I've got it - but what the heck does it do?Dec 26 '04 (Updated Dec 28 '04) Write an essay on this topic.
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The Bottom Line There are many coverage's you can use to customize your homeowners insurance policy. Once you get it like you need it - hope you never have to use it.
This is my first stab at an "epnion" in about 2 years so please excuse me if I am not quite up to par. I am here to talk to you about Homeowners also known as "Hazard" insurance. First let me give you my credentials. I am a fully licensed in Property, Casualty, Life and Health Insurance lines and have extensive career experience working for a top name company (which will remain nameless) I find that most people have no clue what their homeowners insurance covers - they usually have it because their mortgage company made them get it and they know it will come in handy in the case of a catastrophe. Don't let it overwhelm you, and don't think that it isn't important. It is simple and it is very important. Just think how angry you are going to be when a pipe bursts and you find out that your company will pay for the damage the water has caused but you have to pay for the pipe because that is considered a maintenance issue. A Homeowners Policy is very simple. It is broken into 6 parts: 1: Dwelling: $XXX,XXX The dwelling coverage is what you probably associate your entire policy with. This is the portion that will rebuild your home in the event of a loss. It is crucial that your home is insured properly. This is not PMI (Private Mortgage Insurance) If something happens to your home your loan is not affected at all, yet many mortgage companies require your "dwelling" coverage to be at the full amount of your loan, which is absurd. Chances are your loan includes the cost of the land you house was built on, and if your house burns down the insurance company doesn't need to rebuild your land. Depending on what state you live in it may be illegal for mortgage company to require the loan amount to be covered. I live in Virginia, and here it is very illegal. Be cautious - it is illegal for this to happen but it goes on all the time - the way many loan personal avoid this is to go through companies that they know wont question the coverage amount, or to tell the buyer that they will set up the homeowners for them, this seems helpful (who wants to deal with insurance companies), but then they can ask for what they want without you, they pesky buyer, ever knowing what is going on. If you have any doubts to the amount that your house is covered for just pull out your policy and take a look. The basic rule of thumb is that land will account for about 20% of the sale price, so the insurance coverage should be at about 80% of the sale price. ex: Sale Price: $200,000 then insurance Dwelling Value: $160,000 Of course this isn't quite the same when you live in any metropolitan area where the land value is significantly higher than in other areas of the country. In any case no matter who, or where you are, the best thing for you to do is to call your insurance company and discuss the coverage you have. They should lead you in the right direction. 2: Detached Structures $XX,XXX Detached Structures a.k.a. "Dwelling Extensions." Generally this coverage is just a percentage of the dwelling coverage. For example a $160,000 insurance policy would offer $16,000 in Detached Structures. These structures are fences, decks, tool sheds or anything of the like. They are covered for the same losses that your home is, they are just covered under this separate section. 3: Personal Property $XXX,XXX If you take your home and were able to turn it upside down and spill everything thing out into a heap, everything in that pile would be your "personal property" Your furniture and clothes to your refrigerator and spaghetti sauce are items that are covered under your insurance policy. This coverage too is often just a percentage of what your "Dwelling Coverage" is. For example using the same $160,000 policy, your belongings would be covered for approximately $120,000. also keep in mind... Many people don't realize that there are limits on certain types of property. The most obvious limit is on cash. Again the limit varies depending on the state you are in, but the limit is generally around $200. The reason for this is, it would be far to easy for someone going through a hard time to call the insurance company and say someone stole $5,000, it is simply too hard to trace cash, or prove theft. Other limits on personal property could be on, but not limited to jewelry, firearms, and securities. For jewelry and firearms you can generally increase your coverage for additional premium. 4: Loss of Use This phrase tends to confuse people but it's easy. If you lose the use of your home, the insurance company will pay all increased costs of living, i.e. hotel costs, meals out, increased mileage to and from work, etc... The idea is to make sure that your budget stays the same so that you can continue to make mortgage payments, and to make sure that you keep the same standard of living you were keeping at home. 5: Liability $X00,000 What if... ...A neighborhood kid wanders into your driveway and breaks his leg on your boat trailer, or someone falls down your stairs at a get-together, or perhaps your dog gets out and attacks your neighbor's prize winning Poodle. You may be cruisin' for a legal bruisin' What this portion of your homeowners insurance does is help protect you against a liability law suit. Your company will cover your for your amount of coverage which can be a big relief if you get sued of a major amount of moula. Coverage starts at $100,000 and goes up to $1,000,000 Increased coverage is very important, but often overlooked. 6: Medical Payments to Others $X,000 This is probably the most underused portion of your policy. Coverage starts at $1,000 and can be increased. This is the buffer to the liability portion. If a child gets hurt on your property and has to go to the hospital, call your insurance company they will immediately start to pay out up to $1,000 worth of medical bills to the injured person. This type of payment doesn't show any type of negligence on your part, it just looks like a simple act of good faith, and also makes it harder for a liability lawsuit to follow. As if all of this weren't confusing enough: Everything that I just explained are your basic coverage's, on top of the above mentioned coverage's you can tack on "Endorsements"also called "Riders" Which give you protection against things that would normally not be covered. For example A sump-pump loss is not covered under a normal policy but for an additional charge you can add on Back-up of sewer and drain, and then wa-la you are covered in the case of that happening to you. You can also add coverage for Childcare in your home, Waterbed Liability, Nurses Liability, etc... there are many coverage's you can add or remove to truly customize your homeowners insurance policy to your family. The first step is to take out your Policy the second step is try to translate it into English (hopefully this review has helped with that) and the third part would be to contact your insurance company to apply changes or ask what options are available. The last step is to hope that once you have your policy as you need it, that you never have to use it. I hope I have helped you learn a little more about your homeowners/hazard policy thank you and goodnight.  |
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