Interview with Eric Weedin: Homeowners Insurance Coverage Planning #158

 In this episode, Josh sits down with Eric Weedin, manager of Weedin Agency Inc., Loveland’s oldest insurance agency. Since 1956, the Weedin family has been helping Northern Colorado homeowners, families, and businesses protect what matters most. Together, Josh and Eric dive into the ins and outs of homeowners insurance—what’s changing in today’s market, what coverage homeowners should review, and how to make sure you’re properly protected. Whether you’re a first-time homebuyer or have owned your home for years, this conversation offers valuable insights from a trusted local expert with decades of experience.  Learn more at: Eric Weedin

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Transcript

Wiser Financial Advisor – Eric Weedin Interview on Insurance

Hi Everyone, and welcome to the Wiser Financial Advisor show with Josh Nelson, where we get real, we get honest, and we get clear about the financial world and your money. This is Josh Nelson, a Certified Financial Planner and founder and CEO of Keystone Financial Services. Let the financial fun begin! 

Recently, I had the opportunity to sit down with Eric Weedin, the manager of Weedin Agency, Loveland's oldest insurance agency, which was started back in 1956. It's been family owned since then, and Eric in particular is an insurance expert, not only with individual clients, but also throughout the country as he teaches insurance topics to financial professionals. We talked about homeowners’ insurance, a topic that's come up in our client conversations lately—how to plan ahead and how to understand why insurance premiums are going up so much, and also how to make sure that we don't get underinsured if we focus too much on price. I think it's information that's relevant to all of us, regardless of where you live. 

Josh: All right, I've got a special guest today, a friend and an insurance expert, Eric Weedin. Welcome, Eric.

Eric: Thank you, Josh. Glad to be here.

Josh: You’re a fellow financial industry pro. That's important, right? The networking aspect of our industry allows us to help each other's clients and help us do good planning, but also being connected makes it more fun. So, I appreciate you. 

Before we get started let’s get a quick intro. Who do you serve? How long have you been in the financial industry? And then we'll dig into homeowners’ insurance. We've all seen the impact of rising homeowner insurance premiums. We'll dig into that topic for what people should be thinking about. But first, give us a quick intro.

Eric: Sure. My name's Eric Weedin. I'm with the Weedin Insurance Agency here in Loveland, Colorado. Our agency was founded back in 1956 by my grandfather, Ken. My dad, Lawrence, has been here 43 years now. I've been here 23 years and working to service a large swath of Colorado, everyone from personal lines, which is like your home, your auto, your boat and toys, all the way up through some life insurance. We serve a lot of business clients as well. About 60% of what we do is commercial based. We are directly licensed in 16 states and do work across the country through our network, which gives us the ability to help people out in a variety of different situations. There are some that may be a bit of a challenge for us, but we do have partners in those locations. Properties in California or Florida are gonna be very tough to place, also coastal Texas, Louisiana, things like that. But partner agencies can help us get you a good referral for someone that can take good care of you if needed. We're an independent agency, which means that our agency works with a lot of different companies every single month. That gives us the ability to compare coverages or compare policies and see the shortcomings in one area or how we might fix that through the use of endorsements or coverage changes on other policies. We are a team of 15 here in Loveland, and that's what Weedin Agency does.

Josh: Yeah, that's great. And at Keystone Financial, we're a fiduciary and work with clients all over the country as well. About 80% of them live here, right? Probably within driving distance of our office, but the other 20% are every place else, including California, including Florida. I don't think we have any Louisiana clients, not yet anyway. People who started out with us have moved to be close to grandkids, or sometimes a work move, or maybe they wanted to move someplace warmer. And sometimes it’s second home situations. There’s no shortage of things that need to be insured. If you own property, which is probably most of us, you've seen some impact in homeowners’ insurance premium increases, sometimes really sharp increases. You're the pro, tell us why is that happening?

Eric: Well, we've started to see this all over the country. The primary driver has been what the industry calls convection weather events. Things like hailstorms or tornadoes, coastal hurricanes, dust storms, haboobs. There are all sorts of funny names for these wind shears and things that come up in different parts of the country. This weather behavior has traditionally been going along fairly level with a spike here and there and then a lull. But for the last 10 to 15 years, it's been on an upward track at a rather significant rate. 

A lot of insurance carriers were hoping it was just a string of bad luck and tried to fight adjusting rates to where they should have been. But unfortunately, we're seeing that most of these weather changes are here to stay. Therefore, the pricing has to be adjusted. You couple that with some of the inflationary factors that I know every one of you have seen, and that will affect homeowners’ insurance providers as well, because if we see a roof that used to be $20,000 10 years ago, and that roof is now costing 40 to $60,000, something has to give. We're seeing it give in a lot of different ways. 

The first and most obvious one is pricing. We've seen insurance carriers have to take a much more aggressive position when it comes to pricing homeowners’ insurance because they can't be profitable at the level they were before. I'm not asking you to feel sorry for an insurance company. No insurance company is truly going out of business as a countrywide thing. We see that in isolated areas where some of the carriers were hyper-focused on places like Florida, for example, but most carriers aren't going out of business overall. But the marketplace has become much more segmented. By that I mean micro-targeted, taking into account your employment, your age, your credit status, the age of your roof, the year your house was built. Carriers have started to mine this data, and they're able to make micro-adjustments in rates. As they've done that, they've also cut the margins they operate under in other lines of business. 

Homeowners’ insurance was a loss leader for a lot of insurance companies. Think the gallon of milk at the back of the store for 99 cents to get you in, hoping you walk by the potato chips and the ice cream and everything else you might want to buy. And it works. Homeowners’ insurance was treated for a long time. Then carriers realized they were just losing too much money in that line of business. And when I say homeowners, I'm also talking about things like rental properties and condo policies and things like that. They were losing too much money on that. So, the first thing that had to give was pricing. 

The second thing that had to give is selectivity in the market by the underwriters. Things that previously would have been acceptable for a carrier to take on as a new policy are no longer acceptable to them. The biggest thing we're seeing with this is roof age. The age of your roof is one of the biggest factors that will affect how much your premiums are on a homeowner's policy. In places like Colorado, we have it tough because in Colorado, we have less atmosphere to filter out solar radiation. We're finding that a manufacturer may make a 30-year shingle, but in the Colorado sun and thin atmosphere, the shingles become brittle at a rate that cuts that expected life in half. That 30-year or 50-year roof is now expected to maybe last 15. And the reason this matters is because it takes a lot smaller storm if we get a lot of hail.

Josh: Yeah, I know some people are praying for hail if their roof is getting to the end of its age.

Eric: I would be lying if I said I had never heard that in my 23 years.

Josh: I'm sure you hear it every day.

Eric: Yeah. The next thing we're seeing is reduction in coverage. Carriers started by forcing higher wind and hail deductibles on policies. It is going to vary by state. In Colorado, for the most part you're seeing almost standardized now a 1% wind and hail deductible as a requirement. But in states like Oklahoma where they're prone to tornadoes, we commonly see a 3% mandatory wind and hail deductible. So, 1 to 3% will probably be pretty standard on residential properties. And if any of your clients have commercial properties, they may already be accustomed to 5, 8, 10% wind and hail deductibles, significantly higher than the flat $1,000 deductible we were used to before. 

Another coverage reduction we've seen applied by many homeowners’ insurance carriers is a depreciation schedule or a roof payment schedule on a roof surface, or a roof being covered at what they call actual cash value, which would be the cost to replace the roof minus any applicable depreciation for the old roof that was already on the property. I hate to say it, but that is a reduction in coverage. 

Those are the three main ways insurance carriers have reacted to this crisis in pricing on homeowners’ insurance, and it's been tough. In Colorado, we have seen the average homeowner's policy at least double in the last four years. That's a rapid pace of increase considering most of my 23 years prior to this, 8, 10, 12% was a common increase in homeowners’ insurance policies. And when we see these increases, with homeowners’ policies in particular, part of it is rate, but part of it is that the actual coverage on the policy is stepping up with inflation. You've got thousands of dollars’ worth of more coverage on your policy because it will take more to replace things. 

Josh: Yeah, and that makes a difference, right? We don't even think about our insurance until something happens, and then all of a sudden it matters a lot what the coverage levels are and how the policy was designed. Most of us aren't educated when it comes to the inner workings of policies and whether we have the right coverage. So, if you're the average person out there, maybe you’ve been with one of the big name, national companies for years and years, or decades, not really thinking about it a whole lot. So how does the average person approach that, as far as knowing how to figure out if they’ve got the right policy with the right amounts of coverage? How do I know I'm not getting ripped off, and whether the company I’m with is not charging dramatically higher rates than some other company?

Eric: Yeah, Josh, that's a great question, with so many people being on those big advertising-based insurance companies. Keep in mind there are probably about 3,000 insurance companies in the United States. Most people, if we really put them to it, probably couldn't name more than 8 or 10 of them. Many of the big ones advertise in all the football games and car races. And many of those agents, while they're good people, they rarely learn insurance inside and out the way an independent agent does. We actually have to read policy to policy to policy, make comparison to comparison to comparison, and understand how the forms read. The insurance industry is complex. We're selling a promise, right? A promise to pay when something bad happens. But not all promises are the same. I'm going to say that straight up. And although the listeners of your podcast are bright and intelligent people, the problem is policies are not something that you can just open up, see page one and read, “It was the best of times, it was the worst of times,” flip to the end and read on the last page, “The butler did it.” You can't read it like you would a novel. There’s an actual skill set to reading the documents. 

We've got an insuring agreement, which is the bones of that promise to pay. We will pay, all sums as damages, blah, blah, blah, whatever it reads, which sounds great. And then they have a whole section of a policy that's simply definitions, right? These definitions are in the policy to take away ambiguity so that if you and the insurer disagree, they can go to court and the judge can say, “Hey, insurance company, you said this word means this in the policy.” If it's not defined, it becomes a much tougher thing. 

Then we have exceptions and exclusions. We have exceptions to exclusions, where we give back. We say we don't cover something, then we say, “But we will actually do this.” And then we may have special sub-limits for certain types of perils or based on certain types of property. And there are conditions, which are rules of the game, right? Under what guidelines do you as the policyholder have to operate? Under what guidelines does the insurance company have to operate? All this stuff in most states has to be justified to the division of insurance for that state. That is different from state to state, Josh. 

The governor gets to appoint the commissioner of insurance, which as long as you have a governor who's being thoughtful about the process, generally seems to work okay. In my 23 years, most of the insurance commissioners we've had in Colorado have been knowledgeable and probably appropriate for the time in the industry. In other states like California, it's a difficult environment because guess what? That insurance commissioner is elected. Who's going to vote for an insurance commissioner that says, “Hey, we need to make sure everyone raises the rates on everyone's policies so that these policies can remain viable and fundable vehicles to make sure that when bad things happen, the money’s there to pay for them.” You're probably not going to vote for that guy. You're going to probably vote for the one that says, “I'm not going to let those greedy insurance companies raise your rates.” And I understand that reaction. 

I mean, there are so many other fun things you could be doing with that money. I get it, but I also understand that insurance is a smaller, mostly predictable expense so that when a terrible, unpredictable event happens, the money is there to do what’s needed. And the beautiful thing is, we could pay on a policy for one day, and that night have the worst thing in the world happen, and the insurance company has to pay for it. They're never going to be able to recover the money from you, even if you'd probably stay with them the rest of your life, but they're still obligated, unlike an investment. So this is where I always try to make sure people have that separation in their head. Investments are one thing, but insurance and insurance programs are not an investment. People can make the argument that, “Well, if I just put all this money in premiums in my investment account, by now I'd have enough money to rebuild my house a couple of times.” That's great if it doesn't happen to you for 30, 40 years, but what happens when that bad thing happens tonight? That's the way we have to think about it. 

In my opinion, the best way to go is to work with an agent that has an understanding of other policies, can read other policies, can come at this from the standpoint of getting the coverage right for you. Insurance agents around the country will market to you and try to convince you that the only thing that matters is coming in cheaper. But if you work with an agent that focuses on getting the coverage right first, and then finding ways to manage your expenses that are not harmful, we can take away convenience coverages to reduce premium but make sure that the big picture is really covered. You don't want to build someone’s fortune, Josh, just to see it go away because they saved 15% or more on their car insurance, right? It's not worth it. So, people will come to us, and we take that castle you've helped them build, and then we put a moat around it. We may throw some sharks and alligators in that moat so that when bad things happen, we can protect those assets along with the efforts that you put forth for your clients.

Josh: Absolutely. Having a protection bucket, which includes insurance, and having an adequate cash reserve and making sure you're paying your debt off, things like that are important parts of a financial plan. But what I'm hearing lately is that somebody gets a renewal and they’re going to be paying 20% more, 40% more, something crazy like that. A knee jerk reaction could be, “I'm going to start calling around until I find somebody who will give me the cheapest rate.” But that way, more than likely they're getting stripped down coverage that may not be appropriate. It's tempting to just do things based off the price, but what is that actually paying for?

Eric: Exactly right, Josh. We see that all the time. Someone comes in and says, “Agent so-and-so down the street gave me this quote and it's less.” Well, it’s easy to see why it's less. There’s less coverage, less benefit to the insured, especially in times of catastrophe. And that is something that should not be looked at like it’s a minor thing. Minor things are stuff like windshield coverage. Most of us can finance our way out of having to replace a windshield out of pocket if we have to, but most of us are not able to self-finance if our house was undercovered and a total loss. 85% of the people in the Marshall Fire that happened in Colorado a few years ago, did not have enough insurance to rebuild. That means they have to sacrifice replacing the house the way they had it, buy something smaller, build something smaller. Even worse, many of these people had to take out additional mortgages. Many had to declare bankruptcy. It was just an ugly, ugly situation. 

I say start from the standpoint of, “I'd love to have $1000 deductible, but in reality, my lifestyle can handle 5 or $10,000,” –or whatever it is. Take that savings, go with it and then avoid using insurance for what some insurance carriers refer to as nuisance claims. Yeah, technically you could turn that claim in and get a payment for $1,500, but should you?

Josh:  Because the more claims you put in, the more the carrier is going to want to raise your premiums to make up for it.

Eric: And I understand that people are entitled to turn it in, if the damage exceeds their deductible by a single cent. They have a valid claim at that point. I'm not questioning that. I just question the wisdom of using it for these small things that weren't going to change your lifestyle. I mean, I don't want you to be out of home and I don't think any good agent does. I'm not suggesting that you sacrifice to get so much coverage that you're going to have to go eat ramen for the rest of your life because you can't afford real food anymore. These are the trade-offs that an agent who really gets it will have with you. They'll say, “Hey, if we do this or we take away this coverage, this is the consequence.” And just know that contrary to what the industry tells you, there's more that matters to us than just how much. What is covered and how it is covered are both better questions.

Josh: Yeah, whether you're working with us or with an independent insurance agent, you want to be working with somebody who has a consultative approach, someone who will take time to know your entire situation rather than just throwing out a product and coming up with the quick solution that'll get you to buy. Like having a high deductible for a lot of people, if they have no debt and have a bunch of cash in the bank to absorb smaller losses, that could be an easy place to go, when you're probably not going to file those claims anyway, on something small. For other people, a $2,000 out-of-pocket type expense could be financially devastating if they don't have a whole lot.

Eric: Yeah, it absolutely is. I tell this story because things like deductibles are very personal, right? My grandfather’s business partner, when he was doing real estate in the 60s, 70s, 80s, was one of the guys that inherited some of the Kool-Aid money. And Norm would come into our office and throw a new title down on my desk and say, “Eric, put this on my policy.” And I'd say, “Okay, what deductibles do you want, Norm?” He's like, “I don't want any coverage on the car. I just want to make sure if I hit someone and I get sued, I'm protected.” I'm like, “Well, that's crazy. You just spent $60,000 on a brand new car.” And he says, “Eric, you don't understand. If that car is gone today, I'm going to waddle my fat behind over to the dealership and write another check for another $60,000. It's not going to change my life one little bit.” Not everyone's in that situation. I also had a little lady with a car that was maybe worth $1,500 and she had $500 deductible on her car. And I'm like, “If your car's in an accident, you're going to get a check for 1000 bucks at best. Why are you paying the money for the comp and collision?” She said, “Well, Eric, if I can get that $1000, I can probably figure out how to get into a car of some kind. But if I don't get that $1000, I don't think I can recover.” She was in a much different financial situation. Now, most of us are going to fall somewhere in between those extremes, right? That's the bell curve. I'm talking about people on either end of that bell curve right there. But if you're on the more fortunate end of that bell curve where you do have that income, you should have that kind of conversation.

Josh: Yeah, and if people are self-directing, which is what I was doing before I came to you, they don’t get that level of service. Full disclosure, Eric's actually my insurance agent. And from when I was in college, my dad used one of the national carriers and didn't have an agent, right? How often did I hear from them? Did I have any idea what the coverage was or if it's appropriate? Nope. It's important to have somebody you trust. Not only somebody you trust and you like, but also someone who really knows what they're doing and takes the time to get to know your situation.

Eric: There was another old saying that said your best policy is a good insurance agent. I would say that’s true to a certain extent because even some of the big name guys can do a really good policy if you ask them for it. But unfortunately, many of them are trained in the culture of some of those companies where you just keep cutting coverage until you get to a price the customer's gonna accept—and then attempt to get them back to where they should be over the next several years. That’s fine unless you have a claim that night or that next month or in six months. And in no way am I saying that every agent from those big names are like that. There are many I know that are extraordinarily conscientious and very good people to work with. Just be cautious and figure out what this person's mindset is. Are they focused more on getting the coverage right, or are they just focused more on the sale? Do they have more to say than, “Look, it's cheaper,”?

Josh: Yeah, exactly. I think that's probably the best way to describe what we should be looking for as somebody who's being consultative and really looking out for our best interest, right? Which doesn't mean just the cheapest price.

Eric: Without question. Our whole mission statement at Weedin Agency is that we help put lives back together when bad things happen. We're under the philosophy that when we write that policy, the worst thing in the world could happen the next day, right? If we do that right, we can provide hope at a time of hopelessness or light in a time of darkness. And that's the rewarding part of what we do.

Josh: Yep, so takeaway, if you haven't looked at your insurance coverage for a while, you probably should. And maybe you have the best insurance agent in the world, which is great. Keep working with them, but have a conversation with them and say, “I really want to review this thing and see if I've got the right coverage for all my stuff—my toys, properties, businesses, things like that.” And if you don't, talk to somebody like Eric. What's the best way for people to find you, by the way, Eric?

Eric: People can find us on the internet at www.weedinagency.com . They can call our office. Unlike a lot of agents, we love meeting with our people and seeing them and talking to them. Our phone number's 970-667-2145.

Josh: Thank you. And I'll tell you too, the first thing Eric did when we talked was to look at my existing policies before we did anything.  He didn't try to sell me on anything. He looked at my current policies with me and we went from there. It was a super helpful process. And obviously it's not an area that probably any of us listening are going to be an expert in, enough to really know what we've got and what the options are out there. 

Eric: That expertise is really where we can come in or another highly qualified agent can come in. 

Josh: Absolutely. Well, thanks for the conversation, Eric. 

Eric: Thank you. I hope everything goes great for you and your clients here. It's an interesting time and I hope this has helped guide you in some way.

Josh: Appreciate it. Thank you. Have a great week and God bless. 

We love feedback and we'd love it if you would pass it on to me directly at josh@keystonefinancial.com . Also, please stay plugged in with us, get updates on episodes, and help us promote the podcast by rating us five stars and also subscribing to us at Apple Podcasts, Spotify, or your favorite podcast service. Keystone Financial Services and Eric Weedin are separate and non-affiliated parties. Keystone does not endorse or receive compensation from Eric Weedin. The views expressed represent the views of Eric Weedin. Views are subject to change. This material is for informational purposes only.