Home Insurance Quesitions

What is homeowners insurance and who should buy this type of coverage?

Homeowners insurance is one of the most popular forms of personal lines insurance on the market today. The typical homeowners policy has two main sections: Section I covers the property of the insured and Section II provides personal liability coverage to the insured. Almost anyone who owns or leases property has a need for this type of insurance. And many times, homeowners insurance is required by the lender as part of the requirements in obtaining a mortgage.

What is the difference between "actual cash value" and "replacement cost"?

Covered losses under a homeowners policy can be paid on either an actual cash value basis or on a replacement cost basis. When "actual cash value" is used, the policy owner is entitled to the depreciated value of the damaged property. Under the "replacement cost" coverage, the policy owner is reimbursed an amount necessary to replace the article with one of similar type and quality at current prices.

What factors should I consider when purchasing homeowners insurance?

There are a number of factors you should consider when purchasing any product or service, and insurance is no different.

Here is a checklist of things you should consider when you purchase homeowners insurance.

  1. First and foremost, purchase the amount and type of insurance that you need. Remember that if your policy limit is less than 80% of the replacement cost of your home, any loss payment from your insurance company will be subject to a coinsurance penalty. Also, determine the amount of personal property insurance and personal liability coverage that you need.
  2. Second, determine which, if any, additional endorsements you want to add to your policy. For example, do you want the personal property replacement cost endorsement or the earthquake endorsement?
  3. Finally, once you have decided on the coverage you want in your homeowners insurance policy, you can now decide which insurer you would like to purchase the insurance from.
What are some practical things I can do to lower the cost of my homeowners insurance?

There are a number of things you can do to lower the cost of your homeowners insurance. The best thing to do is to shop around.

It is not surprising to find quotes on homeowners insurance that vary by hundreds of dollars for the same coverage on the same home. When you shop, be careful to make sure each insurer is offering the same coverage. Many insurers use the ISO policy forms, but this is not always the case.

Another way to lower the cost of your homeowners insurance is to look for any discounts that you may qualify for. For example, many insurers will offer a discount when you place both your automobile and homeowners insurance with the them. Other times, insurers offer discounts if there are deadbolt exterior locks on all your doors, or if your home has a security system. Be sure to ask your agent or company about discounts any that you may qualify for.

Another easy way to lower the cost of your homeowners insurance is to raise your deductible. Increasing your deductible from $250 to $500 will lower your premium, sometimes by as much as five or ten percent. However, be careful to make sure that you have the financial resources necessary to handle the larger deductible.

What are the policy limits (i.e., coverage limits) in the standard homeowners policy?

[Note: this answer is based on the Insurance Services Office's HO-3 policy.]

Coverages A and B provide protection to the dwelling and other structures on the premises on an "all risks" basis up to the policy limits. The policy limit for Coverage A is set by the policyowner at the time the insurance is purchased. The policy limit for Coverage B is usually equal to 10% of the policy limit on Coverage A. Coverage C covers losses to the insured's personal property on a named perils basis. The policy limit on Coverage C is equal to 50% of the policy limit on Coverage A. Coverage D covers the additional expenses that the policyowner may incur when the residence cannot be used because of an insured loss. The policy limit for Coverage D is equal to 20% of the policy limit on Coverage A. The coverage limit on Coverage E - Personal Liability - is determined by the policyowner at the time the policy is issued. The coverage limit on Coverage F - Medical Payments to Others - is usually set at $1000 per injured person.

Where and when is my personal property covered?

Coverage C, which provides named perils coverage, applies to all your personal property (except property that is specifically excluded) anywhere in the world. For example, suppose that while traveling, you purchased a dresser and you want to ship it home. Your homeowners policy would provide coverage for the named perils while the dresser is in transit - even though the dresser has never been in your home before.

Do I need flood coverage? How can I get it?

Direct damages due to floods, "rising water" are not covered under the standard homeowners insurance policy. All of Florida is designated in some type of flood zone, it may be low risk "B,C,X,etc. or high risk "A,V,etc. If you have a mortgage on your home and live in a high risk area you may be required to carry flood insurance on the home. Obviously the higher the risk the more costly this coverage will be. If you live in a low risk flood zone this does not mean that you may not have a flood loss. Over 30% of flood losses occur in low risk zones. There are numerous ways to possibly save money on flood insurance, however the rates will be the same for all companies and all agents, as long as the quote is based on the same information. recent changes to the flood insurance program may have changed what you thought you were covered for, Please take a moment to read your policy to make sure you are properly covered.

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