offers protection against all of the above, alongside a few other specifics such as damage from the weight of snow or ice. It also adds coverage for plumbing, heating and air conditioning problems.

HO-3: The most common of all HO policies, this “special form” protects against all threats except a few specifics like flood, earthquake, nuclear and war. Supplementary policies may be purchased to cover these specific threats, and flood insurance is a legally mandated expense for those living in a geographic floodplain.

HO-4: “Renter’s policy” that insures all personal possessions inside the residence. It protects against all the risks listed in the HO-2 policy. It also offers assistance with related living expenses and medical payments. This policy does not cover the actual rental structure itself, as that is typically covered under a landlord’s policy purchased by the property owner.

HO-6: “Condominium coverage” that helps protect personal belongings and anything else not covered by the condo association policy. It does not cover the structure itself, as that should be covered by the association’s policy.

HO-8: Older homes are covered under this policy, particularly those with historic value. The policy does not cover reconstruction, as with older homes, that might cost much more than the home’s market value.