What You Should Know about HOMEOWNERS Insurance
courtesy of Susan Gonzalez
Homeowners insurance provides you financial protection in the event that your home is destroyed or damaged due to unforeseen or catastrophic event. In addition to your home, homeowners insurance also covers your belongings (or personal property) and can reimburse you for medical expenses and liability claims resulting from property damage and personal injury to other people caused by you or members of your family.
A homeowners policy will also pay for additional living expenses (or ALE). ALE will cover your expenses if you are forced to move into a hotel or apartment temporarily because of a covered loss to your home.
TYPES OF COVERAGE
There are two basic types of coverage offered under residential property policies:
ALL RISK (the most comprehensive coverage also referred to as an open peril policy) – offers the broadest protection and covers all perils unless they are specifically excluded by the policy. You should always carefully review the excluded causes of loss section of your policy. Even the most comprehensive policy will exclude certain types of loss (damage caused by flood, for example).
NAMED PERILS – (also known as specified perils coverage) offers narrower protection than an all risk policy and covers only those perils specifically named under the policy. A policy that offers named perils coverage will also contain exclusions to perils named under the policy. If you are thinking of purchasing a policy that provides named perils coverage only, it is important make certain that the policy provides coverage for the perils that most concern you.
PLEASE NOTE: It is not uncommon for homeowners policies to provide all risk coverage on the dwelling and named perils coverage for the personal property. Please visit the OPIC Policy Comparisons Page for more information on the types of coverage offered by specific companies.
Residential property policies also offer different methods of repairing or replacing your property:
REPLACEMENT COST – pays for all necessary expenses associated with rebuilding or repairing damaged property, up to the policy limits, less any applicable deductible amount.
ACTUAL CASH VALUE – factors in depreciation costs to your claim and pays you the costs to replace or repair the damaged property, less this depreciation and less any applicable deductible amount.
PLEASE NOTE: Most insurance companies that offer replacement cost will initially pay for the loss on an actual cash value basis. The company will pay any additional costs associated with the “replacement cost” once repairs have been made to the property, or the damaged property has been replaced.
Residential property policies do not cover damage caused by flood. Most residential property policies define flood to include: surface water, waves, tidal water, storm surge, tsunami, seiche, overflow of a body of water, or spray from any of these.
Flood Insurance can be obtained through your insurance agent from FEMA and the National Flood Insurance Program
Important Questions to Ask Your Homeowners Agent
- Ask what policy they are selling. Is it the HO-B, HO-A, HO-3 or another policy.
- If it is an HO-A, ask if any coverage has been added to the base HO-A policy. Verify what they tell you with an independent source (such as the OPIC policy comparison chart www.opic.state.tx.us/)
- If it is another policy (i.e. a company’s national policy) ask how it compares to the HO-B or the coverage you currently have. Verify what they tell you with an independent source (such as the OPIC policy comparison chart)
NEVER take “It’s basically the same coverage as you had before” for an answer.
REMEMBER, EVEN WITH THE AMENDMENTS, THE HO-A IS A NAMED PERILS POLICY AND DOES NOT COVER ALL PERILS COVERED UNDER THE HO-B OR OTHER “ALL RISK” POLICIES.
- When getting a quote, ask the agent if this is the best rate offered to any applicant by any company the agent represents.
- If you are not getting the best rate, ask why not.
- Ask when and how much the company’s last rate increase was.
NON-RENEWAL – Ask about the company’s policy regarding claims and non-renewal?
REMEMBER – check the Texas Department of Insurance website for the company profile (CLICK HERE to go to TDI Company Profiles Page). This profile shows the financial rating of the company as well as the complaint ratio, and any enforcement actions taken by the Department against the company.
Susan Gonzalez, mother of 3, is a Liberty Mutual Insurance Agent based in The Woodlands, Texas. She offers Home Owner Insurance, Auto Insurance, Personal Liability Policies, Life Insurance, Renters Insurance, Condominium Insurance, Flood Insurance and can be reached at 832.339.3243.