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FAQ - Home Owners

Frequently asked questions with answers

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Homeowners insurance protects you if your home is damaged or destroyed and it covers your family's possessions. It can also provide you with compensation for liability claims, medical expenses, and other amounts that result from property damage and personal injury suffered by others.

By consistently paying insurance premiums, and satisfying the other requirements of your insurance company, you can protect yourself in the event of loss due to unforeseen and/or catastrophic events. Although natural occurrences cannot be predicted, at least you will sleep better at night knowing that homeowners insurance can save you from financial ruin.

You may need homeowner's insurance because your mortgage lender requires it. Yet, even if you own your home outright, you still need homeowners insurance to protect that which you can't afford to lose. The importance of having homeowners insurance is obvious.

You spend years building up a solid financial foundation for you and your family. All that hard work can become obsolete in minutes. There are virtually thousands of possible scenarios that could result in severe financial loss or even the loss of your home. Homeowner's insurance is designed to help prevent that result.

Homeowners insurance protects more than just the owner of the house. Generally, it protects anyone named on the policy, your spouse, residents of the home (other than renters), household employees, guests and visitors. The property insurance section of your homeowners policy protects more than just your actual home or dwelling. In most cases, your insurance company should reimburse you for damage or theft affecting your dwelling, any structures attached to the dwelling, structures on your premises that are not attached to the dwelling, personal property, loss of use of your dwelling, and liability if you or another insured are found responsible for personal injury or property damage to another.

There are a wide variety of damages, conditions, and costs that are not covered by homeowners insurance. Here are just a few examples of situations that are not covered by a homeowners insurance policy: the land underneath your home is damaged, your claim exceeds your maximum stated coverage amount, you have flood damage, you have losses related to business activities in your home, your liability results from injuries suffered by a tenant, your claim is covered by other insurance, or your claim was caused by someone else who is insured under your party.

Your homeowners policy may exclude coverage that you can purchase by adding an endorsement to your policy. Other coverage, such as flood insurance, has to be purchased under a separate insurance program. Still other coverage can be obtained by purchasing a policy that covers a broader list of perils. The cost of homeowner's insurance will depend upon the amount of your coverage, any endorsements you add to the policy, and the deductibles you choose.

Property coverage pays for:

  • Damages to your home
  • Damages to other structures on your property
  • Damages to your personal property

Liability coverage offers protection, including the cost of legal representation, from covered claims made against you or a resident family member for property damage or bodily injury. This section of your Homeowner's coverage is broken into two parts:

  • Personal Liability coverage - this coverage pays, up to your limit of liability, when you or a resident family member is found legally responsible for damage to the property of others or injuries to persons who are not members of your household. For example, a delivery person slips on the ice on your doorstep and is injured. If you are found legally responsible, your Personal Liability coverage will cover the damages (e.g., medical expenses, lost wages) incurred by the delivery person.
  • Medical Payments to Others - Pays medical bills if someone (outside of your family) is injured while on your property, or is injured by you or a resident family member away from your property. This coverage is available regardless of whether or not you are legally responsible for the injury.

There are seven basic kinds of home insurance (HO) policies and they're pretty much the same regardless of where you live (except for Texas). They tend to be defined by the perils they cover:

  1. (HO) Basic homeowners. Covers your dwelling and personal property against losses from 11 types of perils: fire or lightning, windstorm or hail, explosion, riot or civil commotion, aircraft, vehicles, smoke, vandalism or malicious mischief, theft, damage by glass or safety glazing material that is part of a building and volcanic eruption.
  2. (HO) Basic homeowners plus some. Covers dwelling and personal property against 11 perils plus six more: falling objects; weight of ice, snow or sleet; three categories of water-related damage from home utilities or appliances; and electrical-surge damage.
  3. (HO) Extended or special homeowners. Covers 17 stated perils plus any other peril not specified in your policy, except for flood, earthquake, war and nuclear accident.
  4. (HO) Renters' coverage. Covers only personal property from 17 listed perils.
  5. (HO) All risk coverage for building and personal property. This policy form isn't sold very often anymore.
  6. (HO) Condominium owner coverage. Covers personal property from 17 listed perils along with certain building items in which the unit owner might have an insurance interest.
  7. (HO) Basic older-home. Covers dwelling and personal property from 11 perils. Differs from HO-1 in that it covers repairs or actual cash values, not rebuilding costs. This is for homes where some historic or architectural aspects make the home's replacement cost significantly higher than its market value.

There are variations on these policies as well. For example, landlords can buy coverage that insures only their dwelling and not your personal property (which is what a tenant's renter's policy would cover). And you can get special policies to cover mobile homes (a k a manufactured housing). Most homes are covered by HO-2 and HO-3 type policies.

It is important to highlight the fact that flood and earthquake damage are not covered by your homeowners policy. Things that are covered include the following:

  • Fire or lightening
  • Windstorm or hail
  • Explosion
  • Riot or civil commotion
  • Damage caused by aircraft
  • Damage caused by vehicles
  • Smoke
  • Vandalism
  • Theft
  • Volcanic eruption

In addition, depending on the policy, other aspects will be covered.

If you want your belongings covered against damages caused by a flood, then you should invest in flood insurance. Basic homeowners insurance policies do not cover damage from flooding. Because flood damage happens so infrequently, most insurance companies do not think about writing flood coverage. The National Flood Insurance Program (NFIP) underwrites the overwhelming majority of flood policies in the United States. While most people should at least think about getting flood insurance, it is true that some people need it more than others. Geographical location is also an important factor in deciding weather or not to purchase the option.

General claims process:

Insured calls agent or claim service center to report initial claim.

Claim received in local claim office from service center.

The insured receives a call from the claim department to review loss facts and claim-handling procedures.

If an inspection is not needed, the adjuster requests information needed to process the claim and issue a settlement check.

If an inspection is needed, the claim is assigned to a field adjuster who contacts the insured and sets an appointment.

If a contractor is involved, the adjuster attempts to meet with the customer and the contractor to reach an agreed scope and dollar amount of loss. An estimate is prepared and a check is written for the damages.

If a contractor is not involved, the adjuster prepares an estimate and issues a check for the damages.

If the insured obtains a contractor after the loss is settled, the insured is instructed to have the contractor review the estimate and contact the adjuster with any discrepancies.

Every attempt is made to reach an agreed price with the contractor and resolve any discrepancies. If additional money is owed, a supplemental estimate is prepared and a check issued.

In most cases one claim will not increase your current rate. The mostly likely reason for an increased rate would be if the claim highlighted a risk on your property, such as a new pool or maybe a trampoline.

Insuring a home that is under construction is a very good idea. If you do not, you open yourself up to a great deal of risk if a fire, theft, or other event disrupts the construction process.

By purchasing a standard homeowners policy you will be able to cover your new home during its construction. This will cover you for any damages or theft that may occur. It is important to understand that this policy will not cover your personal property until the building is deemed 'secure' and 'lockable'. At this point coverage for your personal property can be added to the policy.

An additional option is to purchase a 'dwelling and fire' policy. This policy covers only damage incurred to the physical structure; it does not cover theft.

Once the building is complete, you should re-evaluate your coverage.

Homeowners insurance provides coverage for personal property, but only to a certain extent. The standard homeowners policy limits personal property coverage to 50 percent of the coverage amount on your home.

Homeowners policies set specific dollar limits for particular categories of personal property:

  • $200 for money, bank notes, bullion, gold, silver, coins, and metals
  • $1,000 for securities, accounts, deeds, letters of credit, notes other than bank notes, manuscripts, personal records, passports, tickets, and some other related items
  • $1,000 for the theft of jewelry, furs, watches, and precious and semi-precious stones
  • $2,000 for the theft of firearms
  • $2,500 for the theft of silverware, silver-plated ware, goldware, gold-plated ware, and pewterware
  • $2,500 for property at the residence used for business purposes
  • $250 for property used away from the residence for business purposes

There is not a standard coverage limit for artwork. It is commonly included with your other personal property, limited to a maximum of 50 percent of the dwelling coverage amount.

To increase personal property coverage you can purchase an endorsement, or a floater. In order to buy additional personal property coverage, you must be able to verify the cost and condition of the item.

The majority of insurers will offer a discount to your homeowners policy premium upon installation of a home security system. The amount of discount is dependent on the level of home security. For instance, dead bolt locks can mean a 5 percent discount, while a sophisticated security system can mean up to a 20 percent discount. It is beneficial to check with your insurer to see what discounts you may qualify for, or what you can do to decrease your premium.

Replacement coverage means that in the event of a loss, the insurance company will pay the cost to replace the property in respect to current rates. Replacement coverage varies depending on the company that supplies your insurance.

FAIR is an acronym for "Fair Access to Insurance Requirements". FAIR offers insurance to people in high-risk areas who might otherwise be denied coverage. FAIR is a pooling plan with policies for fire and allied perils. It is reinsured by the United States government.

It is highly unlikely that you could recall all that you have acquired over the years in the event that all was lost to a fire. Taking a home inventory will speed up the claim process, verify losses for your income tax return, and assist in the purchase of a fitting homeowners policy. For these reasons it is important to maintain an up-to-date home inventory. You can begin your inventory by making a list of your possessions, describing and labeling the cost of each item. Sales receipts, purchase contracts, and appraisals may prove helpful. Most importantly, store your home inventory in a safety deposit box, or in another secure location.

An umbrella liability policy provides an extra layer of liability protection. It picks up where normal liability coverage ends. In addition, it covers you for libel and slander.

Umbrella liability requires you have about $250,000 of liability insurance on your auto policy and $300,000 of liability insurance on your homeowners policy. When these are met an umbrella liability policy can be bought for $1 million of additional coverage.

According to the Centers for Disease Control and Prevention, there are approximately 4.7 million dog bites per year. These bites cost over $1 billion, with the property/casualty insurance industry paying roughly $310 million in 1999, about 20% of total homeowners insurance liability payouts. Insurers may charge more for certain breeds of dogs.

  • "Pit Bull"
  • Rottweiler
  • German Shepherd Dog
  • "Husky"
  • Malamute
  • Doberman Pinscher
  • Chow Chow
  • Great Dane
  • Saint Bernard