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A typical homeowner’s insurance policy is often lengthy, complicated and written in such a way that even a lawyer often has to spend extra time going over what’s in it in order to make sure he or she understands its provisions. Since most of us don’t even think about our homeowners policy other than when we first purchase it, when it’s time to renew or if we have to make a claim, knowing what’s in it can be extremely useful, especially during the stress-filled time you’d expect in the event you experience a loss. Because of the complex nature of insurance, many of us don’t even read the policy unless a claim has been denied, and by that time it is too late.
Having a good insurance agent is one of the best ways to begin the insurance buying process, and understanding how insurance companies operate is important. Almost without exception, insurance is sold either directly by a company or through an agent or broker. A company that deals directly with its policy holders is referred to a as a direct writer. Agents and brokers are referred to as insurance producers and may represent only one company or several. As an independent agent, I have access to an extensive insurance market through a local agency affiliation. A local, independent agent will likely better understand the geographic area surrounding your property’s location, and may better understand the most common associated risks. For example, is your home located in an area that experiences a disproportionate number of tornadoes, or does the area have a high crime rate, or is there frequent flooding? In all cases, when you first talk to an insurance agent, you should be prepared to discuss your insurance needs and answer questions about your home or property.
Some Typical Coverages
A homeowner’s policy package will normally contain four types of coverages: 1) Dwelling and Personal Property Damage Coverage, 2) Personal Liability Coverage, 3) Medical Payments to Others Coverage, and 4) Additional Living Expenses.
Dwelling and Personal Property Damage Coverage: This coverage helps pay for damage to your home itself, in addition to other buildings on your property. It also covers the loss of your personal property as a result of a covered peril. Covered losses may include, your home, household furnishings, clothing, personal belongings or a detached garage or tool shed to name a few. The dollar limit of the dwelling coverage is determined based on the property description you provided to your agent. This information is used to determine the cost of replacing your home in the event of a covered loss, and can vary from company to company. Dollar limits for other structures and personal property are usually calculated as a percentage of the dwelling coverage, and can often be adjusted, but not always.
Personal Liability Coverage: Personal Liability coverage protects you against claims and lawsuits that result from damages or accidents on or off your property. For example, property owners are normally responsible for injuries due to falls that occur as a result of ice, hail or snow, someone who trips or falls due to poor lighting conditions, or hazards such as loose steps or holes in the ground, to name a few. If a pet or a family member causes injury or property damage to others, the Homeowners Personal Liability Coverage pays for the cost of defending any litigation that may result, and for any damages for which you may be liable, up to the dollar limit of liability as stated in the policy. Regarding injuries or damage caused by your dog, depending on the breed, some companies will turn down the risk, or may offer a policy that excludes injuries or damage caused by the animal.
Medical Payments to Other Coverage: This coverage pays for the immediate medical services to someone other than a member of your household regardless of fault. For example, a dinner guest gets cut on a broken glass while helping with the dishes, and needs to go to the emergency room for stiches. This is a situation where a claim could be made against the homeowner’s insurance policy to pay for the cost of the guest’s medical services. In all cases, the coverage would only pay for medical care up the dollar limit as stated in the policy. I’ve seen limits for this coverage as low as $1,000, and as high as $10,000. Depending on the wording of each individual policy, this coverage sometimes extends to injuries you may cause while away from home as well.
Additional Living Expense: Also referred to as Extra Expense, this coverage may reimburse you for additional living expenses incurred as a result of having to temporarily relocate elsewhere due to a covered loss. For example, the reasonable cost of a local motel or apartment, or additional food or laundry expense. Again, this coverage reimburses for expenses above what you would have normally incurred. Each policy will have its own limits for this coverage.
A document in nearly all homeowner’s policies is a list of exclusions. The exclusions are items and/or conditions the policy will not cover. This is usually the first place people go to re-read when a claim is denied.
Flood: All homeowner’s policies exclude water damage caused by flood. According to The National Flood Insurance website, FlootSmart.gov, flood is defined as follows:
“a general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or of two or more properties (at least one of which is the policyholder's property) from one of the following:
You can purchase your flood policy from me at the same time you get your homeowner’s insurance.
Most homeowner’s policies will exclude the following as well:
Other: Check your policy carefully for other listed exclusions. For example, an insurer may exclude your pool if not secured behind a self-locking gate or your trampoline if it doesn’t have a vertical safety net around it. If your dog is of one of the identified breeds considered vicious, the insurance company may exclude it from coverage.
Some Other Coverages
Ordnance or Law Coverage: Ordnance or Law Coverage helps defray any additional rebuilding costs as a result of enforcement of ordinances or laws regulating construction and repair of damaged buildings. For example, older structures that are damaged may need upgraded electrical; heating, ventilating, and air-conditioning (HVAC); and plumbing units based on city codes. In not already included in the policy, this coverage can usually be purchased separately and listed as an endorsement.
Watercraft: If you own a boat, you should ask your agent or insurer if it is already covered. Some policies will cover small motorboats and sailboats, but not larger one. Coverage for your watercraft can be purchased separately as well.
In keeping true to the title of this article, I’ve provided a brief overview of homeowner’s insurance. This article was written for informational purposes only. Each homeowner’s policy is unique to the insured that is named on the policy and based on the information provided to the insurance company at the time of application. Please refer to your own policy for specific guidance on coverages. If you would like a free consultation to go over your homeowner’s policy, please contact me, Aaron Etzkin, right away at firstname.lastname@example.org or call me on my cell phone at 985-351-1287. Please check back periodically for additional informative articles on property & casualty insurance.
Homeowner's Insurance...............A Brief Overview
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