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WHAT IS COVERED
What is covered by a policy depends upon which of the seven packages is selected and what inclusions or exemptions are
specifically written into the policy. You should read the policy carefully before purchasing the plan. Most homeowner policies
cover the following:
Structure- In most cases, a house is not considered adequately insured unless it is covered for at least 80 percent of the
replacement cost. If cost is no object the house structure should be insured for 100% of its replacement cost. Keep in mind,
however, that the purchase price of a home includes the cost of land and foundation which are not destroyed in a fire.
Some homeowners only insure their homes for the outstanding balance on their mortgages because that is what is required by
the lender. This may be unwise, because as a home increases in value and as the loan amount decreases, the homeowner's
liability for potential loss increases.
While 80 percent of the current replacement cost may provide adequate coverage, a homeowner should consider purchasing a
policy that provides for 100 percent coverage, especially if the difference is significant. The policyholder who opts for less than
the 80 percent coverage takes a potentially large risk in the event the home is totally destroyed since he is liable for whatever
portion of the home's full replacement cost is uninsured.
Some companies offer a *guaranteed replacement cost
coverage endorsement to homeowner policies. This arrangement provides the homeowner who purchases less than 100 percent coverage, but more than 80 percent, with full
replacement protection in the event of a total loss regardless of policy
limits.
* Most insurers require that the home be insured for at least
90% of the replacement cost estimate with this option. "Guaranteed Replacement
Cost Coverage" is a low cost option that you should include
on the dwelling and contents.
In many cases, the cost of a 100 percent replacement cost policy can be reduced if the homeowner is willing to assume
responsibility for minor losses through a deductible clause. The insurer pays only for that portion of the loss that exceeds the
deductible.
Landscaping- Generally, trees and plants surrounding the house are insured up to five percent of the level of coverage on the
structure. Additional insurance is almost always available at an extra cost. However, do not expect insurance to replace a 200
year-old oak tree with a duplicate, since that is impossible.
Personal Property- Normally, personal property is insured for up to 50 percent of the coverage on the house structure.
However, there are actual dollar limits on such items as jewelry, silverware, stamps and coin collections,
furs, golf equipment and computers. In order to adequately insure these items it is usually wise to purchase additional insurance coverage by way of a "floater" or "rider" policy.
These policies will independently insure specific items against theft, damage of any other type of loss in the home or away from
home. Most expensive items must be professionally appraised before they will be insured under a floater.
Temporary Home Expenses- If damage to your home requires that you live temporarily elsewhere, some or all of the extra
cost may be covered.
Personal Liability- Personal liability insurance is designed to protect the homeowner against a claim or lawsuit that could
devastate the homeowner financially. If, for example, a visitor slips and falls on the front porch, the homeowner could be sued
for hundreds of thousands of dollars. The homeowner also could be liable for damages caused by a tree in his yard falling and
damaging his neighbor's house.
In either event, the insurance company will pay the damages assessed against the homeowner up to the limits of the policy.
While insurers offer minimum coverage, a homeowner often can obtain considerably higher protection for only a few dollars
more per year in premium costs.
When reviewing an insurer's personal liability coverage, you should check what protection is provided and at what cost. You
should also find out if coverage extends to damage to personal property resulting from accidents that occur away from the
home, or while you are on vacation.
If a visitor is injured on your property and needs medical attention, a homeowners policy will pay for the visitor's medical
expenses regardless of whether the visitor or the homeowner was at fault. It is standard for insurance policies to provide
supplementary coverage that pays for minor damage to another person's property caused unintentionally by the homeowner or
another member of his family. A homeowner should ask if coverage is provided regardless of who is at fault. Most policies that
include supplementary coverage provide payments for damage caused intentionally by children under 13 years of age because it
is considered to be accidental. It should be noted that most homeowners policies do not pay for damage caused by an owner's
pet.
Under some "standard" policies liability insurance may be inadequate to protect against the full claims of persons injured on
your property. "Umbrella" policies are designed to extend your liability coverage. |
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DETERMINING HOW MUCH INSURANCE TO BUY
The first step in determining how much insurance protection to buy is to calculate the value of your home and personal
property.
Next, find out how much it would cost to replace your house and personal property. Your insurance agent or broker can help
you by providing formulas or worksheets. Also, consider hiring a professional appraiser to calculate the replacement cost.
When calculating any replacement cost keep in mind that what you spent to buy something will likely be very different from
what it will cost to replace. For example, clothing and shoe costs have escalated dramatically over the years.
Additionally, consider choosing a policy with a high deductible. With these policies you pay for all small damages or claims up
to the amount of the deductible, then the insurance company will cover amounts over the deductible.
By waving the insurance company's responsibility to pay for the smaller claims you receive the benefit of coverage for major or
catastrophic emergencies without having to pay the high costs associated with low deductibles. By raising the deductible, for
example, you may save up to 50% of the cost of your homeowners insurance. |
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FILING CLAIMS
It is not our intent to discourage anyone from filing a claim.
However, most people do not fully understand the consequences they
may face if their policy is canceled due to too many claims.
First and foremost, NO STANDARD COMPANY IS GOING TO WRITE YOU A
NEW POLICY WITH A MULTIPLE LOSS HISTORY DURING THE PAST 3 YEARS.
Some companies will only allow one weather related loss and there
are some that won't allow any. What this means is, you could be
forced to go through a HIGH RISK company in order to obtain
coverage and the cost could be double or more of what you were
paying.
People who suddenly find themselves in this situation are
usually those with "Low" deductibles. Insurance
companies look at frequency of claims over a certain period just
as much as they do the payout amounts. Three relatively small
claims within a few years could cause a company to either cancel
or non-renew a policy, while generally one large claim during the
same period would have no affect. This is because insurance
companies believe frequency shows a developing trend and if that
trend continues, the risk becomes greater.
Before you file a claim, decide on the severity of the damage
first. If it's relatively minor and doesn't affect the immediate
security of your home or family, you may want to consider fixing
or paying for the repairs yourself even if it exceeds your
deductible. This would be one less claim you would have on your
policy should you experience a catastrophic loss later on or run
into a string of bad luck. |
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WHAT ARE SCHEDULED ITEMS
Most policies have an "Any One Item" limit restriction
for certain types of losses. Therefore, any item, be it a
particular piece of jewelry, a computer, family heirloom, coin
collection or possibly silverware that exceeds the "Any One
Item" policy amount must be listed separated on a
"Policy Rider" or "Policy Supplement" as a
"Scheduled Item" in order to be sufficiently covered
should a loss occur. Be sure to verify what this "Limit"
is and be specific when asking your agent if a certain item would
be covered for its full or appraised value. |
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MAKING AN INVENTORY
Before and after buying homeowners insurance you need to prepare and maintain a list of personal possessions and their
estimated value. A thorough and up-to-date inventory list can save a significant amount of money in the event disaster does
strike and the homeowner must file a claim. A good inventory record also can be invaluable when you have to negotiate a
settlement with the insurance company, which will usually ask for evidence to back up claims.
A basic rule to follow is this: make a record of what you own, when you bought it, and what it cost. This may involve a lot of
leg work, but the results can be useful. Generally, household and personal possessions are insured for half the amount of
insurance on the structure. This means that if the home is insured for $100,000, the contents are insured up to a maximum of
$50,000. However, additional insurance coverage for the contents may be purchased.
There are several ways to make a list of household goods and possessions. You can walk through the house carrying a small
tape recorder. As you go through each room, describe all the furniture and valuables. Another method is to take photographs
of the goods and possessions and then store the photographs in a safe location away from the house, preferably in a safe
deposit box. Photos are good proof of ownership in the event an insurance adjuster questions a claim. Video cameras are also
being used with increasing frequency to record the contents both visually and with a verbal description that accompanies the
picture.
Another helpful suggestion is to keep sales receipts from purchases of household possessions- everything from clothing to
stereos. It also is a good idea to keep cancelled checks and credit card receipts as proof of an item's cost.
By using a comprehensive inventory of household goods and possessions, you can determine if an insurer's policies are
adequate and whether additional riders are needed to protect valuables. The list is extremely helpful in the event a disaster
occurs. Insurance experts note that many people simply cannot remember what they have. |
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TIPS TO REMEMBER
Keep in mind that housing market values and construction costs usually increase every year. Therefore, homeowner coverage
should be re-evaluated annually.
When shopping for a policy remember that a home is not considered adequately insured unless coverage is for at least 80
percent of the replacement cost.
There are limits to homeowners insurance that a policyholder should know. For example, most policies do not cover business
property in the event the homeowner conducts a business at home. Only by reading the policy can you be sure how far the
coverage extends.
When comparing home insurance policies, you should look for certain features that can save money. For example, ask if the
company offers premium discounts if the homeowner installs security devices such as a burglar alarm system. Other insurers
may give discounts if the homeowner uses identification devices to mark television sets, stereos, cameras and typewriters.
Discounts also may be available for installing smoke detectors. Your home should already have at least one smoke detector,
which may lower the premium slightly. Smoke
Detectors are required by law in most areas.
Some state insurance agencies provide consumer buyer's guides and complaint ratios for insurance companies that operate
within the state. If you have a question about your homeowners policy or insurance company, contact your:
Insurance Agent;
State insurance department;
Local Better Business Bureau; or
The National Insurance Consumers Org.
121 N. Payne Street, Alexandria, VA 22314. |
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