Basic Coverages Available
|
| Whether you own or rent, there are different
packages of home insurance offered to protect your home and belongings. |
| Each package protects against a specified number
of perils. Perils are events that cause damage to property. Three examples are
fire, windstorm and theft. In addition to coverage for named perils, each
package policy usually contains four additional types of coverage: property
damage, additional living expenses, personal liability and medical payments.
Home insurance policies apply to most owner occupied single-family homes, and
are modified slightly for apartments and condominiums. |
Property Damage
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| Property damage coverage helps pay for damage to
your home and personal property. Other structures such as tool sheds, detached
garages, houses and their contents are also covered. You should check with your
producer or your insurance company to determine if the amount of coverage on
other structures is sufficient. |
| Personal property is the contents of your home
and other personal belongings owned by you or family members who live with you. |
| Home insurance policies may provide limited
coverage for small boats; however, most home insurance policies do not cover
motorized vehicles unless they are unlicensed and used only at your home. Your
insurance producer or your insurance company can help you find appropriate
coverage for your car, boat, snowmobile or other recreational equipment. |
| Some forms of personal property, such as,
silverware, computers, guns, money, expensive antiques and jewelry, have
limited coverage under your homeowner's policy and may need additional
insurance. This coverage can be added to your policy as an endorsement. |
| You can choose to insure your home and
belongings for either replacement cost or actual cash value. These terms are
explained below. |
Replacement Cost or Actual Cash Value?
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| Replacement cost is the amount it would
take to replace or rebuild your home or repair damages with materials of
similar kind and quality, without deducting for depreciation. |
| Depreciation is the decrease in home or property
value since the time it was built or purchased because of age or wear and tear. |
| Many insurers require homeowners to insure their
homes for at least 80 percent of the replacement cost. If the homeowner fails
to insure for at least 80 percent of the replacement cost, a penalty is applied
to partial losses. For example, if it would cost $50,000 to replace your home
and it is insured for $40,000 (80 % of its replacement value), and a fire
causes $25,000 worth of damage, then your insurance company will pay the full
$25,000. |
On the other hand, if your $50,000 home is
insured for $30,000 (which is less than 80 % of its replacement value), and you
suffer a $25,000 loss, your company would pay for only part of the loss. You
would have to pay the balance out of pocket. Your company would pay for damages
based upon the following formula: Amount of Insurance Carried $30,000
= 3/4 or 75%
Amount of Insurance Necessary $40,000
to cover assets (80% of $50,000)
|
| Using these figures, your company will only pay
for 75 % of your $25,000 loss. Hence, 3/4 x $25,000 loss = $18,750 paid by the
company. You would have to pay the balance: $6,250. |
| As you can see, insuring your home for at least
80 % of its replacement cost is very important. Check with your producer or
insurance company to see what is required. You may wish to insure at 100 % of
replacement cost so you will have sufficient coverage in the event of a total
loss. |
| Actual cash value is the amount it would
take to repair or replace damage to your home after depreciation. For example,
if your roof has a 20-year warranty and is 17 years old, there would be a
depreciation for the age and condition of the roof. |
| Most standard home insurance policies cover the
contents of your home (i.e., personal belongings) on an actual cash value
basis. Many insurers offer an option for you to insure your belongings at
replacement cost. The premium will be slightly higher for this coverage;
however, you may want to consider the option. |
| Whether your home is insured for replacement
value or actual cash value, it is important to keep track of its value. For
instance, the addition of a room, new insulation and yearly inflation all
increase the replacement cost of your home, while the actual cash value of the
home may decrease over time. |
| Check with your producer or insurance company at
least once a year to make sure your policy provides adequate coverage. |
Additional Living Expenses
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| Most home insurance policies provide additional
living expenses that will pay some expenses if your home is damaged by an
insured event to the extent that you cannot live there while repairs are being
made, or if you are denied access to your home by government order. These
expenses could include limited motel, restaurant and warehouse storage. |
Personal Liability
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| This coverage protects you against a claim or
lawsuit resulting from (non-auto and non-business) bodily injury or property
damage to others caused by your negligence. This coverage applies to you and
all family members who live with you. You should check with your producer or
insurance company to determine if the amount of personal liability coverage is
sufficient. |
Medical Payments
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| Regardless of who is at fault, this coverage
pays medical expenses for persons accidentally injured on your property by a
member of your family or by your pets. Medical payments do not apply to your
injuries or those of family members living with you or to activities involving
your at-home business. You should check with your producer or insurance company
to determine if the amount of medical payments coverage is sufficient. |
