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The 10 Most Asked Questions About Homeowners Insurance Answered:Introduction
The more you know about homeowner's insurance, the better you'll be able to decide what kind of insurance is best for you. That's why we - the companies of the Utica National Insurance Group - have put together this booklet of basic information: the answers to the questions we're most often asked by homeowners like yourself. Take a few minutes to read through them carefully and you'll be prepared to sit down with your agent and together select the coverages that meet your particular requirements. A few minutes now can save you a lot of time - and possibly money - later on.
Question 1:
Why is it important to have homeowner's insurance?
Answer:
A home is the largest, most important investment most people will make. Basically, homeowner's insurance is a way of protecting that investment. It insures your house, your garage, and any other buildings on the property against most major dangers. It also protects the contents of your home - your family's household goods and personal belongings - from theft and damage, both at home and away from home.
Another advantage of homeowner's insurance is personal liability coverage. You need it because, as a property owner, you can be held legally responsible - personally liable - for bodily injury to visitors while they are on your property. Your homeowner's insurance will cover legal claims brought against you for such injury and will pay the damages if you are proved to be at fault. Regardless of who is at fault, your homeowner's insurance will pay medical bills in case of bodily injury to, others on your property. Your personal liability coverage extends to cover all bodily injury and property damage caused by you, a family member or a pet, at home or elsewhere.
Refer to your policy for the specific limits of coverages it provides in these areas.
To sum up, homeowner's insurance protects you two ways: it covers you for damage to your home and its contents, and it also provides personal liability coverage.
Question 2:
What basic types of homeowner's policies are available?
Answer:
Some basic types are now standard for most homes, although you should check with your insurance company to see which policies it offers. Each type of policy can be written with varying limits of coverages, depending on the value of your property and your personal decision.
HOMEOWNERS 2:PROPERTY PROTECTION under H02 insures your property against these perils: fire, lightning, windstorm, hail, riot or civil commotion, explosion, theft, and vandalism. There is also coverage for non-owned vehicle damage, damage by aircraft, smoke from faulty cooking or heating units, and glass breakage in storm doors and windows.
Your residence is covered on a replacement cost basis when insured to at least 80 percent of replacement value. Garages, sheds and other buildings not attached to your home are covered at a value up to 10 percent of the dwelling insurance.
H02 is also a broad policy to extend your protection to include: broad theft, broad vehicle damage, broad smoke damage, water heating system loss, water heater loss, falling objects, damage from weight of ice, snow or sleet, water damage, damage from freezing and electrical injury.
Personal property at your residence is covered up to 50 percent of the insurance on your home, with pro rata coverage for property at old and new locations while moving. Personal property away from home is insured anywhere but, in some circumstances, to limits less than property at home.
Additional living expenses are covered up to 20 percent of the dwelling insurance for living in a hotel or motel if your home is uninhabitable after an insured loss.
LIABILITY PROTECTION includes: claims for injuries to tradesmen, guests or other persons injured on your premises; off-premises injuries to others resulting from acts of members of your family or pets; medical expenses for injuries to others on your premises; and damages to property of others whether or not you are liable. Defense costs are also covered, as is use on premises of motorized equipment, recreational vehicles and some outboard motors.
HOMEOWNERS 3This "Special Form" broadens your dwelling coverage from a "named peril" to an "all-risk" basis. Covered are your home, garage, shed or other buildings not attached to your home, with coverage for additional living expenses and unscheduled personal property. Personal property is covered on a named-peril basis.
Question 3:
What coverage are available for people who rent, have a co-op or own a condominium?
Answer:
Special policies are available in these cases: Homeowners 4 and Homeowners 6. These policies offer similar contents coverage and personal liability protection, if you are a tenant not owning the building in which you reside (H04) or the owner of a condominium (H06). The policies insure your personal property against loss or damage brought about by a number of named perils.
Question 4:
What is personal liability insurance?
Answer:
It's the legal protection you get against a variety of bodily injury and property damage claims that may be brought against you. This protection is provided on a cash value basis and is part of the financial protection package in all forms of homeowner's insurance. (The answer to Question 1 touches on this briefly and makes clear that your homeowner's policy protects more than just your dwelling and personal possessions.)
For example, suppose a visitor slips and falls on your property, suffers a serious injury and sues for $50,000, $100,000 or more. Or suppose that a tree in your backyard falls on your neighbor's house, causing extensive damage, and your neighbor sues for damages. In either case, if you are legally liable, your insurance company will pay the damages up to the limits of your policy. If there's a lawsuit, the company will pay the legal costs of defense regardless of whether you, the policyholder, are found to be legally responsible. And if you are away from home, and if you, a family member or a pet causes property damage or bodily injury, the personal liability portion of your homeowner's policy covers you in the same way. The minimum personal liability protection you can purchase is $100,000. Larger amounts are available at a very reasonable cost.
Question 5:
What other kinds of protection are included in a basic policy?
Answer:
The most often asked about refers to what we call "additional living expenses." Your homeowner's policy will provide money to reimburse you for additional living expenses in case your home is damaged to the point where it's impossible for you to live there. For example, if your home is severely damaged by fire and it becomes necessary for you to stay at a hotel and eat in restaurants while repairs are being made, you'll receive the difference between your normal living expenses and the cost of living away from home, up to the limits stated in your policy.
Question 6:
What isn't covered by a basic homeowner's policy?
Answer:
Generally speaking, your basic homeowner's policy will not cover automobiles, commercial buildings on your property or any building you rent or lease to others - except a private garage. And there's no coverage on injuries to pets, or damage to your property caused by pets.
Almost all policies exclude certain perils, and these vary with the type of policy. Mud slides, earthquakes, floods and several other perils called "acts of God" are not covered with a basic policy.
Many policy forms carry limited coverage on money, coins, precious metals, securities, manuscripts, boats and equipment. Policies normally do not cover the following: animals, aircraft, motor vehicles, theft of watercraft or trailers away from the home, business data or information, property of roomers, and others. Consult the policy or your agent for complete details.
Question 7:
Does a basic homeowner's policy provide for full replacement costs of property and possessions in case of partial loss?
Answer:
Not necessarily. To receive full replacement payment on buildings, you must insure a dwelling for at least 80% of its replacement value. For example, a home with a replacement value of $100,000 would require coverage in the amount of $80,000. Given this coverage, if a fire should cause $6,000 worth of damage to the living room, the insurance company would pay that amount, less the deductible, to cover the necessary repairs. But should the same house be insured for less than $80,000, reimbursement would be reduced accordingly to reflect the proportional replacement value the policy provides, based on the limits carried, compared to 80 percent of the replacement cost value.
The amount of coverage on the house is a key factor in all homeowner's policies. It's the basis for determining the amounts of coverage assigned to other structures on the property, to personal items, to additional living expenses. Here are the figures: other structures on the property are covered for 10% of the amount of coverage on the house, personal property for 50%, additional living expenses for 20%.
Most policies pay actual cash value (replacement cost less depreciation) for losses to personal property or possessions, unless you purchase a policy endorsement for replacement cost coverage.
It makes sense to base the amount of coverage you buy for your house not on market value but on the cost of replacement - the expenses you will incur to repair or replace damaged property. Your insurance agent can help you determine current replacement cost.
Question 8:
What forms of supplemental coverage are available?
Answer:
There are a number of "extras" you can buy, based on your individual needs. While most homeowner's policies provide adequate protection for personal property, there are definite limits to this coverage. If you own valuables like jewelry, furs, coin collections and silverware that exceed the usual limits, it's a good idea to purchase additional insurance for these special items by adding a special "rider" to your policy. Coverage for earthquake damage to your home and personal property can also be added to your homeowner's policy.
Most insurers offer coverage for miscellaneous expenses which often occur after a dwelling has been damaged or destroyed. The following items probably are included in your policy: temporary repairs to protect property from further damage; limited reimbursement for damaged trees, shrubs and other plants; coverage for property removed from your home to, protect that properly from further damage; fire department service charges; and expenses due to lost credit cards or losses resulting from check forgery or acceptance in good faith of counterfeit money coverage. Higher limits can be purchased for the later two.
Flood insurance is not part of a homeowner's insurance program, but it is available through the U.S. Department of Housing and Urban Development. To qualify, your property must be located in a community organized to carry out land-use control measures to reduce future flooding. Your insurance agent will tell you if this insurance is available where you live.
Question 9:
How can I keep my insurance costs as low as possible and still provide adequate protection for my family, property and possessions?
Answer:
The best way is to maximize the amount of your "deductible." A deductible is the amount of loss or damage that you, the policyholder, agree to pay on a properly loss. For example, if you have a $100 deductible on your homeowner's policy, you've agreed to pay the first $100 of damages. Your insurance company is then responsible for reimbursing you for the rest of your loss, up to the limits of your policy.
Naturally, the larger your deductible, the lower your premiums will be. Therefore, to keep your insurance costs as low as possible, you should designate the largest deductible you can afford.
Question 10:
How does inflation affect my homeowner's insurance coverage?
Answer:
Inflation will most likely continue to drive up the value of your home and its contents. That's why you should make sure that your insurance keeps pace with the higher prices you'd have to pay to repair or rebuild your home or to replace your personal possessions. Some insurance companies, including members of the Utica National Insurance Group, offer policies that make these adjustments automatically if you agree to maintain increased levels of coverage. Of course, since the cost of your insurance reflects the prices of those things for which it pays, your premium may be adjusted accordingly.
Today it's particularly important to keep your homeowner's program up-to-date. Your insurance agent can help you do it. Consult your agent regularly, especially if you make alterations to your home that increase its value significantly. And if you have especially valuable personal possessions, it may be worth your while to have an independent, licensed appraiser help you determine their current value. This may be particularly advisable if you suspect that the value of your possessions now exceeds the limits covered by your policy (probably 50% of the amount of coverage of the house itself). For more information on this aspect of coverage, see Question 7.
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