Whether you rent or own your dwelling, insurance will give you peace of mind in knowing that your home and its contents are covered in the case of weather damage, theft, fire, or other tragedies. This guide was designed to answer questions for homeowners and renters and to assist in making the best decisions about your policy. Your McCartin Insurance agent can help you sort out any other questions you have. Feel free to contact us anytime.
Why does the insurance company want to know the distance between my home and the nearest fire hydrant?
The insurance company has to weigh many factors in determining a premium to charge for your policy. One factor is access to water (hence the question about the location of the nearest fire hydrant) as well as the dependability and nearness of your local fire and police stations. Rural homes more than five miles from a water supply are at greater risk for severe damage from fire and lightning. Therefore, they can be more expensive to insure and rural homeowners may even have difficulty obtaining insurance.
Other factors are, of course, the age and construction of your house. Generally, brick and stone homes are cheaper to insure than ones constructed of wood.
The number and dollar amount of lawsuits in your state can also influence your premiums. Residents in states that experience a large number of lawsuits or of verdicts in excess of $1 million may face higher premiums to cover the cost of those suits.
Who keeps an eye on the insurance companies?
Insurance is a heavily regulated industry. Every state has some type of department, administration, or agency that regulates and monitors every insurer operating within the state’s borders. In addition to approving rates, your state’s insurance department is involved in all insurance matters on behalf of private citizens and businesses. It also issues operating licenses to insurers and agents, based on their ability to meet the state’s requirements for conduct and knowledge about insurance issues.
Your insurance company and agent work closely with your insurance department to ensure that you are getting the best and fairest possible service within the state’s guidelines. If you ever have difficulty settling a claim, work with your agent to resolve the matter. However, you can also contact your state’s insurance department if you wish to know more about your options and rights as an insurance consumer.
Who decides how much my property is worth?
State laws may dictate how losses are to be figured, which means the same insurance company may use one method in one state and a different method in another. The common methods are:
- Actual Cash Value—The replacement cost of the item minus depreciation. For example, a new television set may cost $500. If your 7-year-old TV set gets damaged in a fire, it might have depreciated 50 percent. Therefore, you would be paid $250 for that set.
- Replacement Coverage—The cost of replacing an item without deducting for depreciation. So today’s cost for a TV set with features similar to the 7-year-old one damaged by fire would determine the amount of compensation. If it still costs $500 today, that would be the replacement coverage. Replacement value should not be confused with market value. The market value is what your house would actually sell for and is generally more than the replacement cost. This is because replacement value does not include the land – which almost always does not need to be replaced.
- Agreed Amount—Art objects, antiques, and other unique items are usually insured at an amount agreed upon when the policy is being written. An appraiser values the goods to be insured and the business owner and the insurer agree upon an amount that the insurer will pay if the goods are destroyed due to a covered peril.
Check your policy. If you prefer replacement coverage and do not already have it, this coverage can be added to your policy. Typically, the difference in premiums is 10 to 15 percent to upgrade from actual cash value coverage to replacement coverage. However, it is well worth it to protect your investment in your possessions. Your agent can advise you of the costs involved.
What kinds of perils am I protected against?
Remember that policies vary but homeowner’s insurance usually covers damage to both structures and personal property caused by:
- Fire or lightning
- Windstorm or hail
- Riot or civil commotion
- Theft or vandalism (sometimes called malicious mischief)
- Falling objects
- Weight of ice, snow or sleet
- Freezing of a plumbing, heating, air conditioning or other such household system
In fact, your coverage is most likely even more comprehensive than the above list. Many homeowner’s policies cover damage by “just about everything,” unless the coverage is specifically excluded. In these cases, it is even more important to understand what is not covered.
What if I am sued or found liable for injury to another person?
Liability covers bodily injury and property damage to others due to your negligence. The coverage applies to non-auto accidents that occur either at your residence or off the premises. Medical expense payments such as first aid can also be due to the injured party. Should you be sued or suspect that you may be, contact your agent immediately.
What do I do when my property is damaged or stolen?
Contact your agent as soon as possible. If there is damage to your home or possessions, make “emergency” repairs to protect yourself and your property from further damage, then call your agent. For example, if some of the windows in your home have been blown out by wind, you may board them up to prevent additional damage. In fact, your policy covers the cost of these emergency measures. However, before setting about to make permanent repairs, call your agent. The insurance company has the right to inspect the property in its damaged condition. They may want to send a claims adjuster or instruct you to get an estimate from an independent contractor. If you have property stolen, notify the police immediately and call your agent.
What about our vacation home in the next state?
Insurance companies can operate in more than one state so the company that carries your primary residence may issue a policy for your vacation home. Personal liability is covered in the first homeowner’s policy so the second policy need cover only property. This type of policy is called a “dwelling policy.”
If you rent out your second home for all or part of the year, your homeowner’s policy may need to be endorsed (added to) to cover the increased liability exposure. The renter’s property is not covered under your dwelling policy. Should damage occur while someone is renting your property, they will need to check with their own agent about their coverage.
What about floods, earthquakes and other catastrophes?
Most catastrophes are covered; for example, wind damage from hurricanes and tornadoes come under the windstorm peril listed in the previous question and so are included. Flood and earthquake damage, however, are not covered by a standard policy.
Be careful not to be lulled into a false sense of geographic security. Flood and earthquake activity is more widespread than many people realize. For example, almost 90 percent of the U.S. population lives in seismically active areas. Since 1900, earthquakes have occurred in 39 states and caused damage in all 50. And if your home is located in a flood-prone area, you are 26 times more likely to suffer a flood loss than a loss from fire.
You may want to check with your agent about special catastrophic policies for normally excluded conditions like floods and earthquakes. Of course, the cost of such extra coverage may reflect the high risk involved. If you live along a shoreline, for example, expect to pay a higher premium for flood coverage than someone living on a mountaintop would pay.
My mother lives with us in a separate in-law suite. Are her possessions covered?
As a member of the family, she is probably covered under your homeowner’s policy. So too is your child away at college covered for personal liability or theft or damage to his or her property even in the dormitory or college apartment. However, you should check with your agent to be sure of the extent of coverage.
My homeowner’s insurance is part of the payment I make each month to the mortgage company. Who decides what insurance to get?
You do—it is your home and your insurance policy. As a means of protecting its investment, the mortgage company collects a set amount from you each month, puts it in escrow, and then pays your insurance and taxes when they are due. However, the policy is still yours and you may select the insurance you feel offers the best coverage at the best rates. In fact, if you allow the mortgage company to choose, you might well end up paying more for your homeowner’s insurance.
Isn’t my apartment covered under my landlord’s policy?
No, the landlord’s insurance covers damage to the building and the landlord’s property—not your personal property or liability. Plus, you may be liable for damage to the building if it is your fault. If you go out and leave the stove on and an ensuing fire causes extensive damage to the entire building, you may be held liable to the landlord.
Is there anything I can do to lower my premiums?
Because your premium is based partly on the level of risk the insurance company must take, there are things you can do to lower your premium. Installing deadbolt locks (to discourage theft), fire extinguishers, smoke alarms, and burglar and fire alarms that alert your local police and fire stations can often save you up to 15 percent on your premium. Check with your agent before purchasing any of these items to see if your insurance carrier has specific requirements to qualify for the discount.
Many insurers also offer discounts if you insure both your home and automobile with the same company. Another way to save may be to increase the deductible on your homeowner’s policy. If your deductible is $100, it means that you agree to pay this amount first, and your insurance company will pay for damages that exceed this deductible. By increasing your deductible from $100 to $250, or even $500, this decreases the insurance company’s risk, which may mean a savings in your premium.
Also, it pays to shop around for insurance coverage just like anything else. Of course, you may want to keep in mind that the extent of coverage also determines the premium cost so the cheapest policy is not necessarily the best. Your insurance agent can help you evaluate the different policies and companies to find the one most suitable for you.
I work out of my home. Are my inventory and business property covered?
Yes, but within certain limits. Both are covered as personal property used for business purposes. However, like all personal property, there are monetary limits on reimbursement. Whether your home business is your primary occupation or a hobby that nets you a few hundred dollars a year, it is still a business and you should treat it as such. If you’ve invested quite a bit in equipment (woodworking tools, for example) and sell the occasional decoy, you should consider whether the personal property limits are sufficient.
Also, keep in mind that the personal liability protection in your homeowner’s policy does not extend to business liability. Check with your agent concerning your business insurance needs.
I rent out my basement. Are my tenants covered by my homeowner’s policy?
No. Your property and the structure (the basement) are covered by your policy as is your personal liability. However, the tenants’ possessions and liability are not covered by your policy. Therefore, they may wish to purchase their own renter’s insurance. Whether you are a lessor or a renter, you should check with your agent to ensure that you have the right coverage.
I own a condo. How is my policy different?
Condo owner’s insurance covers the same general areas outlined throughout this FAQ guide for homeowners in the important areas of personal property and liability. In addition, condo owner’s insurance provides coverage for some situations specific to condominium unit owners.
Usually, the condominium association buys insurance to cover the property (building and structures) and liability coverage for the general association. If you own a condominium unit, you may be responsible for covering from the “walls in” on your unit, that is, for your personal property and the interior of your unit (whatever area is excluded from the condo association’s policy) as well as for your personal liability.
Sometimes, condo owners are assessed by their condo association for losses “outside the walls” that were not completely covered by the association’s policy. For example, if the clubhouse is destroyed and the condo association did not have it insured, you could be assessed for a “share” amount needed to replace it. If you wish, check with your agent about adding such “loss assessment coverage” to your condo owner’s policy.
I live in an apartment with three roommates. Do we each need a policy?
Check with your agent. Usually, it is best if all roommates are on the same policy although it is possible for each to purchase his or her own coverage. If you do need to “go it alone,” then you alone receive the security of renter’s coverage.
I know I have that homeowner’s policy in a drawer somewhere. What exactly does it cover?
“Exact” coverage is hard to define because there are different policies and about 900 insurance companies writing most of the property/casualty business in the United States. However, 80 percent of homeowner’s policies are based on a standard form and that is the one described in this FAQ. All homeowner’s policies cover two important areas: property and liability. Remember that you have to have protection against the proverbial thief in the night and the person who slips on your sidewalk by day.
What this means in insurance terms is that your homeowner’s policy has two basic components. It covers your structures and possessions—property insurance—and it furnishes protection against personal liability. Personal liability, as its name implies, means you are legally obligated to pay money to another person for actions caused by you, your family, or your property. That liability extends to medical payments to others for injuries caused by you or your family.
I am a renter, not a homeowner. Do I need insurance?
The same rule of thumb applies to renters as to homeowners. If catastrophe struck tomorrow, could you afford to replace everything you own? Or if you were sued, would you have enough money to pay legal fees and possibly settle the suit? If not, chances are you would benefit from the protection that renter’s insurance brings.
Renter’s insurance offers the same general personal property coverage and liability protection as a homeowner’s policy. Thus, your camera is insured while you are on vacation, and you are covered if your grandfather clock crashes into the apartment lobby’s wall and leaves a gaping hole. In fact, most policies are surprisingly extensive and may include additional living expenses (also called loss-of-use coverage) if you are forced by fire or other damage to live elsewhere.
How much will I be paid for damage to my personal property?
Remember that homeowner’s insurance is designed to cover general personal possessions, not valuable collections like antiques, jewelry or original art. Insurance companies deliberately limit their coverage of expensive possessions so that household premiums are more affordable to everyone. After all, if they had to cover museum-level art collectors under standard homeowner’s policies, we would all end up paying higher premiums to cover those expensive items.
Your policy lists the specific monetary limits for personal property under what is called “Special Limits.” Those limits usually are:
- $200 for money, bank notes, gold and silver (other than goldware and silverware), platinum, coins, and medals.
- $1,000 on securities, accounts, deeds, evidences of debt, letters of credit, notes (other than bank notes), manuscripts, passports, tickets, and stamps.
- $1,000 on watercraft, including their trailers, furnishings, equipment, and outboard motors.
- $1,000 on trailers not used for watercraft.
- $1,000 for loss by theft of jewelry, watches, furs, precious, and semiprecious stones.
- $2,000 for loss by theft of firearms.
- $2,500 for loss by theft of silverware, silver-plated ware, goldware, gold-plated ware, and pewterware.
- $2,500 on property on the resident premises, used for business, and $250 on this property damaged or lost away from the premises.
If these limits seem low to you (maybe that engagement ring is worth much more than $2,500), you may wish to talk to your agent about additional coverage for specific items.
How are prices determined for renter’s insurance?
Renter’s insurance is surprisingly inexpensive. That’s because you are not insuring a building. Like all property/casualty policies, the value of your property to be insured and other risk factors are weighed by the insurance company to determine your premium. Your insurance agent can help you find the best combination of coverage and cost.