Frequently Asked Questions
- What is homeowners insurance and who should buy this type of coverage?
- What is the difference between "actual cash value" and "replacement cost"?
- What factors should I consider when purchasing homeowners insurance?
- What are some practical things I can do to lower the cost of my homeowners insurance?
- What are the policy limits (i.e., coverage limits) in the standard homeowners policy?
- Where and when is my personal property covered?
- Do I need earthquake coverage? How can I get it?
- Do I need Flood Coverage?
- What should I consider when purchasing automobile insurance?
- What are some practical things I can do to lower my automobile insurance rates?
- I have an older car whose current market value is very low - do I really need to purchase automobile insurance?
- Suppose I lend my car to a friend, is he/she covered under my automobile insurance policy?
- What is the difference between collision physical damage coverage and comprehensive physical damage coverage?
- What factors can affect the cost of my automobile insurance?
What is homeowners insurance and who should buy this type of coverage?
Homeowners insurance is one of the most popular forms of personal lines insurance on the market today. The typical homeowners policy has two main sections: Section I covers the property of the insured and Section II provides personal liability coverage to the insured. Almost anyone who owns, rents or leases property has a need for this type of insurance. And many times, homeowners insurance is required by the lender as part of the requirements in obtaining a mortgage.
What is the difference between "actual cash value" and "replacement cost"?
Covered losses under a homeowners policy can be paid on either an actual cash value basis or on a replacement cost basis. When "actual cash value" is used, the policy owner is entitled to the depreciated value of the damaged property. Under the "replacement cost" coverage, the policy owner is reimbursed an amount necessary to replace the article with one of similar type and quality at current prices.
What factors should I consider when purchasing homeowners insurance?
There are a number of factors you should consider when purchasing any product or service, and insurance is no different. Here is a checklist of things you should consider when you purchase homeowners insurance:
- First and foremost, purchase the amount and type of insurance that you need. Remember that if your policy limit is less than 80% of the replacement cost of your home, any loss payment from your insurance company will be subject to a coinsurance penalty. Also, determine the amount of personal property insurance and personal liability coverage that you need.
- Second, determine which, if any, additional endorsements you want to add to your policy. For example, do you want the personal property replacement cost endorsement or the earthquake endorsement?
- Finally, once you have decided on the coverage you want in your homeowners insurance policy, you can now decide which insurer you would like to purchase the insurance from.
What are some practical things I can do to lower the cost of my homeowners insurance?
There are a number of things you can do to lower the cost of your homeowners insurance. The best thing to do is to shop around.
It is not surprising to find quotes on homeowners insurance that vary by hundreds of dollars for the same coverage on the same home. When you shop, be careful to make sure each insurer is offering the same coverage. Many insurers use the ISO policy forms, but this is not always the case.
Another way to lower the cost of your homeowners insurance is to look for any discounts that you may qualify for. For example, many insurers will offer a discount when you place both your automobile and homeowners insurance with the them. Other times, insurers offer discounts if there are deadbolt exterior locks on all your doors, or if your home has a security system. Be sure to ask your agent or company about discounts any that you may qualify for.
Another easy way to lower the cost of your homeowners insurance is to raise your deductible. Increasing your deductible from $250 to $500 will lower your premium, sometimes by as much as five or ten percent. However, be careful to make sure that you have the financial resources necessary to handle the larger deductible.
What are the policy limits (i.e., coverage limits) in the standard homeowners policy?
[Note: this answer is based on the Insurance Services Office's HO-3 policy.]
Coverages A and B provide protection to the dwelling and other structures on the premises on an "all risks" basis up to the policy limits. The policy limit for Coverage A is set by the policyowner at the time the insurance is purchased. The policy limit for Coverage B is usually equal to 10% of the policy limit on Coverage A. Coverage C covers losses to the insured's personal property on a named perils basis. The policy limit on Coverage C is equal to 50% of the policy limit on Coverage A. Coverage D covers the additional expenses that the policyowner may incur when the residence cannot be used because of an insured loss. The policy limit for Coverage D is equal to 20% of the policy limit on Coverage A. The coverage limit on Coverage E - Personal Liability - is determined by the policyowner at the time the policy is issued. The coverage limit on Coverage F - Medical Payments to Others - is usually set at $1000 per injured person.
Where and when is my personal property covered?
Coverage C, which provides named perils coverage, applies to all your personal property (except property that is specifically excluded) anywhere in the world. For example, suppose that while traveling, you purchased a dresser and you want to ship it home. Your homeowners policy would provide coverage for the named perils while the dresser is in transit - even though the dresser has never been in your home before.
Do I need earthquake coverage? How can I get it?
Direct damages due to earthquakes are not covered under the standard homeowners insurance policy. However, unless you live in an area that is prone to earthquakes, you probably do not need this coverage. If you do live in a part of the country with high earthquake activity you may want to consider adding an earthquake endorsement to your homeowners insurance policy. This endorsement will cover damages due to earthquakes, landslides, volcanic eruptions and other earth movements.
Do I need Flood Coverage?
That depends on whether your properties lies in a flood plain as determined by US Government Flood Maps. We have these maps available and can provide flood coverage should it be required or desirable.
Why would I want to buy renters insurance?
If you live in an apartment or a rented house, renters insurance provides important coverage for both you and your possessions. A standard renters policy protects your personal property in many certain cases of theft or damage and may pay for temporary living expenses if your rental is damaged (including loss of use). It can also shield you from personal liability. Anyone who leases a house or apartment needs to consider this type of coverage.
How does a renters policy protect my personal property?
A renters policy provides named perils coverage. This means your property is protected from all the perils that are specifically listed on your policy. These usually include:
- Fire or lightning
- Windstorm or hail
- Vandalism or malicious mischief
- Falling objects
- Weight of ice, snow, or sleet
- Accidental discharge or overflow of water or steam
- Sudden and accidental tearing apart, cracking, burning, or bulging
- Sudden and accidental damage from artificially generated electrical current
- Volcanic eruptions (but this doesn't include earthquake or tremors)
- Renters coverage applies to your personal property no matter where you are in the world. This means you're covered when you are on vacation as well as at home.
Why do some apartment complexes require tenants to have renters insurance
The owners of these apartment complexes require their tenants to have renters insurance to ensure that they have personal liability coverage. Owners of apartment complexes carry property insurance to protect themselves in the event that the apartment building is damaged. However, if a negligent tenant causes damage, the owner's insurer will sue the responsible tenant for the amount of damage they caused. The owner wants to make sure that the tenant has insurance coverage that will protect him or her in this event.
What if I share my apartment with a roommate? Do we both need to have renters insurance?
Standard renters policies cover only you and relatives that live with you. If your roommate is not a relative, each of you will need your own renters policy to cover your own property and to provide you liability coverage for your own actions.
What should I consider when purchasing automobile insurance?
There are a number of factors you should consider when purchasing any product or service, and insurance is no different. Here is a checklist of things you should consider when purchasing automobile insurance.
- Don't base your decision on price alone. Base your decision on value - what you get for what you pay. Consider the quality of the company's claims service and consumer education.
- Purchase the amount of liability coverage which makes sense for you.
- You should decide which optional coverages you want. For example, do you want optional physical damage coverages or is the market value of your car too low to warrant purchasing them.
- Once you have decided what you want in your automobile insurance policy, you can now decide from whom you would like to purchase the insurance. For example, you may decide you like the idea of purchasing insurance from a mutual company rather than a stock company.
What are some practical things I can do to lower my automobile insurance rates?
There are a number of things you can do to lower the cost of your automobile insurance. The easiest thing to do is to shop around.
It is not surprising to find quotes on automobile insurance that can vary by hundreds of dollars for the same coverage on the same car. When you shop, be careful to make sure each insurer is offering the same coverage. Many insurers use the ISO policy forms, but this is not always the case.
Another way to lower the cost of your automobile insurance is to look for any discounts that you may qualify for. For example, many insurers will offer you a discount if you insure multiple cars under the same policy, or if you have had a driver education class in the last five years. Be sure to ask your agent or your company about their discount plans.
Another easy way to lower the cost of your automobile insurance is to increase the deductible. Simply raising your deductible from $250 to $500 can lower your premium sometimes by as much as five or ten percent. However, you should be careful to make sure that you have the financial resources necessary to handle the larger deductible.
I have an older car whose current market value is very low - do I really need to purchase automobile insurance?
Most states have enacted compulsory insurance laws that require drivers to have at least some automobile liability insurance. These laws were enacted to ensure that victims of automobile accidents receive compensation when their losses are caused by the actions of another individual who was negligent.
Except for the minimum liability coverages that you may be required to purchase, many people with older cars decide not to purchase any of the physical damage coverages. It is often the case that the cost of repairing the damages to an older car is greater than its value. In these cases, your insurer will usually just "total" the car and give you a check for the car's market value less the deductible.
Suppose I lend my car to a friend, is he/she covered under my automobile insurance policy?
Whenever you knowingly loan your car to a friend or an associate, he or she will be covered under your automobile insurance policy. In fact, even if you do not give explicit permission each time a person borrows your car, they are still covered under your automobile insurance policy as long they had a reasonable belief that you would have given them permission to drive the car.
What is the difference between collision physical damage coverage and comprehensive physical damage coverage?
Collision is defined as losses you incur when your automobile collides with another car or object. For example, if you hit a car in a parking lot, the damages to your car will be paid under your collision coverage.
Comprehensive provides coverage for most other direct physical damage losses you could incur. For example, damage to your car from a hailstorm will be covered under your comprehensive coverage.
It is important to know the differences between the collision and comprehensive coverages for a couple of reasons.
- In order to make an informed purchasing decision about these optional coverages, you need to know the difference between them.
- The deductibles under the collision and comprehensive coverages are often different in amount.
What factors can affect the cost of my automobile insurance?
A number of factors can affect the cost of your automobile insurance - some of which you can control and some which are beyond your control.
The type of car you drive, the purpose the car serves, your driving record, and where you live can all affect how much your automobile insurance will cost you.
Even your marital status can affect your cost of insurance. Statistics show that married people tend to have fewer and less costly accidents than do single people.