Homeowner's Insurance
Frequently asked Questions
MSNBC Article, 9/25/05:
Is your Home
Properly Covered?
CNBC Article, 7/ 23/03:
Is
Homeowners Insurance At Stake?
(Adapted from the Massachusetts Division of Insurance FAQ Page)
ANSWERS
Homeowners insurance covers both damage to your property (your home, garage
and their contents) and the liability of you and your family arising from
their actions (such as a lawsuit arising from your child accidentally injuring
another child during a baseball game.) "Enough" needs to take both
of these types of losses into account.
Property Insurance:
If all you want to do is pay off your mortgage and walk away from the
property, "enough" would be the outstanding balance of your
mortgage.
The replacement cost of the home is the amount it will cost you to rebuild
the house with material of like kind and quality (excluding the foundation,
which is usually not damaged during a loss,) it is not any of the
following:
- The market value of the house
- The assessed value of the house, or
- The value the mortgage company used as its worth.
All of these values include the cost of the land and the foundation of the
home.
If you want to rebuild the house and replace the contents, you will need to
insure for considerably more than the amount of any outstanding mortgage.
Unless you insure for at least 80% of the replacement cost of your home (the
building itself, not including the cost of the land and the foundation,) if
you have a loss, you will be "underinsured" and the insurance
company will not pay the full loss. While a discussion of
"coinsurance" and the "coinsurance penalty" is beyond the
scope of this question, your insurance agent can give you examples of what
might happen.
You should remember that even if you insure for at least 80% of the
replacement cost of the home but less than the full replacement cost, the loss
may exceed the amount of insurance. In that case, the insurance company will
only pay the policy limit, leaving you to pay the remainder yourself. Many
companies offer some type of "guaranteed replacement cost" or
"inflation guard" endorsements which will increase the value of the
property as construction costs increase.
Special valuation situations: the homeowners policy is
designed for the typical house. If your house was built before World War I,
has hand-made details, stained glass windows, or unique features not commonly
found in houses today, the homeowners policy may not provide adequate
coverage. We can help you tailor the policy to your particular needs.
Liability Insurance:
The basic homeowners policy provides $300,000 of coverage, which, for many
individuals, is sufficient. Higher limits are available for an additional
premium.
If you have an umbrella policy, you should determine what limits of
insurance it requires for your primary policy.
Return to Questions
Replacement Cost is the amount to repair or replace the damaged property using
materials of the like kind and quality, without deduction for depreciation.
Depreciation is the loss of value that develops as an item ages, wears out, or
becomes obsolete. Actual Cash Value is the replacement cost of an item, less
the amount for depreciation.
Return to Questions
First, talk to the bank. We can help you substantiate
the replacement cost of the building. In the event of a loss, the replacement
cost is the most your insurance company would pay, even if you have more
insurance. Banks are well aware of this, but your particular loan officer may
not be.
Also, the standard homeowners policy does NOT cover flood losses. You should
find out from your Town Hall if
the house is in a flood plain, and, if it is, if Federal Flood Insurance is
available. Since your homeowners policy
excludes flood damage, can be a lifesaver if you are flooded. (In addition, if
you are in a flood plain, many banks will require you to obtain it.)
Return to Questions
Generally, insurance companies will replace the items if possible through
their jeweler because they receive a better price than if they used your
jeweler. If you decide not to replace the jewelry, your company will pay you
only the amount of money that they could replace it through their jeweler.
Return to Questions
Most homeowners policies will cover business items up to $2,500 in your home
or $250 away from you home, subject to your deductible. There are some
exceptions to this limitation on business items, but it is so important that
you check your policy in each case. You should also be aware that there are
other policies available that specifically cover business equipment.
Return to Questions
Under Massachusetts law, your company must notify you of their decision not to
renew your policy, at least 45 days prior to its expiration date. Your
insurance company does not have to send you a notice by certified mail. They
are only required to use first-class mail to the address listed on your
policy.
Return to Questions
Your company has the right to renew or not renew your policy. Recent severe
storm losses incurred by many insurance companies have caused them not to
renew policies in coastal areas. You have several options if your insurance is
not renewed. First, you can check with your company agent to see if they have
companies writing business in the area other than the one that is not renewing
you. Second, you can ask about purchasing insurance through the FAIR PLAN,
technically, the Massachusetts Property Insurance Underwriting Association. It
was formed by the Massachusetts legislature in 1968 to make available
insurance protection to individuals who were having problems getting insurance
for their home. Third, you could also contact the FAIR PLAN directly. Their
phone number is (617) 723-3800 or 1-800-392-6108. And do not forget to ask
your agent about the Federal
Flood Insurance Plan, especially if you are in a coastal area. It is a
good companion to a homeowners policy.
Return to Questions
Generally, damage to both the exterior and interior of a home resulting from
weight of ice and snow or ice dams is covered under that homeowners policy.
However, when a claim is evaluated, the insurance company adjuster will look
at the damage to the roof and will pay only for the area damaged in the loss.
If further damage to the roof has occurred due to wear and tear, that part of
the claim will not be covered.
Return to Questions
If the actual receipts are not available, insurance companies generally will
accept photos, warranties, owners manuals, canceled checks, credit receipts,
bills, servicing agreements, even video tapes, as proof of ownership. We
suggest that you consider video taping your home before a loss.
Return to Questions
According to Massachusetts General Laws Chapter 175, Section 99 (12), your
policy can be canceled for these reasons:
- Non-payment of premium;
- Material misrepresentation/Fraud. That means that they honestly believed
you planned on committing fraud;
- Conviction of a crime arising out of acts increasing the hazard insured
against. (For example, conviction for illegal storage of fireworks);
- Discovery of willful or reckless acts or omissions by the insured
increasing the hazard insured against. (An example of this would be not
getting a gas leak fixed);
- Physical changes in the property insured which result in the property
becoming uninsurable. (For example, should the home become vacant for more
that 60 consecutive days, there is automatically assumed to be a greater
exposure to vandalism and damage); and
- A determination by the Commissioner of Insurance that continuation of
the policy would place the insurance company in violation of the law.
Return to Questions
Your insurance company would first confirm the value of the items with one or
more independent antique dealers. You should then be paid a dollar value based
on the dealer(s) estimate of the worth of the antique items. If you disagree
with the settlement offered by your company, then you can follow the dispute
resolution process outlines in your policy. There is a simpler way. Get
appraisals and keep your appraisals up to date.
Return to Questions
Generally, your own policy should cover such a loss. Your insurance company
may be able to recover the amount it pays you for the loss and your deductible
from the homeowners insurance that your neighbor may have, in the event that
the loss occurred as a result of your neighbor's negligence.
Return to Questions
Flood coverage is generally excluded on the basic homeowners policy. However,
some homeowners policies provide coverage for backup of sewers and drains that
cause flooding in your basement. This coverage can be purchased for an
additional
premium. You should check with your company agent to see if this coverage is
provided and how much it costs.
However, if you live in a flood-prone area, you should consider purchasing
a flood insurance policy. Flood policies have certain provisions that may
limit recovery at the time of a claim. For example, unless two or more acres
are flooded, or your neighbor's home as well as yours is damaged, the National
Flood Insurance Plan will not cover your loss. It also is limited as to what
it will cover in basements. Generally, it is the washer and dryer. Your agent
should be able to determine whether you are in a flood plain by contacting
your Town Hall.
Return to Questions
The basic homeowners policy usually does not. But, this is a popular coverage
for insurance companies to offer and you may be able to buy it for an
additional premium. There is also the issue of where the power was lost. Some
policies are limited to coverage for electricity lost in the home or where the
electricity enters the home. Others will limit it to within so many yards from
the home. Your agent should be able to tell you about the availability of
coverage and how much it would cost.
Return to Questions
Developed by DOI/MIS Section; September 1997
Contents were written by DOI Staff.
|
