My first introduction to the business world was in insurance. I used to marvel at the blasé casualness of homeowners and Realtors® in particular when it came to insurance.
The ritual was always the same, beginning the moment the intercom buzzed and the words "Ineedit Now from Should-Have-Called-a-Week-Ago-Realty is on line 1." Immediately the clarions would sound and code yellow alert would be activated. After a cursory hello, the person on the other line would always blurt, "I have a closing tomorrow and I need a policy covering..."
Insurance back then, and to a lesser degree now, is far down on the to-do list, especially when a new home is about to be purchased. Its priority is banished to the recesses of the closing process because of its invisibility combined with our notions of invincibility (accidents and claims happen to others, not me) and the additional cost at a time when you've already bet the proverbial farm.
The popularity of buying insurance ranks up there -- or down there, depending on your attitude -- with being told "you're getting a colostomy, dude" and having to walk a long distance in wet shoes. What's changed about the underwriting and insuring process allows me to add another verse to the score of sweet ironies of business life now that I've found you.
The process of purchasing homeowners insurance and obtaining a loan has to a certain degree exchanged roles. Each has undergone a metamorphosis as though they've reincarnated with attributes of the other.
Back then, obtaining homeowner coverage was a much simpler process with elementary underwriting criteria. The underlying philosophy in vogue had little or no problem with paying out more for losses than it took in, hoping that other more profitable polices like life insurance would make up the difference.
At the same time, the strictures on procuring a loan were narrower and shallower than they are today. You literally had to have a downpayment and a good credit score before you could pass "go."
But this isn't your father's business environment any more. What was acceptable business practice yesterday might not be today, particularly when it comes to insuring your home. The careless underwriting practices of the past are gone.
The reasons for this are numerous. The bull market has waned and the easy profits have vanished. Claims paid for catastrophic losses such as hurricanes and tornadoes have increased at an alarming rate. Mold -- a minor issue and a rare occurrence in years past -- has forced open the insurance companies' sewn money pockets. The events of Sept. 11 and the faster-than-inflation increases in home value have forced an escalation in premiums collected and a severe tightening of the underwriting process, which now contemplates new approaches and levels of acceptability.
Next week I'll have more on how to protect yourself so you can protect yourself when insurance time rolls around -- which I hope will make it a little less of a mystery.
THIS WEEK'S TIP: Use Circuit Analyzer to Check for Faults
Here's a tip that could help save lives: Learn to take extra precaution around ungrounded electrical circuits.
No doubt you've noticed that most newer homes feature three-prong receptacles that accept three-prong grounded plugs. But just because receptacles are three-pronged doesn't mean they're grounded.
To protect yourself against shocks, use a circuit analyzer to check your outlets. Circuit analyzers plug into wall outlets and light up to indicate any faults. They cost about $8.
For appliances without three-prong plugs, use a grounding adapter that has two prongs and a lug to be screwed onto the cover-plate screw on the outlet.
And if you find that the wiring in your home isn't properly grounded, call an electrician. Even in an older home, an electrician can rewire your home and install a grounding rod. Depending on how old your wiring is, you might be able to have the wiring updated and a grounding rod installed for just a few hundred dollars.
Isn't your safety, and the safety of your children, worth it?
Home Work is a weekly column geared toward residential real estate.
