Q: What can I do to lower the cost of my homeowners insurance?
A: There are several things you can do to lower the cost of your homeowners insurance. The key is to do it in a way that does not harm you at the time of loss. The first real step is to get a comprehensive review by a competent, professional insurance agent who will assess your specific insurance needs.
Prices among different insurers insuring the same property will many times vary by hundreds of dollars. So, when you are shopping, make sure you are getting a fair comparison on the same coverages.
Some immediate ways to lower your costs are to assume more of the risk yourself. You can save money by
- Increasing your deductible, thereby taking on more of the risk and cost of each claim.
Find discounts that apply to you that you may not be getting such as
- Senior Discounts,
- Vocational Discounts,
- Smoke Alarm Discounts,
- DeadBolt Lock Discounts, etc.
- Each company offers slightly different sets of discounts, so ask your agent to look these up for you.
Q: What does homeowners insurance cover?
A: It depends. A typical homeowners policy has two main sections:
Section I covers the physical property of the insured. There will typically be four or more sections listed that will outline the amount of coverage for:
A. Your Dwelling–This is the maximum amount the insurance company is obliged to pay to you in the event of a total loss.
B. Your Other Structures–This is the maximum amount the insurance company is obligated to pay for other structures on your property such as detached garages, well houses, sheds, etc. Be careful, though because a commercial structure or farm structure will not typically fall under this coverage. Ask your agent for more details.
C. Your Personal Property–This also is the maximum payable for all of your personal property. There are limitations on property like jewelry and guns, so read the fine print. If you’re a collector and your collection is important to you, you’ll want to make sure it’s covered. Never assume.
D. Additional Living Expense–If your home burns down or blows away, you’re going to need a place to stay. That’s where this coverage comes in handy. Actually, it’s more than ‘handy’ because while your property is being replaced or repaired you still have to make that mortgage payment AND you’ll have to rent somewhere to stay. So unless you have a lot of cash handy, you will really like what this coverage will do for you.
Other coverages are for Farm Related Buildings and Property. If you have any of this type of property, see your agent.
Section II provides personal liability coverage for the insured.
Liability Protection typically offers at least two levels of coverage.
Medical Payments coverage is usually sold in increments of $1,000 $2,000 $5,000 or more. This is coverage for people (other than you or the residents of your household) that are hurt on your property. It’s considered ‘good will’ coverage in that if a small claim can be paid quickly, a more contentious and expensive claim can be avoided in the future.
Liability Protection is sold in amounts like $100,000, $300,000 and more. This is in the event you are sued as a homeowner, but there are limitations. Again, a qualified and competent insurance agent can counsel you on what is and is not typically covered.
Q: What is the difference between “actual cash value” and “replacement cost”?
A: 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. For instance, a roof typically lasts about 20 years. If your 10-year-old roof is damaged and must be replaced, you will only be reimbursed about half (less your deductible) of the cost of replacing the roof. Everything has an expected life and as such these will be used to determine how much you will be reimbursed.
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. In many situations, you will be immediately given the ‘actual cash value’ of the loss and once you replace the item you will be reimbursed the difference.
Even in the best of replacement cost policies, there are some household items that will always be paid at ‘actual cash value’, so talk with your agent about these specific items.
Q: What should I consider when purchasing homeowners insurance?
A: Here are some things you should consider when you purchase homeowners insurance:
1. The Company–Visit the Missouri Department of Insurance at http://insurance.mo.gov/reports/complaint/compindx.htm and check out the company in which you are interested in placing your insurance. This lists by the COMPANY and not the agency.
For instance, a search by company in June 2010 revealed the following number of complaints by consumers against insurance companies:
- State Farm – 263
- American Family – 144
- Safeco – 34
- Allied – 15
- Meramec Valley Mutual Insurance Company – 0
2. The Agency – Is the agency experienced? Does it have a competent staff to handle your questions? Does the staff hold any certifications which indicate a commitment to their service to you? Do they take the time to help you or merely rush you through the process and out the door? These are all legitimate questions you should consider because these will be the same people who will be there when you experience a loss.
3. The Amount of Insurance – Make sure that you have enough money to replace what you’ve lost. it’s really that simple. Cutting the amount of insurance on your home is never a good idea because when it’s laying in a pile of ashes and you need to rebuild your life you do not want to have to have problems with cash flow.
4. Other Coverages – Optional coverages like Earthquake, Flood, Replacement Cost, Jewelry and Gun Riders, and others are all important. An indepth assessment of your insurance needs will reveal these needs.
Q: What am I covered against in the standard homeowners policy?
A: There are basically two ways to insure any dwelling or other property.
1. The dwelling/property is insured against ALL direct losses to the house WITH CERTAIN NAMED EXCEPTIONS (which the policy then names), or
2. The dwelling/property is insured ONLY against certain named ‘perils’ like fire, wind, hail, etc. The policy then goes on to name those specific things or events for which you are covered. If it’s not on that list, you are not covered.
Now, the details get more involved, but these are the two ways to look at the policy you buy. The first is usually the best and most comprehensive way to cover your property if possible.
No matter what policy you buy from whichever company you must realize that everything is not covered. No company will do that. The premium charged for that coverage would not affordable. Take time to read through your policy. They are all written on a grammar school level so everyone will be able to understand. You just have to take the time and responsibility to understand it for yourself. If there is something you do not understand, call your agent. That’s what they get paid to do.
Q: Where and when is my personal property covered?
A: Personal property (except property that is specifically excluded) is covered 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.
Q: Do I need earthquake coverage, and how can I get it?
A: The standard insurance policy does not pay for direct damages caused by earth movement. “Earth movement” is a much broader term than “earthquake”. It includes earthquakes, volcanic activity, and other earth movement. This coverage may be available by endorsement for an additional charge. If you live in an area that is more likely to have an earthquake, you’ll pay more than if you live in an area that is unlikely to have one. We can help you weigh the costs and benefits of this coverage before you decide to purchase.
Please understand that nothing in this article should be taken as legal advice or as an absolute statement of what is and is not covered under any particular insurance policy. As always, it is your responsibility to seek competent counsel from qualified advisors regarding your specific insurance circumstances and needs.