home owners insurance

Go to the cabinet, drawer, or folder and pull out your home owners insurance.  Go step by step with the coverage explanations on this page to go over your insurance.  If you don’t have insurance yet and are simply still shopping, the coverage explanations on this page hopefully will make you feel more confident about choosing your insurance company.

Below is an example of a possible home owners insurance.  It outlines what is covered, the dollar limit amount, and the premium, without showing the actual dollar amounts (The dollar amounts vary depending on what coverage amount you want and how much your insurance provider charges for your coverage limit amount.  Also, your monthly premium may be dependent on the amount of your deductible).

Coverages:

For further coverage which is optional, you may wish to obtain an umbrella policy for one million dollars extra coverage, for your house, cars, and whatever other assets you wish to include in this policy.

Here is a great page for further explanations on insurance terminology:  https://www.insurancequotesusa.com/hometips.htm.  The information from this page is given below:

Coverage Explanations

For purposes of this discussion, the following will be based upon the most common of HomeOwner's policies . . . the Standard Bureau Form "H/O III" or the "special form" equivalent there of. As a preface to this discussion, you will need to understand a few terms (and abreviations) that will be used herein.

All Physical Loss (APL):
Property covered on an APL basis means that property is covered against damage from Any-and-All perils EXCEPT those perils that are SPECIFICALLY EXCLUDED by the policy (act of war, flood, public domain, wear and tear, drain backup, earth movement, nuclear hazard, etc.).

Named Peril (NP):
Property covered on an NP basis means that property is covered against damage ONLY if the damage is the result of a specifically named peril (wind, rain, fire, vandalism, falling objects, etc.).

Actual Cash Value (ACV):
The maximum potential payment the Insurance Company will make for damage to covered property is based upon the ACV (or depreciated value) of the property at the time of loss. Example:  Two years ago you paid $500.00 for an item. That item had a reasonable life expectancy of ten years. You have already received two years (or 20%) use of that item when it was damaged. That item (or a comparable equivalent if that item is now out of production) currently sells for $500.00 new. Based upon ACV Coverage, the most you would collect is $400.00 ($500.00 less 20% depreciation).

Replacement Cost Value (RCV):
The maximum potential payment the Insurance Company will make for damage to covered property is based upon the current cost to replace the property with NEW comparable property (no depreciation). Example:  Two years ago you paid $500.00 for an item. That item currently sells for $500.00. Based upon RCV coverage, the most you would collect is $500.00 (no depreciation).

Declarations Page (Dec Sheet):
This is the single page form that is attached to the actual policy on which appears policyholder information such as insured name and address, mortgage company name, address and loan number, policy number, inception and expiration dates, coverages, premium charges, endorsement forms, etc.

Endorsement:
A separate written form attached to the basic policy that changes some of the terms, conditions, limitations or exclusions that appear in the basic policy contract.
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Home Owner's Insurance Policies

Home Owner's Insurance Policies are "package" policies providing multiple forms of insurance to protect the Insured against multiple possible causes of loss. The Home Owner's Insurance Contract package includes two primary forms of insurance:

1.        Property Insurance

2.        Liability Insurance

INCLUDED IN THE PROPERTY SECTION of your Home Owner's Policy is coverage to protect your property against loss or damage, as well as coverage to protect your household budget against increased expenses that could be incidental to the insured property having sustained a covered loss. Coverage with the "property" section of your Home Owner's Policy are typically referred to as Coverage(s) "A", "B", "C", and "D". These coverage designations breakdown as follows . . .

A.      Coverage "A":  This insurance covers your main dwelling structure and all permanent attachments thereto. Coverage "A" is usually All Physical Loss (APL) and is based upon Replacement Cost Value (RCV).

B.       Coverage "B":  This insurance covers other structures on your same property that are NOT permanently attached to your dwelling (fence, storage shed, gazebo, pool, etc.), as well as landscape components (trees, shrubs, grass, sprinklers, decks, etc.). Coverage "B" is usually All Physical Loss (APL) and is based upon Replacement Cost Value (RCV), except trees, shrubs, plants and lawns, which would be covered on a Named Peril (NP) basis. Coverage "B" will NOT usually cover separate structures on your premises that are "intended for use" or are actually used "in whole or part" for business purposes. If this presents a potential problem for you, ask your agent to "endorse" your policy to extend this coverage or contact one of our Local Expert agents.

C.       Coverage C:  This insurance covers your personal property, which can be loosely defined as "anything you own which is not a permanent part of your dwelling, out buildings or land (clothes, furniture, jewelry, paintings, appliances, etc.)". Coverage "C" is usually Named Peril (NP) and is based upon Actual Cash Value (ACV). Some insurance companies are now starting to offer All Physical Loss (APL) and even more are offering Replacement Cost Value (RCV) on Coverage "C" of their HomeOwner's policies.

Whether Coverage "C" on your HomeOwner's Policy is based upon All Physical Loss (APL) or Named Peril (NP), Actual Cash Value (ACV) or Replacement Cost Value (RCV), most basic HomeOwner's policies include coverage "limitations" that apply to certain classes of personal property.

Following are listed some types of personal property and the typical coverage limits that could apply . . .

·         Any personal property:  while away from premises - $1,000.00

·         Artwork:  varies greatly (low limits to no limits) - check your policy

·         Business property:  (not including electronic data equipment) - $200.00

·         Electronic data equipment:  (on premises only) - $5,000.00

·         Firearms:  $1,000.00

·         Jewelery:  including furs, precious and semi-precious stones - $1,000.00 to $2,500.00

·         Manuscripts:  $1,000.00

·         Money:  medals, precious metals - $100.00

·         Passports:  securities, stamp collections, tickets - $1,000.00

·         Trailers:  (not used with watercraft) - $1,000.00

·         Watercraft:  (including equipment, motor and trailer) - $1,000.00

Having adjusted HomeOwner's Claims for many years, it always bothered me that I was the one who had to explain COVERAGE LIMITS to the insured after a loss had already occurred. This should have been explained by the agent (and endorsed if necessary) when the policy was purchased. The insured was ALWAYS DISAPPOINTED (to say the least) when they learned about COVERAGE LIMITS the hard way.

D.      Coverage "D":  This is the insurance that protects your household budget. It is typically referred to as Additional Living Expense (ALE) or Loss-of-Use Coverage. In the event you should have a covered loss that renders your home uninhabitable, you would have to incur the expense of relocating to a temporary substitite residence while your home is being repaired. The extra expense you would incur for this temporary relocation would be reimbursed to you under this coverage. This would be a dollar-for-dollar reimbursement and would not be subject to ACV or RCV conditions.

Included in the Liability section of your HomeOwner's policy is Liability and Med-Pay Coverage. Liability insurance pays to others who may sustain a Bodily Injury while on your property due to some negligence (an act or failure to act) on your part for which you may become legally liable. Med-Pay Coverage also pays to others who may sustain an injury while on your property whether you are legally liable (at fault) for the injury or not. While Liability Coverage would pay for medical expenses, lost wages, pain and suffering, etc, Med-Pay Coverage would simply reimburse the injured "visitor" for necessary medical expenses incurred in treatment of their injury.

Some HomeOwner's policies may EXCLUDE coverage for Liability arising out of a business or profession. If you are operating a business or profession out of your home, you need to check with your agent to verify that your clients would be covered if they were to sustain an injury while at your home. If your existing HomeOwner's policy does not provide this protection, have your agent endorse your policy to cover this potential liability. If your present insurance company will not provide this coverage . . . GET ANOTHER INSURANCE COMPANY!

Typical Liability / Med-Pay Coverage limits are $50,000 / $500. However, if your property has an increased "risk" (such as a swimming pool), we suggest increasing these limits to at least $100,000 / $1,000. Check with one of our Local Experts for other possible recommendations to address your specific situation.
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You should now have a basic understanding of HomeOwner Insurance Policy Coverages. Suggestion:  dig out your current HomeOwner's Insurance policy and review it in light of what you have learned here. You may have some deficiencies you will want to address IMMEDIATELY!

Insurance Quotes USA recommends calling our Local Expert for help. 

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