Homeowners/Dwelling insurance is a package policy
consisting of different types of coverage for the house,
its contents or contents alone, in certain cases
additional living expenses, personal liability claims
against the policyholder and other members of the
household, and medical payments to others. The
policyholder pays a single premium amount for the
combination(s) of these coverages.
When you purchase insurance, it is important to remember
to shop for insurance in the same way that you shop for
any other consumer product. Make sure to compare prices,
features, and reputation. Also, don’t ask for "the best
coverage." Someone may give you what they think you
need, rather than what you actually need. It is always
wise to compare coverages to determine the best product
for you.
Always try to plan ahead when you need to purchase
insurance. Don’t make such an important decision on the
spot. Remember, this is your home, not ours or lender’s.
You should take the lead in deciding what sort of
insurance to buy and how much of it you need.
Not All Insurance
Companies Charge the Same Price
Each insurance company calculates its own rates. Since
each company’s loss experience differs, the rates will
differ as well. It is wise to shop for the best price
and coverage available in relation to your insurance
needs. We are pleased to review your existing coverage
or other quotations you may receive.
Discounts
Many companies offer discounts for burglar alarms and
fire protection devices such as smoke detectors, alarms,
and sprinklers. Ask about the discounts available
through the companies you are considering.
What Is Covered By
Homeowners Insurance?
Typical homeowners coverage insures your dwelling,
other structures and contents, and may cover against
losses such as
 | Fire or lightning
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| Windstorm or hail
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| Breakage of glass
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| Explosion
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| Riot or civil commotion
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| Theft
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| Aircraft impact |
| Vehicles
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| Smoke
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| Vandalism and malicious mischief |
You may elect to buy broader homeowners coverage, which
can provide additional protection for your dwelling and
contents, or special homeowners endorsements such as
building code upgrade coverage. Also, earthquake and
landslide coverage can be considered. Your policy also
covers loss of use, including increases in living
expenses due to fire or other insured loss. Liability
coverage protects you for injuries or damages to others
caused by you, a member of your family, or pet. Medical
payments insurance covers medical expenses to non-family
members injured at your home. Important: Read exclusions
in your insurance contract. Earthquake, flood, mold,
earth movement, and "wear and tear" are some of the
perils that are usually excluded. Tenants (renters)
insurance covers the loss of personal property and loss
of use due to the above-mentioned perils, and may
include liability and medical payments coverage.
Condominium insurance is similar to tenants insurance
and covers personal property and improvements. The
condominium association generally purchases insurance
for the building structure and common areas, such as
corridors. Loss Assessment Coverage can be an important
policy provision for you. It covers you for certain
assessments the condominium association makes. However,
you should check if it covers you for earthquake losses
and how much it will provide you in the event of an
earthquake loss. You should also carefully analyze the
type of insurance your association has and how it would
affect you in the event of a loss. Most condominium
association policies cover the common areas and walls.
Your condominium owner’s policy will cover interior
damage to your unit.
What Limits Should I
Set on My Policy?
The "dwelling" limit should be the amount it would cost
to replace your home. This may have nothing to do with
the purchase price or the current market value of your
home. Your insurance policy is not governed by the real
estate market, but by the cost of the materials and
labor involved in rebuilding your home. Insurance
companies have in-house formulas that they use to
evaluate the replacement cost of your home if you do not
come up with a limit. These formulas are not necessarily
precise, so different insurers are likely to suggest or
require different limits of coverage for your dwelling
limit.
As for the "contents" limits, it is usually around 50%
of the dwelling amount; however, only you can evaluate
the replacement value of the things you own. Be sure to
take into account such things as your books, clothing,
and appliances. Often, people concern themselves with
things such as jewelry, computers, furniture, and stereo
equipment and don’t account for some of the more
commonplace household items.
Two major problems suffered by homeowners are
(a) Many of the dwellings are under-insured, i.e.,
insured for amounts inadequate for rebuilding. Insurers
sometimes refer to this as inadequate
insurance-to-value.
(b) The problem of increased cost of construction was
evident in many situations. When rebuilding, homeowners
have to comply with new building code requirements,
which in some instances necessitated new foundations
being built, neither of which may have been considered
when setting the replacement limits.
It is very important to know and understand the coverage
you have. Make sure values are current and satisfy
policy requirements. Ask if coverage is provided for
building upgrade/code changes.
Will My Policy Completely and Totally Replace My Home
If It Is Destroyed?
This depends on whether your policy is a replacement
cost value policy or an actual cash value policy. If
your policy is an actual cash value policy, it will not.
Fair market value can be loosely defined as the amount
that a knowledgeable, willing buyer would pay and that a
knowledgeable, willing seller would take for an item,
neither being under unusual pressure to buy or sell.
Insurers are permitted to provide an alternate
definition of actual cash value in the policy if another
method of determining value is to be used.
If you have a replacement cost policy, the chances that
you will be able to completely rebuild your home are
better, but there are many types of replacement cost
policies, so you need to be careful. A policy cannot be
sold as a "guaranteed replacement cost" policy unless it
will pay to completely rebuild the home. Other types of
replacement cost policies will pay your policy limits,
plus a certain percentage above those limits. Some
policies do not have building code upgrade (ordinance or
law) coverage. Building authorities periodically change
their building codes. Unless your policy has this
coverage, your insurance company may not pay for changes
you may need to make to the structure of your home to
bring it up to current building codes.
We are able to assist you in establishing a limit that
is adequate to rebuild your home. It is important to
update that limit periodically to maintain a limit that
reflects current construction costs. Ask us to ensure
limits are automatically reviewed or increased.
Read your policy carefully and understand the coverage
it provides. If it is not clear, contact your agent or
company. You can call us for further clarification and
confirmation.
In short, there is no substitute for reading your policy
and your renewal declarations carefully. Discovering
after a loss that you did not have the right coverage is
not a situation you want to experience. Your insurance
policy is a contract. In the event of a loss, the
contract language will prevail. Anything promised
verbally or representations not documented in writing
will be difficult to prove.
If you only shop by comparing prices, you are doing
yourself a disservice. Your home is one of the most
important purchases you will make. Take the time to get
the facts before you purchase insurance to protect it.
Some Final Tips
Ask us to shop around for your insurance needs.
When you call us for a quote or fill out an application,
give the complete and correct information requested.
After the application is complete but before you sign
it, read it again to see if everything is correct and
nothing is left out. Never sign a blank form. After you
sign the document, keep a copy for your records. When
you get your policy, read it. Don’t file it without
checking to see that the coverages, limits, premium, and
other information is correct. Also, read through the
policy to know your rights and the company’s rights
under the policy’s terms. Remember to keep an inventory
of personal property (belongings, furniture, etc.),
listing all of the items you own, the dates purchased,
and the price. If possible, take pictures of important
and valuable items. Keep these records in a safe place
away from home, preferably in a safe-deposit box. Also,
periodically update your inventory, appraisals and
photos. This will help you to file and settle your claim
quickly and efficiently.
Glossary of Homeowners Insurance Terms
Actual Cash Value (ACV) - The fair market value of an
item is the dollar amount that a knowledgeable buyer
(under no unusual pressure) is willing to pay, and a
knowledgeable seller (under no unusual pressure) is
willing to accept.
Agent - A licensed individual or organization authorized
to sell and service insurance policies for an insurance
company. usually they have no flexibility in coverage or
rates.
Binder - A short-term agreement that provides temporary
insurance coverage until the policy can be issued or
delivered.
Broker - A licensed individual or organization who
transacts insurance on your behalf. Allied Insurance
Brokers says it all.
Claim - Notice to an insurance company that a loss has
occurred that may be covered under the terms and
conditions of the policy.
Declarations - Usually the first page of an insurance
policy that contains the full legal name of your
insurance company, your name and address, the policy
number, effective and expiration dates, premium payable,
the limits of insurance, covered property, deductibles,
and any applicable lienholder information.
Deductible - The amount of loss that the policyholder is
responsible to pay up-front before covered benefits from
the insurance company are payable.
Depreciation - A decrease in value due to age, wear and
tear, or obsolescence.
Endorsement - A written agreement that changes the terms
of an insurance policy by adding or subtracting
coverage.
Exclusion - A contractual provision in an insurance
policy that denies or restricts coverage for certain
perils, persons, property, or locations.
Insured - The policyholder who is entitled to covered
benefits in case of an accident or loss.
Insurer - The insurance company that issues the
insurance policy, and agrees to pay for losses and
provide covered benefits.
Premium - The price of insurance paid to the insurance
company for a policy.
Quote - An estimate of the cost of insurance based on
information supplied to the agent, broker or insurance
company.
Replacement Cost - The amount that it costs to replace
lost or damaged property with new property of like kind
and quality in the local market.
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