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June 2, 2014 By Insurance News Editor

What Is Covered By Standard Homeowners Insurance?

Understanding the four essential protections provided by your homeowners policy

Homeowners coverage provides financial protection against loss due to disasters, theft and accidents. Most standard policies include four essential types of coverage: Coverage for the structure of your home; Coverage for your personal belongings; Liability protection; Coverage for Additional Living Expenses

Coverage for the structure of your home

Your homeowners policy pays to repair or rebuild your home if it is damaged or destroyed by fire, hurricane, hail, lightning or other disasters listed in your policy. Most policies also cover detached structures such as a garage, tool shed or gazebo—generally for about 10 percent of the amount of insurance you have on the structure of the house.

A standard policy will not pay for damage caused by a flood, earthquake or routine wear and tear.

When purchasing coverage for the structure of your home, remember this simple guideline: Purchase enough coverage to rebuild your home.

Coverage for your personal belongings

Your furniture, clothes, sports equipment and other personal items are covered if they are stolen or destroyed by fire, hurricane or other insured disasters. The coverage is generally 50 to 70 percent of the insurance you have on the structure of the house.

The best way to determine if this is enough coverage is to conduct a home inventory.

Personal belongings coverage includes items stored off-premises—this means you are covered anywhere in the world. Some companies limit the amount to 10 percent of the amount of insurance you have for your possessions. You also have up to $500 of coverage for unauthorized use of your credit cards.

Expensive items like jewelry, furs, art, collectibles and silverware are covered, but there are usually dollar limits if they are stolen. To insure these items to their full value, purchase a special personal property endorsement or floater and insure the item for its officially appraised value.

Trees, plants and shrubs are also covered under standard homeowners insurance—generally for about $500 per item. Trees and plants are not covered for disease, or if they have been poorly maintained.

Liability covers you against lawsuits for bodily injury or property damage that you or family members cause to other people. It also pays for damage caused by your pets. So, if your son, daughter (or even your dog) accidentally ruins a neighbor’s expensive rug, you are covered. (However, if they destroy your rug, you’re out of luck.)

The liability portion of your policy pays for both the cost of defending you in court and any court awards—up to the limit stated in your policy documents.

Liability limits generally start at about $100,000, however, it’s a good idea to discuss whether you should purchase a higher level of protection with your insurance professional. If you have significant assets and want more coverage than is available under your homeowners policy, consider purchasing an umbrella or excess liability policy, which provides broader coverage and higher liability limits.

Your policy also provides no-fault medical coverage, so if a friend or neighbor is injured in your home, he or she can simply submit medical bills to your insurance company. This way, expenses can be paid without a liability claim being filed against you. It does not, however, pay the medical bills for your own family or your pet.

Additional living expenses (ALE)

ALE pays the additional costs of living away from home if you cannot live there due to damage from a an insured disaster. It covers hotel bills, restaurant meals and other costs, over and above your usual living expenses, incurred while your home is being rebuilt.

Keep in mind that the ALE coverage in your homeowners policy has limits—and some policies include a time limitation. However, these limits are separate from the amount available to rebuild or repair your home. Even if you use up your ALE your insurance company will still pay the full cost of rebuilding your home up to the policy limit.

If you rent out part of your house, ALE also covers you for the rent that you would have collected from your tenant if your home had not been destroyed.

Source: Insurance Information Institute, “What Is Covered by Standard Homeowners Insurance?” iii.org website. Accessed May 2019. https://www.iii.org/article/what-covered-standard-homeowners-policy

© Copyright 2019. All rights reserved. This content is strictly for informational purposes and although experts have prepared it, the reader should not substitute this information for professional insurance advice. If you have any questions, please consult your insurance professional before acting on any information presented. Read more.

Filed Under: Home, Personal, Theme 12, Theme 69

June 2, 2014 By Insurance News Editor

Five Insurance Mistakes To Avoid… And Still Save Money

Saving money feels good. And shopping around when you’re looking for insurance coverage is a great way to do it. However, simply reducing your coverage or dropping important coverages altogether is like diet without exercise—focused only on numbers, not on results. Don’t risk ending up dangerously underinsured and on the hook for much bigger bills in the event of a disaster.

Following are the five most common auto, home, flood and renters insurance mistakes people make, along with suggestions to avert those pitfalls while still saving money (we call them, “better ways to save”):

1. Insuring a home for its real estate value rather than for the cost of rebuilding. When real estate prices go down, some homeowners may think they can reduce the amount of insurance on their home. But insurance is designed to cover the cost of rebuilding, not the sales price of the home. You should make sure that you have enough coverage to completely rebuild your home and replace your belongings—no matter what the real estate market is doing.

A better way to save: Raise your deductible. An increase from $500 to $1,000 could save up to 25 percent on your premium payments.

2. Selecting an insurance company by price alone. It is important to choose a company with competitive prices. But be sure the insurer you choose is financially sound and provides good customer service.

A better way to save: Check the financial health of a company with independent rating agencies (some well-known ones: A.M. Best, Moody’s), and ask friends and family members about their experiences with insurers. Select an insurance company that will respond to your needs and handle claims fairly and efficiently.

3. Dropping flood insurance. Damage from flooding is not covered under standard homeowners and renters insurance policies. Coverage is available from the National Flood Insurance Program (NFIP), as well as from some private insurance companies. You may not be aware you’re at risk for flooding, but keep in mind that 25 percent of all flood losses occur in low risk areas. Furthermore, yearly weather patterns—spring runoff from melting winter snows, for example—can cause flooding.

A better way to save: Before purchasing a home, check with the NFIP to determine whether a property is situated in a flood zone; if so, you may want to consider a less risky area. If you are already living in a designated flood zone, look at mitigation efforts that can reduce your risk of flood damage and consider purchasing flood insurance. Additional information on flood insurance can be found at www.FloodSmart.gov.

4. Only purchasing the legally required amount of liability for your car. The minimum is just that—the least you can get away with by law. So buying only the minimum amount of liability means you are likely to pay more out-of-pocket later. And if you are sued, those costs can jeopardize your financial well-being.

A better way to save: Consider dropping collision and/or comprehensive coverage on older cars worth less than $1,000. The insurance industry and consumer groups generally recommend a minimum of $100,000 of bodily injury protection per person and $300,000 per accident.

5. Neglecting to buy renters insurance. A renters insurance policy covers your possessions and additional living expenses if you have to move out due to an insured disaster, such as a fire or hurricane. Equally important, it provides liability protection in the event someone is injured in your home and decides to sue.

A better way to save: Look into multi-policy discounts. Buying several policies with the same insurer, such as renters, auto, and life will generally provide savings.

Source: Insurance Information Institute, “Five Insurance Mistakes to Avoid… And Still Save Money” iii.org website. Accessed May, 2019. http://www.iii.org/articles/five-insurance-mistakes-to-avoid-and-still-save-money.html

© Copyright 2019.

All rights reserved. This content is strictly for informational purposes and although experts have prepared it, the reader should not substitute this information for professional insurance advice. If you have any questions, please consult your insurance professional before acting on any information presented. Read more.

Filed Under: Home, Personal, Theme 12

June 2, 2014 By Insurance News Editor

How Much Homeowners Insurance Do I Need?

Use these guidelines to protect your home and your assets with adequate insurance coverage

If disaster strikes, you’ll want enough homeowners insurance to rebuild the structure of your home, to help replace your belongings, to defray costs if you’re unable to live in your home and to protect your financial assets in the event of liability to others. Use these guidelines to help determine the coverage and amounts you need.

Determine how much insurance you need for your home’s structure

Standard homeowners policies provide coverage for disasters such as damage due to fire, lightning, hail and explosions. Those who live in areas where there is risk of flood or earthquakewill need coverage for those disasters, as well. In every case, you’ll want the limits on your policy to be high enough to cover the cost of rebuilding your home.

The price you paid for your home—or the current market price—may be more or less than the cost to rebuild. And if the limit of your insurance policy is based on your mortgage (as some banks require), it may not adequately cover the cost of rebuilding.

While your insurer will provide a recommended coverage limit for the structure of your home, it’s a good idea to educate yourself as well. To make sure your home has the right amount of structural coverage, consider:

Major factors that will impact home rebuilding costs

  • Local construction costs
  • The square footage of the structure

For a quick estimate of the amount of insurance you need, multiply the total square footage of your home by local, per-square-foot building costs. (Note that the land is not factored into rebuilding estimates.) To find out construction costs in your community, call your local real estate agent, builders association or insurance agent.

Details that can impact home rebuilding costs

  • The type of exterior wall construction—frame, masonry (brick or stone) or veneer
  • The style of the house, for example, ranch or colonial
  • The number of bathrooms and other rooms
  • The type of roof and materials used
  • Other structures on the premises such as garages, sheds
  • Special features such as fireplaces, exterior trim or arched windows
  • Whether the house—or a part of it—was custom built
  • Improvements you’ve made that have added value to your home, such as the addition of second bathroom, or a kitchen renovation

Other considerations

Whether or not your home is up to code

Building codes are updated periodically and may have changed significantly since your home was built. In the event of damage, you may be required to rebuild your home to the new codes and homeowners insurance policies (even a guaranteed replacement cost policy—see below) generally won’t pay for that extra expense. If you suspect that elements of your home are not up to current building codes, consider getting an endorsement to your policy called an Ordinance or Law, which pays a specified amount toward bringing a house up to code during a covered repair.

Whether your home is older with hard-to-replace features

Lovely, special features on older homes—like wall and ceiling moldings and carvings—are expensive to recreate and some insurance companies may not offer replacement policies for that reason.

If you own an older home, you may have to buy a modified replacement cost policy. This means that instead of repairing or replacing features typical of older homes—like plaster walls—with like materials, the policy will pay for repairs using today’s standard building materials and construction techniques.

Allowing for possible increased cost of building materials

Inflation can impact rebuilding costs. If you plan on owning your home for a while, consider adding an inflation guard clause to your policy. An inflation guard automatically adjusts the dwelling limit to reflect current construction costs in your area when you renew your insurance.

After a major catastrophe such as a hurricane or tornado, construction costs may rise suddenly because the price of building materials and construction workers increase due to the widespread demand. This price bump may push rebuilding costs above your homeowners policy limits and leave you short. To protect against this possibility, a guaranteed replacement cost policy will pay whatever it costs to rebuild your home as it was before the disaster. Similarly, an extended replacement cost policy will pay an extra 20 percent above the limits (possibly more, depending on the insurance company).

Determine how much insurance you need for your possessions

Most homeowners insurance policies provide coverage for your belongings at about 50 to 70 percent of the insurance on your dwelling. However, that standard amount may or may not be enough. To learn if you have enough coverage:

Conduct a home inventory of your personal possessions

In order to accurately assess the value of what you own, it’s highly advisable to conduct a home inventory. A detailed list of your belongings will not only help you figure out how much insurance you need, but it will also serve as a convenient record. In the event any or all of your stuff is stolen or damaged by a disaster an inventory will make filing a claim much easier.

There are several apps available to help you take a home inventory, and our article on how to create a home inventory can help, as well.

While you’re reviewing your possessions, think about whether you want to insure them for actual cash value (where the policy would pay less money for older items than you paid for them new) or for replacement cost (which would cover to replace the items). The price of replacement cost coverage for homeowners is about 10 percent more but is generally a worthwhile investment in the long run. (Note that flood insurance for belongings is only available on an actual cash value basis.)

If you think you need more coverage, contact your insurance professional and ask about higher limits for your personal possessions.

Take stock of your expensive items

There are limits on how much a standard homeowners insurance policy will cover for items such as jewelry, silverware, collectibles and furs. For example, jewelry coverage may be limited to under $2,000. Some insurance companies may also place a limit on what they will pay for computers.

Check your policy (or ask your insurance professional) for the limits of your coverage for any expensive items. If your home inventory includes items for which the limits are too low, consider buying a special personal property floater or an endorsement. This will allow you to insure valuables individually or as a collection, with significantly higher coverage limits.

Determine how much additional living expense insurance you need

Additional Living Expenses (ALE) is a very important feature of a standard homeowners insurance policy. If you can’t live in your home due to a fire, severe storm or other insured disaster, ALE pays the additional costs of temporarily living elsewhere. It covers hotel bills, restaurant meals and other living expenses incurred while your home is being rebuilt.

If you rent out part of your house, this coverage also reimburses you for the rent that you would have collected from your tenant if your home had not been destroyed.

Many policies provide coverage for about 20 percent of the insurance on your house. But ALE coverage limits vary from company to company. For example, there are policies that provide an unlimited amount of coverage, for a limited amount of time, while others may only set limits on the amount of coverage. In most cases, you can increase ALE coverage for an additional premium.

Determine how much liability insurance you need

The liability portion of homeowners insurance covers you against lawsuits for bodily injury or property damage that you or family members or pets cause to other people, as well as court costs incurred and damages awarded.

You should have enough liability insurance to protect your assets. Most homeowners insurance policies provide a minimum of $100,000 worth of liability insurance, but higher amounts are available and, increasingly, it is recommended that homeowners consider purchasing at least $300,000 to $500,000 worth of liability coverage.

If you own property and or have investments and savings that are worth more than the liability limits in your policy, consider purchasing a separate excess liability or umbrella policy.

Consider an umbrella or excess liability policy

Umbrella or excess liability policies provide coverage over and above your standard home (or auto) liability policy limits. These policies start to pay after you have used up the liability insurance in your underlying policy. In addition to providing additional dollar amount coverage, umbrella or excess liability often offers broader coverage than standard policies.

The cost of an umbrella policy depends on how much underlying insurance you have and the kind of risk you represent. The greater the underlying liability coverage you have, the cheaper the umbrella or excess policy. To write an umbrella or excess policy, most companies will require a minimum of $300,000 underlying liability insurance on your standard homeowners policy.

Source: Insurance Information Institute, “How much homeowners insurance do I need?” iii.org website. Accessed May, 2019. http://www.iii.org/individuals/homei/hbs/howmuch/

© Copyright 2019. All rights reserved. This content is strictly for informational purposes and although experts have prepared it, the reader should not substitute this information for professional insurance advice. If you have any questions, please consult your insurance professional before acting on any information presented. Read more.

Filed Under: Home, Personal, Theme 12, Theme 69

June 2, 2014 By Julian Aston

IN: Insuring Your Home: Many Things To Consider

Dear Valued Customer,

In this issue of “———————-” we focus on Homeowner’s Insurance.

How much homeowners insurance do you need? What things do you need to consider when you’re buying homeowner’s insurance? What types of disasters does your insurance cover? Would you be covered in the event of an earthquake, a flood, or other natural disaster? If you’re installing a pool, what type of insurance you need. And, if you’re renting the home you live in, you still have to use insurance to protect your possessions. Read all this and much more.

We appreciate your continued business and look forward to serving you.

Kind regards,

Filed Under: Home, Personal, Theme 12

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