Homeowners Insurance FAQ’s

Q: What are the benefits of using an independent agent to purchase insurance?

A: An independent insurance agent represents a variety of insurance companies to guarantee that you are getting the most competitive rate for the best coverage based on the markets we represent. Having the ability to place your insurance needs with a wide range of available markets certifies that there is a market that meets your individual and unique needs. By using an independent agent to purchase your insurance, you can be sure that you are receiving more personal service and attention rather than dealing directly with the insurance company employees.

Q: I’m in the process of purchasing a home, what should I keep in mind while I’m purchasing a homeowners policy?

A: There are a number of aspects you should consider when purchasing an insurance policy. With any purchase you should always be informed of your options and make sure you are fully aware of what it is you are actually buying. Here are just a couple of things you should keep in mind when you purchase homeowners insurance.

  • Determine the type and amount of insurance that you need. It is very important that the coverage limit (dwelling coverage amount – Coverage A limit) of your home should equal 100% of its replacement cost. If you contact your local insurance agent they should be able to help you determine an approximate replacement value of the home (Keep in mind that you don’t insure a home based on what the loan amount or market value is rather what the replacement cost of the home is since the loan amount and market value takes factors such as land and location into account.) If your policy limit is less than 80% of the replacement cost of your home, any payment from your insurance company may be less than the full cost to replace your home – you’ll have to pay the rest out of pocket. Also, you’ll need to decide if the personal property and personal liability limits are adequate for your needs.
  • Determine which, if any, additional endorsements you want to add to your policy. For example, it’s a good idea to add such endorsements as personal property replacement cost, dwelling replacement cost, personal injury for liability protection, and if you have specific items of value such as jewelry or fine art you would want to specifically schedule those items.
  • Once you have decided on the coverages you want in your homeowners insurance policy, be sure to consult us. We will be able to help you determine if there are any gaps in coverage that you might not be aware of, explain the details of the policy including the limitations and exclusions, as well as, recommend any additional coverages that you might need. It is important to remember that the responsibility of determining what coverages are needed or necessary and to what limit rest with the insured, but the agent is there to help assist you and explain things in further detail so that you, the insured, can make a sound and logical decision.

Q: Why would I need to purchase homeowners insurance?

A: A home can require a remarkable amount of investment of time, money, and energy. In many circumstances the purchase of a home is one of the biggest acquisitions that an individual can make, and it is extremely important to protect that asset. The concept and reality of homeowners insurance is constructed to protect that investment by insuring the structure and personal possessions in and around them. In addition the homeowners policy is providing you with liability protection for the residents of the home in the event that a suit arises. In the event of destruction or damage to your home or personal possessions homeowners insurance is there to protect you and your family from an enormous loss. Keep in mind that homeowners insurance should be thought of as protection against substantial damage or loss and not for the incidental losses or damages that may occur. Don’t think of insurance just as a tool to satisfy a lender, but a way to protect your own assets.

Q: What are the policy limits (coverage limits) in the standard homeowners policy?

A: [Note: this answer is based on the ISO’s HO-3 standard homeowners policy.]

The dwelling (Cov. A) and other structures (Cov. B) [detached structures such as a detached garage, pool, shed, etc.] on the premises are protected on an “all risks” basis up to the policy limits. The policyholder determines the policy limit for the dwelling at the time the insurance is purchased. The policy limit for the other structure coverage is usually equal to 10% of the dwelling coverage amount (may differ from company to company).

Next there is coverage for your personal property (Cov. C) on a “named perils” basis. The policy limit for personal property coverage is usually 50% of the dwelling coverage amount (may differ from company to company). There is also additional living expenses coverage (Cov. D) that the policyholder may incur when the residence cannot be lived in because of a covered loss that is usually equal to 20% of the dwelling coverage amount (may differ from company to company).

There is also coverage for personal liability (Cov. E), which is also determined by the policyholder at the time the insurance is purchased. Medical payments to others (Cov. F) is the last of the main coverages, which is usually set at $1,000 per injured person; however, this can be adjusted at the request of the policyholder at the time the insurance policy is purchased. Medical payments to others can only be paid to those that are not considered “residents” of the household.

It is important to know that these are all the basic coverages of a standard homeowners policy; however, there are many additional coverages that can and are provided for that does vary from company to company and can be requested by the policyholder. It is vital that you inquire with your insurance agent as to any optional coverages that you may need when you are purchasing a homeowners insurance policy.

Q: What is a deductible?

A: Deductibles place the responsibility for the initial cost of certain claims – and some of the risk – back on the insured. Basically, a deductible is the amount the policyholder must pay out of pocket before the insurance company will step in and pay for the loss of your property. The deductible you choose for your policy has a direct impact on the amount of premium you will pay for a policy; the higher the deductible the lower the premium and vice versa.

Q: When and where is my personal property covered?

A: Personal property (except property that is specifically excluded) is covered up to the policy limit when it is located at the residence described on your policy; however, you normally have 10% coverage of your total personal property away from home worldwide (this may differ from company to company). If you have personal property, however, that is far more valuable than the normal coverage limits of the homeowners policy you can purchase additional coverage through an endorsement to your current homeowners policy or a separate policy all together to extend the limits of coverage which specifically schedules the possessions of high value. Items that are specifically scheduled such as jewelry, fine arts, etc. have broader coverages that exist and you would want to check with your insurance company for the exact coverages. Normally, the piece of personal property that is specifically scheduled is covered to the full amount of value and is covered worldwide.

Q: What kind of damage does a basic homeowners policy cover and what is not covered?

A: Most basic policies protect against damage from:

  • Fire and lightning
  • Windstorm and hail
  • Explosion
  • Riot and civil commotion
  • Aircraft
  • Vehicles
  • Smoke
  • Vandalism and malicious mischief
  • Theft
  • Damage by glass or glazing material that is part of the building
  • Volcanic eruption

You can also increase the coverage to include:

  • Falling objects
  • Weights of snow, ice, and sleet
  • Three kinds of water-related damage from home utilities or appliances
  • Electrical surge damage

Coverage that is not afforded for in a standard homeowners policy can vary from company to company. However, unless you purchase additional coverage, damage caused by floods, earthquakes, nuclear accidents, wars, intentional damage, and normal wear and tear is not covered. There are other exclusions that may also apply.

Q: What is the difference between “actual cash value” and “replacement cost”?

A: Covered losses under a homeowners policy can be paid on either an actual cash value basis or a replacement cost basis. When “actual cash value” is used the policyholder is entitled to the depreciation value of the damaged property. Under the “replacement cost” coverage, the policyholder is reimbursed an amount necessary to replace the damaged property with one of similar type and quality at the current price without taking depreciation into account. The item must be replaced in order to receive the reimbursement on a replacement cost basis. If you were to decide to take the money rather than replacing the item, you would only be reimbursed on an actual cash value basis.

Q: What is the difference between an “all risks” policy and a “named perils” policy?

A: An “all risks” policy covers losses that are caused by any peril except those that are specifically excluded in the policy. A “named perils” policy covers losses that are caused by only those perils listed on the policy. Keep in mind that an all risks policy provides broader coverage than a named perils policy.

Q: What if I’m found liable for injuring another person?

A: Assuming that the injury caused was due to your negligence and was not intentional, your homeowners policy would provide coverage for any medical bills and legal expenses, up to the policy limits, found under the personal liability coverage (Cov. E). It is very important to make sure your policy includes personal injury, which is not necessarily included in the policy from company to company.

Q: In the event of a loss how will I be able to recall the contents of my home if it is destroyed?

A: In the event of a loss if your home were involved in a fire that nearly destroyed the entire home it may be very difficult to remember all of your possessions. Not only is it difficult and emotional enough going through such a catastrophic loss the last thing one can be expected to do is recall all of their possessions. It is very wise to generate a detailed list of all your possessions. It is recommended to go throughout the home with a video or photographic camera detailing and documenting all of your possessions. Once you have compiled a list it is recommended to keep it off site in a safety deposit box or in a lock box. Not only does a detailed list of your possessions help you to recall all that you have, but it will also help, at the time of a loss, provide proof that you actually had possession of the items in case the items are recovered from a thief. Also, while receipts are not necessary, they are always helpful to show proof of ownership.

Q: I feel that I’m paying too high a premium for my homeowners insurance, what can I do to lower the cost?

A: There are several things you can do to lower the cost of your homeowners insurance. The first thing you’d want to do is shop your insurance around with a number of different insurance carriers. If you have your insurance with an agent that represents several different carriers you’d want to check with your agent to make sure they have you placed with the most competitive carrier they represent. It is not surprising to find quotes from different carriers that vary in price several hundreds of dollars for the same coverages. You do want to make sure when you’re shopping your insurance around that each company is quoting you with the same exact coverages.

Another way to lower your premium for you homeowners insurance is to make sure you are receiving all the necessary discounts that apply. Many insurance companies offer discounts for deadbolt locks on exterior doors and windows, fire extinguishers, smoke alarms, and sprinkler and security systems. You can also receive a discount if you have your auto and homeowners insurance policies with the same carrier (multi-policy discount). Depending on where you live insurance carriers also offer discounts for living in a gated community or if you have a security attendant at the perimeter of the housing community.

Lastly, another way to lower your homeowners insurance premium is to increase your deductible. Increasing your deductible can sometimes impact the decrease in premium substantially. However, keep in mind that raising the deductible increases the amount of out of pocket expense you’ll have at the time of a loss, so you’ll want to make sure you have the necessary financial resources to handle the increased deductible.

Q: If an accident occurs that I think is covered under my homeowners policy, what should I do?

A: The first thing to consider and understand is that if you call your agent regarding a loss that you may have just encountered, your agent is required by law to file a claim with the insurance company. Many times an insured is just calling their agent to get information or advice and later on down the road finds out that there was a claim filed whether the insured wanted to file a claim or not. It is very important to choose your words carefully when inquiring about information regarding a claim or actually filing a claim when speaking with your insurance agent. Insurance contracts are conditional contracts, which means that policyholders have certain duties that they must perform if a covered loss should occur. Failure to complete these duties, can and sometimes does, result in non-payment by the insurance company for losses that otherwise would have been covered. First, it is very important to notify the insurance company or agent that a loss has occurred as soon as you discover what has transpired. Second, you need to protect the property from further damage and/or take any necessary precautions from preventing further damage to occur. Next, you’ll want to make a detailed list of what was damaged along with taking any pictures of the damage done. Pictures aren’t necessarily required, but I can assure you that it will help out the process that much more when you speak with a claims adjuster. Lastly, you’ll need to complete a statement for the insurance company that details the events that led up to the loss and then what actually took place causing the loss. Be prepared to show any necessary documentation and that actual damaged property to the claims adjuster when called upon to do so. It is also extremely important to keep all proper documentation showing that repairs were made and completed properly for future reference or should you decide to change insurance carriers in the future.

Q: I don’t own a house, but I rent an apartment instead, would a homeowners policy give me the protection that I need?

A: If you rent a house or apartment, the building owner is responsible for any perils that befall the property. It is the responsibility of the building owner to have insurance on the structure that would protect and compensate him if something were to happen to the structure. However, his policy does not protect you for your personal belongings. In order to receive the necessary protection for your possessions – electronics, furniture, clothing, etc. – you would need to purchase a renters insurance policy, which is a type of homeowners policy for the non-homeowner. A renters insurance policy has many of the same provisions that a homeowners policy has with the exception of coverage for the structure. It protects your personal property (Cov. C), and it protects you against claims of liability if you cause injury to someone or an individual’s property. A renters insurance policy is also referred to as an HO-4 policy.

Q: I have just purchased a condominium. Will a homeowner’s insurance policy cover me in the proper way?

A: Insurance for a condominium is different from insurance for a home because of the way ownership is structured. A homeowners insurance policy covers you against losses, and you can only suffer a loss if you have ownership. Due to the fact that there are areas of common ownership in a condominium complex, your homeowner’s association may have a master policy. The extent of coverage that you will need to purchase depends on what the master policy covers. It is extremely important to check with your homeowner’s association to see what kind of policy they have so you know exactly what they do and do not cover as far as the structure is concerned. Condominium associations usually have one of three different types of master policies.

One is called an “all risk” policy, which is the broadest form of policies offered that basically covers anything that is “attached” to the dwelling; there is also an “original” policy that basically covers anything originally built as part of the dwelling, but not any improvements made by the owner to the unit. Lastly and most commonly is the “bare walls” policy that only covers to the inside layer of paint, placing most of the responsibility of replacing such things as fixtures, cabinets, carpets, etc. on the owner.