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Home Insurance Tips
Why You Need Homeowner's Insurance
The largest single investment most consumers make is in their
home. The consumer can protect their home, possessions, and
liability with a homeowners insurance policy. The Homeowner's
insurance policy is a package policy that combines more than one
type of insurance coverage in a single policy. There are four
types of coverage's that are contained in the homeowner's
policy: dwelling and personal property, personal liability,
medical payments, and additional living expenses.
Property Damage Coverage
Property damage coverage helps pay for damage to your home and
personal property. Other structures such as a detached garage, a
tool shed, or any other building on your property are usually
covered for 10% of the amount of coverage on your house.
Personal property coverage will pay for personal property
including household furniture, clothing, and other personal
belongings. The amount of insurance coverage is usually 50% of
the policy limit on your dwelling. The coverage is also limited
by the types of loss listed in the policy. The coverage only
pays the current cash value of the item destroyed, unless you
purchase replacement cost coverage. Your homeowner's policy also
provides off-premises coverage. This means that the policy
covers your belongings against theft even when they are not
inside your home.
Personal Liability Coverage
Homeowner's policies provide personal liability coverage that
applies to non-auto accidents on and off your property if the
injury or damage is cased by you, a member of your family, or
your pet. The liability coverage in your policy pays both for
the cost of defending you and paying for any damages the court
rules you must pay. Liability insurance does not have a
deductable that you must meet before your insurer begins to pay
losses. The basic liability coverage is usually $100,000 for
each occurrence. You can request higher limits that are
available for an additional cost.
Medical Payments Coverage
Medical payment coverage pays if someone outside your family is
injured at your home regardless of fault. This includes payment
for reasonable medical expenses incurred within one year from
the date of loss for a person who is injured in an accident in
your home. The coverage does not apply to you and members of
your household. The medical payments portion of your homeowner's
policy will also pay if you are involved in the injury of
another person away from your home in some limited
circumstances. Medical payments coverage limits are generally
$1,000 for each person.
Additional Living Expenses
If it is necessary for you to move into a motel
or apartment temporarily because of damage caused by a peril
covered in your policy, your insurance company will pay an
amount up to 20% of the policy limit on your dwelling for these
expenses. If you move in temporarily with a friend or relative
and do not have any extra expenses, you will not be paid any
additional living expenses by your insurance company.
Home Business
If you operate a home business full or part time you might be
uninsured and not realize it. Many home business owners believe
that their homeowner's insurance policy covers all of their home
business needs. You should not assume that your homeowner's
insurance policy will cover your home business. Your homeowner's
policy may provide coverage but probably only a maximum of
$2,500 for business equipment in the home and $250 away from the
premises.
The price you pay for your homeowners insurance can vary by
hundreds of dollars, depending on the insurance company you buy
your policy from. Here are some things to consider when buying
homeowners insurance.
1. Shop around
It will take some time, but could save you a good sum of money.
Ask your friends, check the Yellow Pages or contact your state
insurance department. National Association of Insurance
Commissioners (www.naic.org) has information to help you choose
an insurer in your state, including complaints. States often
make information available on typical rates charged by major
insurers and many states provide the frequency of consumer
complaints by company. Also check consumer guides, insurance
agents, companies and online insurance quote services. This will
give you an idea of price ranges and tell you which companies
have the lowest prices. But don't consider price alone. The
insurer you select should offer a fair price and deliver the
quality service you would expect if you needed assistance in
filing a claim. So in assessing service quality, use the
complaint information cited above and talk to a number of
insurers to get a feeling for the type of service they give. Ask
them what they would do to lower your costs. Check the financial
stability of the companies you are considering with rating
companies such as A.M. Best (www.ambest.com) and Standard &
Poors (www.standardandpoors.com) and consult consumer magazines.
When you've narrowed the field to three insurers, get price
quotes.
2. Raise your deductible
Deductibles are the amount of money you have to pay toward a
loss before your insurance company starts to pay a claim,
according to the terms of your policy. The higher your
deductible, the more money you can save on your premiums.
Nowadays, most insurance companies recommend a deductible of at
least $500. If you can afford to raise your deductible to
$1,000, you may save as much as 25 percent. Remember, if you
live in a disaster-prone area, your insurance policy may have a
separate deductible for certain kinds of damage. If you live
near the coast in the East, you may have a separate windstorm
deductible; if you live in a state vulnerable to hail storms,
you may have a separate deductible for hail; and if you live in
an earthquake-prone area, your earthquake policy has a
deductible.
3. Don't confuse what you paid for your house with rebuilding
costs
The land under your house isn't at risk from theft, windstorm,
fire and the other perils covered in your homeowners policy. So
don't include its value in deciding how much homeowners
insurance to buy. If you do, you will pay a higher premium than
you should.
4. Buy your home and auto policies from the same insurer
Some companies that sell homeowners, auto and liability coverage
will take 5 to 15 percent off your premium if you buy two or
more policies from them. But make certain this combined price is
lower than buying the different coverage's from different
companies.
5. Make your home more disaster resistant
Find out from your insurance agent or company representative
what steps you can take to make your home more resistant to
windstorms and other natural disasters. You may be able to save
on your premiums by adding storm shutters, reinforcing your roof
or buying stronger roofing materials. Older homes can be
retrofitted to make them better able to withstand earthquakes.
In addition, consider modernizing your heating, plumbing and
electrical systems to reduce the risk of fire and water damage.
6. Improve your home security
You can usually get discounts of at least 5 percent for a smoke
detector, burglar alarm or dead-bolt locks. Some companies offer
to cut your premium by as much as 15 or 20 percent if you
install a sophisticated sprinkler system and a fire and burglar
alarm that rings at the police, fire or other monitoring
stations. These systems aren't cheap and not every system
qualifies for a discount. Before you buy such a system, find out
what kind your insurer recommends, how much the device would
cost and how much you'd save on premiums.
7. Seek out other discounts
Companies offer several types of discounts, but
they don't all offer the same discount or the same amount of
discount in all states. For example, since retired people stay
at home more than working people they are less likely to be
burglarized and may spot fires sooner, too. Retired people also
have more time for maintaining their homes. If you're at least
55 years old and retired, you may qualify for a discount of up
to 10 percent at some companies. Some employers and professional
associations administer group insurance programs that may offer
a better deal than you can get elsewhere.
8. Maintain a good credit record
Establishing a solid credit history can cut your insurance
costs. Insurers are increasingly using credit information to
price homeowners insurance policies. In most states, your
insurer must advise you of any adverse action, such as a higher
rate, at which time you should verify the accuracy of the
information on which the insurer relied. To protect your credit
standing, pay your bills on time, don't obtain more credit than
you need and keep your credit balances as low as possible. Check
your credit record on a regular basis and have any errors
corrected promptly so that your record remains accurate.
9. Stay with the same insurer
If you've kept your coverage with a company for several years,
you may receive a special discount for being a long-term
policyholder. Some insurers will reduce their premiums by 5
percent if you stay with them for three to five years and by 10
percent if you remain a policyholder for six years or more. But
make certain to periodically compare this price with that of
other policies.
10. Review the limits in your policy and the value of your
possessions at least once a year
You want your policy to cover any major purchases or additions
to your home. But you don't want to spend money for coverage you
don't need. If your five-year-old fur coat is no longer worth
the $5,000 you paid for it, you'll want to reduce or cancel your
floater (extra insurance for items whose full value is not
covered by standard homeowners policies such as expensive
jewelry, high-end computers and valuable art work) and pocket
the difference.
11. Look for private insurance if you are in a government
plan
If you live in a high-risk area -- say, one that is especially
vulnerable to coastal storms, fires, or crime -- and have been
buying your homeowners insurance through a government plan, you
should check with an insurance agent or company representative
or contact your state department of insurance for the names of
companies that might be interested in your business. You may
find that there are steps you can take that would allow you to
buy insurance at a lower price in the private market.
12. When you're buying a home, consider the cost of
homeowners insurance
You may pay less for insurance if you buy a house
close to a fire hydrant or in a community that has a
professional rather than a volunteer fire department. It may
also be cheaper if your homes electrical, heating and plumbing
systems are less than 10 years old. If you live in the East,
consider a brick home because it's more wind resistant. If you
live in an earthquake-prone area, look for a wooden frame house
because it is more likely to withstand this type of disaster.
Choosing wisely could cut your premiums by 5 to 15 percent.
Check the CLUE (Comprehensive Loss Underwriting Exchange) report
of the home you are thinking of buying. These reports contain
the insurance claim history of the property and can help you
judge some of the problems the house may have. Remember that
flood insurance and earthquake damage are not covered by a
standard homeowners policy. If you buy a house in a flood-prone
area, you'll have to pay for a flood insurance policy that costs
an average of $400 a year. The Federal Emergency Management
Agency provides useful information on flood insurance on its Web
site at www.fema.gov/nfip. A separate earthquake policy is
available from most insurance companies. The cost of the
coverage will depend on the likelihood of earthquakes in your
area.
If you have questions about insurance for any of your
possessions, be sure to ask your agent or company representative
when you're shopping around for a policy. For example, if you
run a business out of your home, be sure to discuss coverage for
that business. Most homeowners policies cover business equipment
in the home, but only up to $2,500 and they offer no business
liability insurance. Although you want to lower your homeowners
insurance cost, you also want to make certain you have all the
coverage you need.
Common Questions Asked by Homeowners about
Insurance
If a fire, flood, earthquake, or some other natural disaster
were to destroy or damage your home, would you have the right
insurance coverage to rebuild your house? Based on the questions
consumers most frequently ask, this explains what is covered in
a standard homeowners policy and what is not. Where gaps in
coverage exist, it tells you how to fill them. To simplify
explanations, assume that you have a policy known as
Homeowners-3 (HO-3), the most common homeowners policy in the
United States. Find out what type of homeowners policy you have.
If you have a different policy, you should review your options
in question #17.
1: Am I covered for direct losses due to fire, lightning,
tornadoes, wind storms, hail, explosions, smoke, vandalism and
theft?
Yes. The HO-3 provides broad coverage for these and other
disasters or perils, as they are called in the policy, including
all those listed in the question. You should check the dollar
limits of insurance in your policy and make sure you are
comfortable with the amount of insurance you have for specific
items. Also, if you live near the Atlantic or Gulf coasts there
may be some restrictions on your coverage for wind damage. Ask
your agent about windstorm/hurricane deductibles. In areas prone
to hailstorms, you may have a specific hail damage deductible.
2: Are my jewelry and other valuables covered?
The standard policy provides only from $1,000 to
$2,000 for theft of jewelry. If your jewelry is worth a lot
more, you should purchase higher limits. You may wish to add a
floater to your policy to cover specific pieces of jewelry and
other expensive possessions such as paintings, electronic
equipment, stamp collections or silverware, for example. The
floater will provide both higher limits and protect you from
additional risks, not covered in your normal policy.
3: If my house is totally destroyed in a fire and I have
$150,000 worth of insurance to cover the structure, will this be
enough to rebuild my home?
If the cost of rebuilding your home is equal to or less than
$150,000 you would have enough coverage. The HO-3 policy pays
for structural damage on a replacement cost basis. If the cost
of replacing your home is, say, $120,000, then that is all the
insurance you need. On the other hand if the cost of rebuilding
your home is $180,000, then you will be short $30,000.
If you live in an area that is frequently hit by major storms,
ask you insurance company about an extended or guaranteed
replacement cost policy. This will provide a certain amount over
the policy limit to rebuild your home so that if building costs
go up unexpectedly, due to high demand for contractors and
materials, you will have extra funds to cover the bill.
If you choose not to rebuild your home, you will receive the
replacement cost of your home, less depreciation. This is called
actual cash value. You should make sure that the amount of
insurance you have will cover the cost of rebuilding your house.
You can find out what this cost is by talking to your real
estate agent or builders in your area.
Do not use the price of your house as the basis
for the amount of insurance you purchase. The market price of
your house includes the value of the land on which the house is
situated. In almost all cases, the land will still be there
after a disaster, so you do not need to insure it. You only need
to insure the structure.
4: Am I covered for flood damage?
No. If you live in a flood-prone area it may be wise to purchase
flood insurance. Flood insurance is provided by the federal
government, under a program run by the Federal Insurance
Administration. In some parts of the country, homes can be
damaged or destroyed by mudslides. This risk is also covered
under flood policies. Contact your agent or company
representative to get this insurance or call the Federal
Emergency Management Agency at 1-800-427-4661 or visit its Web
site at www.fema.gov.
5: A pipe bursts and water flows all over my floors. Am I
covered?
Yes. The HO-3 covers you for accidental discharge of water from
a plumbing system. You should check your plumbing and heating
systems once a year. While you are covered for damage, who needs
the mess and hassle?
6: What if water seeps into my basement from the ground, am I
covered?
No. Water seepage is excluded under the HO-3. And if the water
seepage is not due to a flood you will not be covered under a
flood policy. Seepage is viewed as a maintenance issue and is
not covered by insurance. You should see a contractor about
waterproofing your basement.
7: Am I covered for earthquake damage?
No. Earthquake coverage is sold as additional coverage to the
homeowners policy. To find out whether you should buy this
insurance, talk to your agent or company representative. The
cost of this coverage can vary significantly from one area to
another, depending on the likelihood of a major earthquake.
8: A neighbor slips on my sidewalk or falls down my porch
steps and threatens to take me to court for damages. Does my
policy protect me?
Yes. The policy will pay for damages, if a fall or other
accident on your property is the result of your negligence. It
will also pay for the legal costs of defending you against a
claim. Also, the medical payments part of your homeowners policy
will cover medical expenses, if a neighbor or guest is injured
on your property. You should check to see how much liability
protection you have. The standard amount is $100,000. If you
feel you need more, consider purchasing higher limits.
9: A tree falls and damages my roof during a
storm. Am I covered?
Yes. You are covered for the damage to your roof. You are also
covered for the removal of the tree, generally up to a $500
limit. You should cut down dead or dying trees close to your
house and prune branches that are near your house. It's true
that your insurance covers damage, but falling trees and
branches can also injure your family.
10: During a storm, a tree falls but does no damage to my
property. Am I covered for the cost of removing the tree?
Your trees and shrubs are covered for losses due to risks like
vandalism, theft and fire, but not wind damage. However, if a
fallen tree blocks access to your home you may be covered for
its removal. Decide if you need extra insurance for the trees,
plants and shrubs on your property. You may be able to purchase
extra insurance, which will not only cover the cost of removing
fallen trees, but will also cover the cost of replacing trees,
and other plants.
11: If a storm causes a power outage and all the food in my
refrigerator or freezer is spoiled and must be thrown out, can I
make a claim?
The general answer is no. However, there are a
number of exceptions. In some states, food spoilage is covered
under the homeowners policy. In addition, if the power loss is
due to a break in a power line on or close to your property, you
may be covered. You should check with your agent to find out
whether you are covered for food spoilage in your state. If not,
you can add food spoilage coverage to your policy for an
additional premium.
12: I have children away at college. Are they covered by my
homeowners insurance?
If they're full-time college students and part of your
household, your insurance generally provides some coverage in a
dorm, typically 10 percent of the contents limit. If they live
off campus, some companies may not provide this limited coverage
if the apartment is rented in the students name.
13: My golf clubs are stolen from the trunk of my car. Does
my homeowners policy cover the loss?
Yes. The HO-3 covers your personal property while it is anywhere
in the world. However, if your golf clubs are old, you will only
get their current value, which may not be enough to purchase a
new set. Consider buying a replacement cost endorsement for your
personal property. This way you will get what it costs to
replace the golf clubs, less the applicable deductible.
14: I have a small power boat. If it is stolen, am I covered?
What if there is a boating accident and I get sued? Am I covered
for that?
Whether or not you are covered for either theft
or liability depends on the size of the boat, the horsepower of
the engine and your insurance company. Coverage for small boats
under homeowners policies varies significantly. Ask your
insurance representative whether you need a Boat owners policy.
15: My house is close to the ocean. I've heard that if it is
destroyed by the wind, the town's new building code requires me
to rebuild the house on stilts. This will add $30,000 to the
cost of rebuilding my house. Am I covered for this extra cost?
No. The HO-3 excludes costs caused by ordinances or laws that
regulate the construction of buildings. You can purchase an
Ordinance or Law endorsement. This will cover the extra costs
involved in meeting new building codes.
16: Am I covered for Acts of God?
Sometimes. The term Acts of God is not specifically mentioned in
homeowners insurance policies. It usually refers to natural
disasters like hurricanes and tornadoes, as opposed to man-made
acts, like theft and auto accidents. Some natural disasters,
such as damage from windstorms, hail, lightning and volcanic
eruptions, are covered under homeowners insurance. Damage from
floods and earthquakes is not.
17: What should I do if my policy provides
less coverage than the HO-3?
Review your coverage with your agent. Some older policies
provide less coverage than the HO-3. They may not provide
coverage for water damage, theft, or liability. They may also
provide coverage for the house on an actual cash value basis,
rather than a replacement cost basis.
Actual Cash Value means replacement cost less
depreciation. For example, if your roof is destroyed in a storm,
the insurance will only pay for the cost of a new roof less the
amount of depreciation of the old roof. If your roof was in
great shape, this deduction will not be large. However, if the
roof was old and worn out, the deduction for depreciation may be
significant. You should try to get an HO-3.
Contents
PATCH
Independent Home Inspections, LLC
Serving Columbus and Central Ohio
Rick A. Harrington
13514 Falmouth Ave
Pickerington, Ohio 43147
(614) 565-4962
(614) 768-1190 fax
Home Inspections
Thermal Imaging (Infrared)
Central Ohio Certified Home Inspections
