Home Insurance: Home owners guide to insurance

by Lucysmith » Sat Feb 07, 2009 06:53 am

You surely must be proud of your home and would like to keep it protected from damages. This is why you need home owners insurance policy. Such a policy not only protects your dwelling but also covers your personal possessions and personal liability.


What is a homeowners policy?

It is a package policy that covers damage to your property and liability that would arise or a legal responsibility for any injury caused to your neighbors or visitors by you or your family members. Homeowner insurance covers several kinds of damage but there are certain exceptions too. Floods, earthquakes and poor maintenance are not covered under a standard home insurance policy.
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What does home insurance usually cover?

A standard home insurance usually covers:
  1. The structure of your home: If fire, hurricane, hail, lightning or any other listed disaster destroys your home and you need to repair or rebuild it, this policy pays for it. Flood, earthquake or routine wear and tear is not covered under this policy. You should buy enough coverage that would pay for rebuilding your home if needed.

    Structures like garage, gazebo or a tool shed that are detached from the policyholder's home are also usually covered. However, these structures are covered for 10% of the total value of the insurance that you purchase for your home. Ask your agent for a suitable home insurance quote if you need additional insurance coverage.

  2. Personal belongings: You will find coverage for your furniture, sports equipment, clothes as well as other personal items if stolen, destroyed by a hurricane, fire or any other listed disaster. Since most companies provide 50% to 70% coverage of the total value, the best way to determine the right amount of insurance to buy would be to create a home inventory.

    You may be anywhere in the world, but this policy will provide coverage for any damage caused anywhere. This means that you get protection off-premises, but some companies have limitations. They may provide only up to 10% coverage of the total insurance value for your possessions.

    You may also find coverage for your expensive jewelry, silverware and furs. But in the event that they get stolen, the insurance companies put a dollar limit to your jewelry and fur. If you want full value for such items, then you need to purchase special personal property endorsement or an additional floater policy. Such coverage would include accidental disappearance and comes without any deductible.

    For trees, plants and shrubs, you generally get 5% of the total value of insurance on the house. These will be protected from explosion, vandalism, theft or a falling aircraft but damage by wind or disease is not covered.

  3. Liability: If you or any of your family members including your pet causes any damage to your neighbor or other people, this policy provides coverage. The cost of defending you in court is also covered under this policy up to the limit provided here. The coverage is available not just in your home but also anywhere else in the world.

    Purchasing a cheap liability insurance limit makes no sense. You should purchase enough to cover yourself properly. Moreover, there are umbrella policies for broader coverage like if you have claims made against you for libel or slander. In addition to this the no-fault medical coverage that the policy provides covers you for any injury a neighbor or any outsider may acquire in your house. A liability claim need not be filed against you, but the bill may directly go to the insurance provider instead.

  4. Additional Living Expenditure: If fire, storm or any other listed disaster caused damage to your home and you are not able to live there, this policy pays for the additional costs of staying away from home for a temporary period. Expenses like hotel bills, bills for restaurant meals and other related living costs while your home is being rebuilt will be borne.

    Usually the companies offering homeowner insurance provides 20% coverage of the total value of the insurance on your house under this policy. Some companies may allow you to increase this coverage for an added premium. You may also avail a policy that offers unlimited coverage for loss from certain companies. But this coverage is only for a certain time limit.

    Those of you who have partially let your house may also find coverage that compensates the rent that you would otherwise get from your tenants.

    There are of course certain perils that home insurance does not cover like flood and earthquake. For these you need to get separate policies.
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What are the types of homeowner insurance?

There are 4 types of policies in general and depending on whether you own a home or a co-op or a condo, or rent a home.
  • When you own a home, you may choose from:
    HO-2 or Basic Policy: The homeowner insurance covers you against disaster resulting from vehicle caused damage, smoke, vandalism, theft, falling objects, ice, snow or sleet, lightning and fire, windstorm, hail, explosion, any civil commotion or riot, accidental tearing apart, cracking, bulging or burning of steam/hot water system, air conditioner or a fire protective system.

    HO-2 also covers overflow of water/steam from plumbing, air conditioning, heating, fire protective sprinkler system or a household appliance. Freezing of a plumbing, heating, fire protective system, any electronic household appliance is also covered. Besides these damage caused as a result of an accident from electrical current is also a part of such coverage.

    HO-3: This is a special policy under the homeowners insurance that provides protection against all dangers as listed in the policy.

    HO-8 or older home: This policy designed for older homes calculates the depreciation value of the home before settling the claim. The present worth of the home is reimbursed after deducting the depreciation value.

    HO-1 or Limited Coverage Policy: Covers you against disasters from smoke, vandalism, theft and volcanic eruption, lightning and fire, windstorm, hail, explosion, any civil commotion or riot, vehicle caused damage. However, this insurance is almost extinct in most states now.

  • When you own a co-operative or a condominium you may have:
    HO-6 or condo/co-op policy: This policy provides coverage for your belongings in the structural part of the building when you reside in a condominium association. It protects you against all listed disasters. There are 3 levels of coverage that this policy offers:
    1. Actual cash value: This level pays to replace any damage caused to your possession after deducting the depreciation value.
    2. Replacement Cost: This level reimburses the cost incurred for rebuilding or repairing your portion of the condominium association.
    3. Guaranteed or extended replacement cost: This level pays for re-establishing your condominium even if it means exceeding the policy limit. This means you can get protection against sudden increase in the cost of construction arising out of a shortage of building materials.

  • When you rent a house:
    HO-4 or renter policy: Renter policy protects your belongings and also all parts of the apartment that is owned by you when you rent your home.
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How an insurer sets your home insurance rates?

You should determine how much coverage will be enough for your home, keeping your financial condition in mind. After you select the insurance company that you find the most appropriate, you'll need to apply for your policy. The company will then try to evaluate your risks through the underwriting process, before allowing you coverage.

The underwriting process for a home insurance determines whether you'll be covered or your insurance application for insurance will be rejected. Your coverage limits and rates are also determined in the same way.

The factors which are considered by the underwriters include:

  1. Type of construction for the building (brick, frame, EIFS etc.)
  2. Size of the house.
  3. Age and condition of the building.
  4. Date and details of the renovations done to the original construction (if any).
  5. Location of the property.
  6. Proximity to the nearest fire station.
  7. Safety devices installed in the house (alarm systems, smoke detectors, sprinklers, security set-ups etc.)
  8. Probabilities of natural perils in the zone (Flood, hurricane, windstorms, earthquake etc.)
  9. Purpose for which the house is used (full-time residence, or seasonal, during vacations etc.) Also, whether the property/house is occupied or left vacant most of the time.
  10. The applicant's preference of deductible, coverage limits and benefits.
  11. Credit history of the homeowner.
  12. Insurance score.

To know more about these factors, click here.

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Can you save money with home insurance?

With a little shopping around you can surely save some money with home insurance. The size of your house and the insurance provider are an important factor in determining the cost of your home insurance policy. Here are few ways by which you may save money:
  1. Shop around for insurance:
    When you are looking for a home insurance it is better that you shop around a little to get the best home insurance quotes. Prices vary from one company to another. Hence you must always check the financial health of the insurance provider. You must know that going for a cheap home insurance doest not always help. You must get a policy that covers your home and its contents to its true value.

    Get in touch with insurance agents for best insurance quotes and more home insurance information and the latest trends.

  2. Raising deductible:
    Usually the more deductibles you pay reduces the amount of premium that you need to pay on your homeowner insurance policy. However, insurance companies have separate deductibles for areas that are disaster prone.

  3. Buying auto and home insurance from the same insurer:
    If you buy more than one insurance policy from the same insurance provider, the companies usually offer you a discount on your premium by 5% to 15%. Usually companies selling homeowner insurance also offer auto as well as umbrella liability policies. All that you need to do is calculate that this combined price is lower than what is offered by other companies.

  4. Rebuilding costs and cost of purchasing your home:
    The cost of rebuilding your home and the price at which you bought your home will be different. Do not get confused between the two. Carefully consider the value of your house so that you do not end up paying more premiums than required.

  5. Discounts:
    If you have smoke alarm, dead-bolt-locks and other such devices, the insurance company may provide you with a discount of around 5% at least. Some companies may even give you discounts on your premiums of about 5% to 15%. However, consider all kinds of situations and what your provider will offer before you buy these devices since these are not cheap.

  6. Group Coverage:
    Sometimes alumni and business groups do provide insurance package at a reduced rate. Enquire with your company if they have any option for a group insurance policy.

  7. Loyalty Discount:
    Staying with the same insurer helps. If you have received the services of a particular insurance company for several years before buying your home owners insurance, you may be entitled to a discount.

  8. Other Discounts:
    Your insurance company may have their own discount options. Ask them about the kind of discounts they offer and the conditions under which they offer such discounts.
Your home is your asset and you definitely want to protect it from any kind of harm. Purchasing home owner insurance is possibly the best way to do so. The homeowners insurance covers not just the structure of your home but also the contents provided you purchase the right policy. Have an agent talk to you and give you the details of such kind of a policy. Protect your home while you still can, because once disaster strikes it will be all over. Top

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Total Comments: 118

Posted: Wed Aug 11, 2010 07:28 pm Post Subject: Home Owners Business

I was wondering how can one start a Homeowner's Insurance Company? and how much, approxiamtely would it cost?
Thank You Sil.

Posted: Wed Aug 11, 2010 08:19 pm Post Subject:

Are you asking what it would cost to start an agency, that would sell homeowners insurance to clients, or an actually insurance company/carrier that would retain the risks and be responsible for paying the claims?

Posted: Fri Aug 13, 2010 05:53 am Post Subject: insurance that an agent carries on themselves

What is the insurance called that the agent carries just incase they make a mistake.

Posted: Fri Aug 13, 2010 11:48 am Post Subject:

E&O (errors and omissions)

Posted: Fri Aug 13, 2010 02:39 pm Post Subject:

Unless they also make the mistake of not carrying any E&O insurance. Then it's called retention (or, self-insurance).

:D

Posted: Fri Aug 13, 2010 02:45 pm Post Subject:

I was wondering how can one start a Homeowner's Insurance Company?



If you're talking about an honest-to-goodness insurance COMPANY, if you have to ask the question, you cannot afford it.

The cost to create and license a new insurance company is in the millions of dollars. Initial claims reserves requirements are at least $1,000,000 alone. Then you have paid-in capital requirements that must equal policyholder reserves, reinsurance agreements that are not free, and all the other costs of starting a new business.

If you're asking about becoming an agent or broker and opening an office, that's a lot less expensive. But if you have no experience in insurance, let alone in business, you would be ill-advised to start at that point. It would be better if you found an established agency in which to get your feet wet, and then, with enough experience, perhaps decide to go it alone.

You could also begin as a "captive agent" for one of the "Big 3" -- State Farm, Farmers, Allstate -- and learn the business with them before deciding to become an independent agent.

Posted: Fri Aug 13, 2010 06:19 pm Post Subject:

Then it's called

"Holy Crap"

Posted: Wed Aug 25, 2010 06:01 am Post Subject: roof inspection

We have wind damage on our roof. Three of our neighbors had their roofs replaced from all of the damage. We contacted our insurance and made a claim . The first time they came out they gave us $400.00 and said that would repair it. We contacted a roof and he cam e out and said the whole roof needed replaced. We called again and had the inspector and the roofer meet. The inspector that time said there was more, so we ended up with another $800.00--- so that the one side of the roof would be replaced. I called again and asked what about the other side, and I was told they were replacing the side the wind was from. They then asked me when the damage was done on the other side of the roof ( gable roof) You dont want to know what I told them but They came out agian and know they say the other side of the roofs damage was caused by settling of the home. Our house was built in 2000 and we dont have any cracks in the dry wall or anything indicating this. How can that effect the shingles on the roof??? The roofer said he had never heard of such a thing. Have you ever heard of this?? Iam calling them back, it seams crazy.

Posted: Thu Oct 21, 2010 07:24 am Post Subject:

What type of coverage for glass does a Texas homeowners policy cover?

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