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What should I include on my home insurance policy?

Insurance Writer — Thu, 06 Oct 2011 13:55:31 +0000

There are several different types of home insurance policies, and each has a standard set-up that insurance companies follow. The most common policy type is known as an HO-3 and includes the following coverages: Dwelling, Other Structures, Personal Property, Loss of Use, Personal Liability and Medical Payments. Typically these policies are a hybrid of open peril and named peril coverages and include endorsements providing your policy with replacement cost rather than actual cash value.

Most companies do not allow you to adjust the limits for the core coverages as they are set percentages of the dwelling limit. There are some, however, that may offer slightly different options. For example, personal property is typically 70% of the dwelling limit, but you may have the option to set it at 60% instead.

There are also optional endorsements that companies offer such as water back-up, identity fraud, and valuable items. A licensed home insurance agent can help you decide if there are any you may need to include on your policy.

What is “named peril” home insurance?

Insurance Writer — Thu, 06 Oct 2011 13:52:52 +0000

Perils, as they pertain to home insurance, are causes of loss such as theft or wind. In conjunction with your policy, the term “Named Peril” refers to the perils insured against. Home insurance policies offer coverages on either “Named Peril” or “All Peril” (sometimes referred to as “Open Peril” or “All Risk”) bases. “All Peril” covers all perils not excluded by the policy while “Named Peril” only covers specific named perils in the policy. A standard home insurance policy is usually “All Peril” on Dwelling and Other Structures and “Named Peril” on Personal Property.

While “All Peril” insures against more causes of loss, “Named Peril” coverages are the most common causes of loss and still offer good protection, especially for personal property. It can vary from company to company, but the perils insured against under “Named Peril” are:

fire or lightning
windstorm or hail
explosion
riot or civil commotion
aircraft
vehicles
smoke
vandalism or malicious mischief
theft
falling objects
weight of ice
snow or sleet
accidental discharge or overflow of water or steam
sudden and accidental tearing apart
cracking
burning or bulging
freezing
sudden and accidental damage from artificially generated electrical current
volcanic eruption

Your policy jacket will define the type of coverage you have as well as any exclusions.

I’m thinking about changing my deductible from $500 to $1,000, what effect will that have?

Insurance Writer — Mon, 03 Oct 2011 13:34:49 +0000

Increasing your deductible will actually lower your premium. The total amount will depend on your individual policy, but you will see a decrease in your monthly payments (or receive a prorated refund if either you or your mortgage company paid in full) after you confirm the change with your insurance company.

The main reason carrying a higher deductible gives you more of a discount is because you are taking on more of the risk inherent in the policy. Insurance companies are responsible for paying the amount it will take to repair or replace the damaged or lost property minus the deductible and subject to the limitations on the policy. With a higher deductible, the insured is pledging to pay more of the loss amount. As an example, say your roof is damaged in a windstorm and the adjuster determines it will take $3,000 to repair it. With a $500 deductible, the amount the insurance company pays out is $2,500 while the insured pays $500. With a $1,000 deductible in the same scenario, the insured receives $2,000 and is responsible for paying the remaining $1,000 to complete the repairs.

There are several deductible options beyond $500 and $1,000, so be sure to discuss them with your Licensed Agent and see which is best for you.

What does an insurance agent need to provide a home insurance quote?

Insurance Writer — Tue, 27 Sep 2011 20:50:35 +0000

Not as much as you may think! While an agent will need more information to provide you with an accurate insurance quote (which is really what you want), most of it is basic and many times they can access some information through online databases. If you are unsure on your home’s details, consider having an appraisal or other source containing your home’s specifications handy when getting a quote, otherwise just be ready to answer questions!

To start, your agent will need some personal information like your name, date of birth and address to run your claim history and, in some states, an insurance score report. From there they will ask you questions about your home ranging from the basic (square footage, year built, roof and exterior type, etc) to more in depth (kitchen/bathroom features, type of windows/flooring, etc). If you have a lot of custom features in your home you will want to let your agent know during this process as this information helps the agent work up your home’s replacement cost that will serve as the dwelling limit on the policy. Once the dwelling limit is set, the coverage amounts for other structures, personal property and loss of use can be determined as they are all certain percentages of the dwelling. Your agent will then likely consult you on the amount of coverage to carry for personal liability and medical payments as well as any additional coverage options or the endorsements that they suggest. Once all the coverages are in place, your quote should be ready!

While all companies are different, the basic quoting process is pretty similar across the board. All in all it is typically a quick and easy process that hopefully ends in you saving money! Get started on your Home Insurance quote today.

My home is only worth $80,000, but my insurance company is requiring me to insure it for $125,000, why?

Insurance Writer — Tue, 27 Sep 2011 20:03:26 +0000

This is a very common question, especially in today’s economy. More than likely your insurance company is requiring you to carry the replacement cost they determined based on your home’s specifications and location. While it may be tempting to only cover your home for its market value or what you owe on your mortgage, you should always be insured for 100% of the replacement cost. With the dwelling coverage at $80,000, your home is currently only insured for 64% of its replacement cost. If a home is insured for less than 80% of its replacement cost, the coverage reverts to actual cash value and in the event of a covered claim, rather than receiving the total amount it would cost to rebuild or repair the home, you would only receive the depreciated value. Typically this amount is lower than is needed to rebuild and you would be left to pay the remainder. It sounds like your insurance company is trying to prevent you from winding up in this scenario.

Keep in mind that construction costs tend to increase over time so the cost to rebuild your home with the same materials and quality can be higher than the actual market value, especially if you have an older or more customized home. Insurance is really a worst case scenario business and you want to be sure that should your home be destroyed, you have enough coverage to rebuild. Take a look at our Homeowners Insurance Calculator for an estimated range of dwelling coverage amounts for your home.

Does the type of flooring I have affect the cost of my home insurance?

Insurance Writer — Tue, 27 Sep 2011 19:59:39 +0000

Yes and no. Home insurance premiums are determined by a long list of factors that include, among many other things, the specifications of the home. While the flooring itself does not immediately affect the cost of your home insurance, it is considered when calculating how much it would cost to rebuild the home in the event of a total loss. This figure is known as replacement cost which then determines the dwelling limit, or Coverage A, on your policy. A home with custom features will typically require a higher replacement cost than a home with mostly standard features. For example, a home with custom bamboo flooring will cost more to rebuild than a home with mostly carpet. Since Coverages B, C and D (Other Structures, Personal Property and Loss of Use) are percentages of Coverage A, the total cost of the policy will be higher for a home with a higher replacement cost.

Most insurance agents utilize detailed cost estimators that take the information you provide (sq ft, construction type, number of bathrooms, location, etc) and return the replacement cost. The agent then knows how much coverage you need and can complete the policy. It’s important to have the right amount of coverage for your home so make sure to provide your licensed agent with as many details as you can when reviewing your policy.

What is the difference between Replacement Cost and Actual Cash Value?

Insurance Writer — Thu, 22 Sep 2011 15:36:12 +0000

Replacement Cost and Actual Cash Value are both types of replacement coverage that help to determine how much the insurance company pays out to either repair or replace damaged property in the event of a covered claim. The difference between the two essentially comes down to depreciation (the decrease in home or property value since it was purchased due to age or wear and tear). Actual Cash Value is the replacement cost of the property minus its depreciation, meaning the insured is left to pay the remainder of what the property costs to replace. With Replacement Cost, the insurance company does not factor in depreciation, but calculates the amount based on the actual cost to replace the damaged or destroyed item. Of course both types are subject to deductibles depending on your individual policy.

While Replacement Cost can be more expensive than Actual Cash Value, in the event of a covered claim, it is likely to more than pay for itself compared to the amount of depreciated value. It is possible for a policy to have Replacement Cost on one coverage and Actual Cash Value on another so you will want to discuss it with your agent to make sure you have the best possible coverage for your home and property. A home inventory can help you figure out how much property you have in your home and come in handy in the event of a claim.

What is a Third Party Loss?

Insurance Writer — Thu, 22 Sep 2011 15:34:54 +0000

A “Third Party Loss” is a situation that involves another person other than the insurer (company) and insured (homeowner, typically). More common are “First Party Losses” that involve only the insurer and insured such as roof damage to a covered home after a particularly bad storm. Third Party Losses occur most often when someone is injured on or by the insured’s property and decides to sue the insured for their damages.

The “Personal Liability” coverage on your homeowner’s policy will typically cover such claims, but it depends on the exclusions of the policy and the specific situation of the claim. Talk to your agent about the specifics of your policy and take a look at our Homeowners Insurance 101 for more information on the standard coverages for home insurance policies.

Is my furniture covered under my “Personal Property” or “Dwelling?”

Insurance Writer — Fri, 09 Sep 2011 19:48:28 +0000

Exact coverages differ from state to state and company to company, but Personal Property, also known as Coverage C, primarily pertains to the contents of your home and the other property items that you own. A common way to think of it is if you tipped your home on its side and shook it, everything that fell out would be considered your personal property, and that would typically include your furniture. Most companies will cover your personal property anywhere in the world with certain exclusions and special limits. There are also optional endorsements that you can add to your policy to extend or increase coverage, depending on your individual needs. You should discuss all of these with your agent to insure that your property is well covered.

Also take a look at our discussion of a home inventory and consider filling one out. Home Inventories are invaluable in the aftermath of a catastrophe and can help expedite the process with your insurance company. It can be difficult to take stock of everything lost after a claim, no matter the cause or amount, so having a list of what you have-along with a few pictures-in multiple safe locations is a very good idea.

Who does “Medical Payments” cover?

Insurance Writer — Fri, 09 Sep 2011 19:47:29 +0000

Medical Payments covers medical expenses for a friend or neighbor who is accidentally injured on the property and does not intend to sue you, but needs help with their medical bills. This coverage can also be applied if a friend or neighbor is injured off premises by your activities or by an animal owned by you or in your care. Medical Payments does not apply to you, your family members, or regular residents of your household except any residence employees.

Medical expenses that are typically covered are medical, surgical, x-ray, dental, ambulance, hospital, professional nursing, prosthetic devices and funeral services. Most policies offer $1,000 per occurrence, but that amount can be changed. Talk to your agent about what your policy offers and take a look at our Homeowners Insurance 101 for more information on a standard home policy.