SUNDAY, MARCH 29, 2015
It's that time of year again when the blossoms begin to bloom, and bare trees turn into a gorgeous luminescent green overnight, like magic. Spring is a time when our world once again is colorful and beautiful. But unfortunately, as we've seen recently, it's also a time when heavy rains, hail and winds can wreak havoc. Now is the time to give your homeowners policy a thorough spring cleaning because the best thing you can do to make sure you don't get caught in the storm is to prepare for it. So let's get your policy out of the file, or drawer, wipe off the dust, and let's review your coverages. (If you can't find your policy, please let us know and we will have one sent to you.)
Step 1 - Review your limits
Your base coverage limits are found on your declarations page. A limit is just that, the most the policy will pay for.
Coverage A is your Dwelling. It's based on replacement value, how much it costs to rebuild.
Coverage B is Other Structures such as a detatched garage, fence, shed, gazebo, or swimming pool. This coverage is usually 10% or 20% the dwelling and does not cost extra. If more coverage is needed, it can be increased.
Coverage C is Personal Property, is for the contents in your home. This coverage is usually 60-75% of the Dwelling which is usually sufficient for your average home. However, if your home is filled with Antiques or Fine Art, you should schedule those pieces seperately because they will exhaust your coverage quickly.
Coverage D is Loss of Use covers your extra expenses if you need to live elsewhere while the damage to your home is being repaired. This coverage is usually 20%-40% of the Dwelling. Some policies cover Actual Loss Sustained for a 12, or even 24 month period.
Coverage E is Personal Liability for property damage or bodily injury to others if you are found negligent.
Coverage F is Medical Payments which pays for immediate medical expenses to others even if you are not negligent.
Step 2 - Review your deductibles
The deductible is the portion you would pay in the event of a claim. If you see you have a $250 or $500 deductible, you may want to see how much you can save by having a higher deductible. The standard deductible these days is a "flat" $1,000 for all types of perils such as fire, wind, or hail. However, many insurance companies are moving towards a 1% or 2% wind deductible to control claims, and as a result control premium increases.
If you see a 1% or 2% deductible on your declarations page, it means your deductible is a percentage of the Dwelling. For example, if you have a 1% deductible, and your home is insured for $300,000, your deductible is $3,000.
Step 3 - Review your policy forms and endorsements.
Your policy form and endorsements are what give you your protection. If you don't have the proper policy form or endorsement, you may not have the protection you need. Below are common policy forms and endorsements for owner occupied residential properties.
1) If you have a 1-4 family home, you should have a Homeowners Special Form 3 (HO-3) or Comprehensive Form 5 (HO-5). The Comprehensive form provides broader personal property coverage than the HO-3. A homeowners policy should include Extended Dwelling Replacement Cost which adds an additional amount of coverage to the dwelling amount as an added cushion, usually 25% more coverage. The best type of dwelling replacement coverage to have is Guarenteed or Full Dwelling Replacement Cost. This coverage pays to rebuild the home with "like kind and quality material" even if it's more than the insured amount. You just have to notify your agent when you make structural changes or upgrades to your home such as adding square footage, or finishing your basement.
2) If you have a condominium, you should have a Condominium Unit Owners Form 6 (HO-6). Make sure you have enough "Dwelling" coverage to pay for damages to the interior of the unit such as hardwood floors, wall to wall carpeting, tile, cabinets, appliances, fixtures and more.
3) If you're a renter, you should have a Renters Form 4 (HO-4) which will cover your personal property.
1) Your policy should have Personal Property Replacement Cost which pays to repair or replace personal property without a deduction for depreciation (new for old).
2) Does your policy have Back up of Sewers or Drains coverage? This endorsement provides coverage for damage caused by the backing up of sewers or drains including sump pump failure. You can have coverage in limits of $5,000, $10,000, $25,000, $50,000, $100,000. If you have a finished basement, this is valuable coverage you may want to add to your policy. Clean up alone could cost you $5,000 so at least $10,000 coverage is recommended.
3) Does your policy have Ordinance or Law coverage? This endorsement covers increased costs due to building code requirements. Many homeowner policies contain 10% of this coverage; however, more coverage may be needed and is available for an additional premium. Sometimes the cost could be very little, and is money well spent if you have a serious claim. Building code changes, especially for older homes, could cost thousands, if not tens of thousands of dollars out of your pocket.
4) Does your policy have Special Personal Property Coverage? This endorsement turns an HO-3 policy to an HO-5, providing the more comprehensive "open peril" coverage not only on your dwelling coverage, but also on your personal property coverage.
5) Does your policy provide Replacement Cost coverage for your roof, or is it Actual Cash Value (less depreciation)? To control wind and hail claims, some insurance companies have moved to cover roofs on an Actual Cash Value basis.
6) Do you have at least $500,000 Personal Liability coverage?
7) Does your policy include Personal Injury Liability coverage? This coverage is for damages to others as a result of liable, slander, false arrest, and more. With the growth of social media and the unknown implications of this medium, this protection is a must for the 21st century.
8) Does your policy include Identity Theft protection? This coverage helps you restore your credit.
Step 4 - Review the limitations and exclusions found in your policy.
Here is a list of some common limitations (maximum your policy will pay) and exclusions (what's not covered).
1) Jewelry, Furs, Silverware, Business Property, Memorabelia, Collectibles, and other high valued types of property limited to $100-$2,500 depending on the type. Coverage can be increased for an additional premium.
2) Debris removal is limited - usually 5% or 10% of the Dwelling
3) Mold and Fungi is limited - usually only a $5,000 limit
1) Flood damage - but you can purchase a federal flood insurance insurance policy.
2) Sewer Back-Up - but you can add it for an additional premium.
4) Earthquake - but you can add it for an additional premium.
5) Sinkhole - but you can add it for an additional premium.
6) Wear and Tear
7) Damage caused by rodents (including squirrals), insects, vermin (including lice and bedbugs)
Not sure what's included in your policy, Or you can't find your policy? Call us to review your coverages. We are here to help!
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