Personal Liability in the Homeowner’s Insurance Policy

Personal Liability in the Homeowner’s Insurance Policy

Owning or renting a residence has a certain amount of risk associated with it. Anyone who visits your residence can become a plaintiff in a lawsuit against you if they are injured at your residence. Also, resident employees such as Nanny’s or Caregivers may present a certain amount of risk as well. Oh but our Nanny or Aunt Jane would never bring a suit against us, oh really? What if Aunt Jane breaks a hip after falling down your stairs because the carpet covering them happens to be loose? Would she get advice from an attorney to sue your insurance company? Of course she would. This is why personal liability protection is built into the homeowner’s and renter’s insurance policy.

personal liability coverageWhen a personal injury lawsuit is brought against a homeowner, it is not for just the cost of medical care. In most cases the remedy sought is for medical bills both current and future, pain and suffering, and lost wages. This can in many cases, amount to tens of thousands of dollars. Without the proper coverage offered by your insurance policy, the cost of legal fees alone can be financially devastating. All standard homeowner’s insurance policies offer some personal liability coverage. Most companies offer $100,000 in coverage included in the standard policy. For an additional premium, usually about only $25 per year, the limit can be increased to $300,000. Most insurance companies have a $300,000 maximum on this coverage but there are several that will go as high as $500,000.

What limit is best to purchase?

Consider first what the liability protection is for. If you or a resident family member is named in a lawsuit for personal injury, what is the value of your assets that can be at risk? For many people that may be a low amount. For others, the amount may be much larger if they own a considerable amount of assets. Also, the homeowner must take into consideration the cost of their defense. Good attorneys are expensive and a case may drag out for a year or more which can run legal expenses into the tens of thousands of dollars. The personal liability coverage in the homeowner’s policy includes a duty of the insurance company to defend the insured if a lawsuit is filed against them. If the insurance company’s legal team feels they have a winnable suit then they will most certainly defend you and force the plaintiff to pay all legal fees. If not, then chances are probable that a settlement will be made on your behalf.

What if I need more than $500,000 in coverage?

Many people do and that is why the insurance industry provided an umbrella policy. This policy is purchased in limits of $1,000,000 to $5,000,000. Its purpose is exactly what the name suggests. If your limit of personal liability on your homeowner’s policy or auto policy is breached, the umbrella kicks in to pick up the balance. Most umbrella policies require at least $300,000 in coverage from the underlying (homeowner’s and auto insurance) policy. You can think of this as a deductible for the umbrella policy and the homeowner’s or auto policy fills the gap. Anyone who has assets that amount to $300,000 or more should consider purchasing an umbrella. The cost is very reasonable and the peace of mind is priceless.

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Using Life Insurance to Protect & Continue a Business

How Life Insurance Can Protect a Business

The need for life insurance for the business is usually discussed in two very important aspects; Key Man insurance and Buy/Sell Agreements. In both scenarios, life insurance is the lowest cost funding vehicle.

What is Key Man insurance?

Key man buy sell business insuranceAlthough a business may have five or five hundred employees, in most cases there are only a few key individuals that the business depends on to exist. This is not always the owner or CEO. Take for example a successful real estate agency. Typically less than a handful of agents will be the driving force in any particular office. The same goes with a successful hair salon where one or two key stylists have a client list that keeps the doors open. In any business, whether small or large, the loss of a key person can result in financial turmoil for the surviving business.

The most cost effective way to protect a business after the loss of a key person is with a life insurance policy issued with the key person as the insured and the business as the beneficiary. Upon the death of a key person, the business would have access to these funds for the following:

  • replace lost revenue resulting from the key person loss
  • use the insurance funds as a signing bonus to hire a replacement
  • finance a PR campaign to offer assurances to existing clients
  • finance a previously written transition plan

Using a term life insurance policy can be a very affordable way to provide insurance for the key person or persons provided there are no serious health issues. The business can purchase the policy for one to thirty year terms and allow the key person to take the policy with them if they leave the company.

What is the best way to fund a buy/sell agreement?

The second scenario discussed previously is the need for a buy/sell agreement between stakeholders of a business. Although typically used in partnerships, the buy/sell agreement can also be setup between the business owner and an employee or group of employees. Templates for a buy/sell agreement can be found online and do not necessarily have to be written by an attorney. The agreement is a fairly simple.

A typical example would be a two person partnership where each partner wants their spouse bought out of the company in the event of the death of a partner. For example, you and a partner own an insurance agency. Upon the death of one of the partners, the ownership share would typically pass on to the spouse or heirs. The surviving partner would then need the cash to purchase the ownership from the spouse or heirs who have become his or her new partner. The most affordable funding vehicle would be a term life insurance policy. With the death benefit determined to be the estimated value of the business, the surviving partner (the beneficiary of the policy) would then have the cash needed to offer a respectable buyout. In this case the beneficiary would be the partner rather than the company. The value of the company would need to be estimated at least every five years so that more insurance can be purchased as needed. This same process can work to fund a buy/sell agreement for the owner of a business and his or her employees. Another example would be a person owning a dental practice and wanting to set up the buy/sell agreement between himself and staff members. Upon the death of the owner, the staff members would have the needed funds to buy out the interest of the business owner’s spouse or heirs.

Given the fact that death is inevitable and in many cases happens sooner rather than later, it is incumbent upon the business stakeholders to get the proper key man insurance and/or buy/sell agreements in place when the business is young and most likely the participants are also. The required insurance policies will be much more affordable for a younger and healthier person.

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Directors & Officers Liability Insurance

Directors & Officers Liability Insurance

Board of Directors liability insurance coverageAny board member or company officer serving at a for-profit or non-profit company is at risk of being accused of wrongful misconduct when they are acting on behalf of the organization they represent. Directors & Officers Insurance (D&O) is the vehicle used to transfer this risk to an insurance company.

Most of these policies cover alleged wrongful acts that have taken place either before or during the policy period. Many policies that are purchased may or may not include coverage for “past acts”, and for that reason the applicant must pay close attention to the “retroactive date” listed on the policy. Since coverage is provided on a “claims made” basis rather than “occurrence” basis like other liability policies, a claim may be filed based on an alleged wrongful act that may have occurred several years before the current policy was purchased. For this reason, changing insurance carriers will require the applicant to completely disclose much information regarding the history of the company.

While historically only directors and officers were covered under the D&O policy, today many policies are expanded to include upper level managers and non-executive employees. Also, the company itself can be afforded coverage. Claims can be brought by stakeholders, customers, consumer groups, competitors, suppliers and government regulatory groups.

Typical exclusions include fraud, illegal compensation, intentional acts, pending and prior litigation, accounting profits and ERISA claims. The D&O insurance policy will always exclude coverage that should be provided by another type of policy such as General Liability and Fiduciary Liability. Insurers may also exclude other items based on the claims history of the applicant.

The exact definition of a claim can vary among policies and insurers. In fact, some companies and policies do not define it at all. In most cases, a claim includes any type of written demand that accuses an alleged wrongful act by a director or officer acting in their capacity of such, and seeks monetary or non-monetary damages. It can also be expanded to cover investigative activities and subpoenas in actions that want to hold the individual liable.

Fortunately the D&O policy will reimburse the company for costs associated with legal defense, investigation, and negotiating a settlement of a covered claim. The reimbursement will include attorney’s fees, court costs and fees for expert testimony provided for depositions or during a trial. There will always be wording in the policy for “reasonable defense costs” to protect the insurer from paying for excessive expense costs. The carrier will also require advance notice of expense costs and demand that consent be given in advance.

What the insured will not be reimbursed for is typical in most policies. This includes civil and criminal punitive penalties, multiplied damages and amounts that are uninsurable under the law. Today however, carriers are modifying their contracts to allow coverage for punitive damages where allowed by law. Most D&O policies contain a provision that states that an insured is not permitted to settle a claim without the carrier’s written approval. This becomes a matter of relevance if the insured expects their carrier to participate and contribute to the settlement. Conversely, the carrier will not agree to settle a claim without the insured’s consent. However, if the carrier and the insured are at an impasse, the carrier can elect to invoke a clause referred to as the “hammer clause”. This clause limits the carrier’s liability to what the carrier and plaintiff have agreed to plus defense costs. If the claim ends up totaling more than it could have been settled for, the additional amount is not going to be covered.

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What can life insurance do for my family

Whole Again

Why is life insurance so important for families?

There may be no better motivation for purchasing life insurance than protecting family and loved ones. Most young married couples begin accumulating debt while building the family. Cars are purchased, a home is purchased, mouths to feed, clothes to buy and daycare bills consume the weekly paycheck. A life insurance purchase is also “event driven” in that things that happen around us cause us to think about what happens if I die with all the debt I’ve accumulated? The risk is real, no doubt about it. For this reason, we eventually look for a solution to this ever present need for our families. When a friend, business associate, or close family member dies early in life, those around him or her will witness the financial calamity that ensues. This event will be the trigger to pay closer attention to life insurance advertising and finally make the decision to take this “what If” seriously. Circumstances will need to be addressed:

loss of all or a portion of the family income
the mortgage payments
the car payments
savings for college education
funeral & burial expenses
final health care expenses
daily living expenses
taxes

All of these items will need to be considered when determining the amount of insurance needed to make the family whole again. Insurance experts use a “needs analysis” to determine the amount of insurance that is required to finance the existing and future needs of surviving loved ones. Seeking out a reputable and qualified agent is the first step in putting one’s mind at ease. The insurance professional has a duty to identify the needs and present an affordable solution based on the needs analysis. There are different types of insurance products that can be used to deliver the amount of cash needed, some are permanent and some are not. Purchasing a permanent insurance product for a very large risk can be too expensive for most families so other less-costly products must be mixed in to accommodate the family budget. Also, the life insurance plans need to be re-visited every couple of years so they can be modified to accommodate an increase or decrease in the “needs analysis” which remains fluid throughout one’s lifetime. The reputable and experienced agent understands that there is no “one size fits all” solution and will remain in contact with the client to offer solution for life’s changes.

What are the differences between the types of life insurance policies?

Term life

Although Term Life Insurance remains the most economical approach to the solution, it will not be the best solution for the need of the family. In most cases, the term policy will expire (the policy is out lived) and the insured will have to renew at a much higher rate. If the new rate is unaffordable changes will have to be made and underwriting steps will be ordered by the insurance company. The result can become a major problem if the health of the insured has deteriorated.

Variable (Universal) Life

Variable Life is a great product priced somewhat higher then Term Life, but if funded properly can become permanent. This product also builds cash value that can be accessed in the later years for a financial emergency or assist in funding a college education. The policy is flexible so the face amount can be changed as the need is reduced resulting in lowering the monthly premium. This product can be purchased on a fixed or variable basis depending on the needs of the policyholder. It also allows for child term riders (to cover the children) and additional insured (adding a second insured) at a lower rate than having multiple policies.

Whole life

Whole Life Insurance is used as the standard method for insuring final expense costs. Although priced somewhat higher than Term and Universal Life, the policy is guaranteed to stay in force for the life of the insured as long as the premium is paid. The agent using this product for final expense must also take into consideration the rising costs of funerals when recommending a face amount to purchase. Funerals are now expected to double in cost every 10 to 15 years.

The bad news is that there is always the ever present danger of financial devastation resulting from the death of the family earner(s). The good news is that there is an affordable way to make the family whole again by using the various types of life insurance to transfer the risk to a reputable and highly rated insurance company. Knowing this, do not hang up or give an agent grief when they are merely trying to help you identify the need for their product.

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Business Liability Coverage Protection

Business Liability Insurance

Being a business owner can be very rewarding. You are able to set your own schedule, do what you feel passionate about, and you’re only responsible to your customers. Many people dream of being self-employed but, sometimes dreams can turn into nightmares.

Every prospect you speak with, customer you sell to, or client you perform a service for, may one day file an action against you. Sometimes these actions are legitimate and sometimes they are not. Every business owner is capable of making an error in judgement, under performing, or selling a product that can be harmful. If you own a store or office, there is always the possibility that a customer, prospect or employee might become injured on your premises.

Knowing this risk exposure exists, it is incumbent upon the business owner to transfer the risk to an insurance company by purchasing liability insurance. Your business needs to be protected for bodily injury liability, property damage liability, and professional liability if you offer a professional service. Most professionals are unable to be licensed in their state without the proper liability insurance in place. If you have employees, your exposure is even greater. Thankfully, Employee Dishonesty coverage is available as an endorsement on the General Liability policy. A simple description of the most popular types of business liability insurance is as follows:

General Liability

business liability coverage insuranceMany people refer to this as “slip & fall” insurance and that is pretty accurate. This coverage is triggered when a customer or visitor to your location becomes injured while entering, leaving or being on your premises. Included in this coverage is Property Damage Liability that protects you if you cause damage to another person’s property in the course of your service. GL also includes Products and Completed operations. This coverage is especially important to contractors who may still be at risk after completing a job for a customer or General Contractor. The policy will also provide coverage for damage to premises that you rent and medical payments to customers or visitors who suffer only a minor injury while in or on your premises.

Professional Liability/Errors and Omissions

Any person or business that offers a professional service should consider Professional Liability insurance. Whether a barber or a surgeon, a mistake can happen and the lawsuits will follow. Professional Liability and Errors & Omissions insurance protects the insured in the event that an error or omission is made inadvertently while performing a service or creating a contract. The key words for this coverage are errors and mistakes.

Intentional acts are not covered. If your surgeon accidentally cuts an artery while performing a procedure, coverage would be afforded. If the surgeon does the same thing while intoxicated, chances are he or she will be paying out of pocket.

Directors and Officers Liability (D&O)

Board of Directors liability insurance coverageThis type of liability insurance protects directors and officers of a corporation against their actions that affect the profitability or operations of the company. If a director or officer of a company, as a direct result of their actions on the job, finds him or herself in a legal situation, this insurance can covers costs or damages lost as a result of a lawsuit.

Employment Practices Liability Insurance (EPLI)

Any business owner that has employees should consider purchasing EPLI. This insurance covers the employer if a suit is brought against them as a result of terminating an employee. It also will provide coverage if the employer is charged with sexual misconduct or other workplace issues. The thing to remember is that the insurance company has a duty to defend the named insured and the cost of such a defense can easily amount to thousands of dollars whether you are guilty or innocent.

Worker’s Compensation Insurance

A business owner with employees should also provide liability insurance if an employee is injured on the job or becomes ill due to the job or environment. Most states require this coverage if a business has three or more employees but the business owner should consider this coverage even if only one person is employed. A lawsuit can be brought against an employer by an injured employee and the courts are usually “employee friendly”. Why risk thousands of dollars defending yourself when an insurance policy will provide the employee the needed coverage for far less money?

As we discussed earlier, many people dream of being self-employed only to find that these dreams can become nightmares. Transferring the risk to an insurance company via business liability insurance coverage can alleviate the nightmares and offer the peace of mind needed after reviewing the balance sheet on a daily basis.

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Car Insurance Pitfalls to Avoid

Car Insurance Pitfalls to Avoid

In today’s technology driven world, you might assume that most consumers would be educated when it comes to auto insurance, but it appears that such is not the case. In fact, many consumers begin looking for product information after making this important purchase rather than before.

Liability limits

Many agents will offer reduced limits in order to offer a low price. Don’t fall for it! Bodily Injury Liability (BI) is what pays for the other driver’s injuries if you are in an at-fault accident. 25/50 won’t cut it, especially if more than one person is injured or worse yet – killed. What most consumers do not realize is the savings for these lower limits is not that significant. Every driver should carry at least 50/100 or better yet 100/300. In today’s economy it is very easy to rack up more than $25,000 in medical expenses after a visit to the emergency room or short hospital stay. When you consider all the tests you’ll be subjected to and bills from three different specialists, the final bill can become staggering. One should also consider that you could be charged with an at-fault accident when it really is not your fault – like hitting someone from behind when they slam on breaks to miss a squirrel!

Property Damage Liability

Car Insurance Pitfalls to AvoidThe same advice applies with this coverage as well. Property Damage Liability (PD) is what pays when you hit someone’s vehicle or other property. $25,000 won’t cut it! Most vehicles on the road today cost much more than $25k and what happens if you hit 3 of them? In Florida the required minimum is $10k. There are bicycles out there that cost $10k! Think about this for just a minute – you lose control of your car on a back road in Florida and take out 3 mature orange trees. That tree owner is going to want the price of replacing those trees plus the value of the oranges they would have produced over their lifetime. As another example, imagine you manage to crash into a nice lady driving an expensive rental car. Your policy has to pay to repair the damage to the car AND LOSS OF RENTAL INCOME WHILE THE CAR IS UNDER REPAIR! If you have $10k or $25k limits, you will most likely be paying out of pocket.

Uninsured/Under insured Motorist Coverage

This very important coverage happens to be an optional coverage. It will pay for injuries to you or damage to your vehicle caused by an uninsured or under insured driver. When you consider the minimum limit requirement in most states, and the inability of the state to track insurance for every driver, your chances of being hit by an uninsured or under insured are a compelling reason to purchase this coverage. Also, in most cases, a personal injury attorney will not accept your case on a contingency if you do not have this coverage.

Buying insufficient insurance coverage to save a little money on your monthly payment will in most cases come back to haunt you and your family. It is every vehicle owner’s responsibility to make certain that their insurance policy will respond favorably when a simple error results in unintentional property damage and injuries. For an honest assessment of your existing auto insurance policy don’t hesitate to contact us.

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What Does an Auto Insurance Policy Cover

What Does an Auto Insurance Policy Cover?

What Does an Auto Insurance Policy CoverIn every U.S. state, if you own a vehicle, you must purchase liability insurance that will pay for injury expenses and property damage expenses if you are in an at-fault accident. The state where you reside will also set minimum acceptable limits. More often than not, these minimum limits fall short of being practical and the vehicle owner can be at risk of paying out of pocket in the event of a moderate to serious loss. Personal auto insurance is written as a package policy which can be built based on the consumer’s needs.

Bodily Injury Liability

This is part of the mandatory coverage required in each state. The coverage pays for injuries caused by the at-fault driver up to the limits selected. Most states have low minimums which can fall short of being practical. The suggested amount to carry is $100,000 per person and $300,000 per accident. The limits are listed and spoken about as 25/50, 50/100 or 100/300 as recommended.

Property Damage Liability

This is also part of a state’s mandatory coverage. Most states require only $25,000 which will fall short if your at-fault accident involves a more expensive vehicle or if the accident involves more than one vehicle. The suggested amount to carry is $100,000.
This coverage limit is the 3rd number listed such as 100/300/100.

Personal Injury Protection

This coverage is only offered in states that have some type of “No-Fault” law. It is designed to pay up to the limit of the policy for the insured’s injuries no matter who is at fault in the accident.

Uninsured/Under insured Liability

This is an optional coverage offered to protect the not at-fault driver if the at-fault driver is uninsured or under insured (carries a lower limit policy). In many states it can be purchased for bodily injury and property damage.

Medical Payments

What Does an Auto Insurance Policy CoverThis is also an optional coverage but should be purchased by every driver. This coverage acts as an “accident insurance policy” that pays up to the limit if you or any other occupant of your car is injured in an accident. The limit applies per person, not per accident. It is often used to fill the gaps created by deductibles and copays.

Comprehensive & Collision Coverage

Although considered optional, if your vehicle is financed, the lender will require this coverage since it is designed to cover the vehicle which is used as collateral for the loan. Comprehensive coverage pays for damage to your vehicle that was caused by an event other than a crash such as theft, vandalism or hitting an animal. Collision coverage pays for the cost of repairs as a result of an accident with another vehicle.

Other Optional Coverages

Other optional coverages to consider are roadside service reimbursement and rental reimbursement.

When considering your purchase of an auto insurance package that is right for you, ask the agent as many “what-if” questions as you can think of to give yourself the opportunity to protect yourself and your vehicle adequately. We will be glad to assist you in analyzing your auto insurance coverage and see if it is covering all the “what ifs” adequately.

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How can I save on Auto Insurance?

5 Ways to Save on Car Insurance

animaatjes-mini-cooper-69825There are television ads everywhere that proclaim if you give them 15 minutes, you can save $300 (or whatever) on your car insurance. Maybe they will or maybe the won’t. Insurance rates do not change very frequently but discount programs do, and this is a very good reason to shop your business yearly. The following is a list of some tips to help you take advantage of discounts and thereby lower your auto insurance premium:

Defensive Driver Course – If this is an option we recommend taking the course. It will teach you some good driving habits and save you on your premium expense.

Collision Deductible – purchase the $1,000 deductible level and you will save about $50 to $60 per vehicle. Raising the comprehensive deductible will save money as well but it is not recommended because this coverage pays for damage other than accident like broken windshield, hail damage, hitting an animal or having your car ”keyed”.

Rental reimbursement – decline this coverage if you own more than one vehicle. If you are hit by another vehicle, the at-fault driver’s insurance must reimburse you for car rental.

Bundle your Business – many of the major carriers will offer substantial discounts when you have multiple policies such as auto & home, auto & renters or auto and life. Always take advantage of these discounts as they are usually substantial.

Pay in Full – This discount, usually around 10% is very significant. One of the major expenses for an insurance company is sending out monthly statements, cancel notices for late payments, and reinstatement notices after a payment is received. By paying in full, the company will reward you with this substantial discount.

Liability coverage – this is probably the one area you don’t want to be “cheap” — especially if you own a home and or have valuable assets. If you end up getting sued and you have inadequate liability coverage, I guarantee you that their lawyer will go after every single asset you and your family owns.

Beware – many times the savings you see is because the coverage amounts for certain “insurable events” are lower than recommended. Insurance is designed to help you keep your savings and paycheck when something bad happens, i.e. an accident. If $300/year ends up costing you THOUSANDS because of the “limitations” that the $300 in savings earned you, is it really a savings? NuAlliance Insurance Group will be glad to give you an honest assessment of your current auto insurance policy so you can make an informed educated decision.

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What are Insurance Companies Doing to Transfer More Costs to the Homeowner?

How homeowners insurance policies make you pay more upfront before they ever pay a claim.

Have you noticed lately that cartons of ice cream or frozen yogurt have gotten a little smaller? This is a marketing trick that many manufacturers are using to help keep the retail prices down. Give them less for the same price, who’s the wiser? You may be interested to know that many insurance companies are using the same method to keep their rates competitive and affordable. This little known stunt is becoming especially popular in coastal states because of the exposure to windstorms. You will also find it getting popular in areas that suffer severe hailstorms. The insurance companies are actually using two different (and sometimes combined) methods for reducing their risk.

wind damage to roof wind deductiblesWind & Hail Deductibles – In areas where windstorm and hail is the norm, you will most likely be presented with a higher deductible for these perils. This is usually listed on your policy as a percentage of the dwelling coverage. For example, having a 1% deductible seems negligent at first, but if the dwelling amount is $350,000, that will translate to a $3,500 deductible on your wind or hail claim. That is a substantial out of pocket burden to carry. I find it interesting that this is not very conspicuous on your quote or declarations page. Protect yourself by asking about the deductibles before committing to a purchase.

Roof Surface Endorsement – this is something that raised its ugly head in 2012. A few of the major insurance companies are placing an endorsement (coverage change) on their policies that reduce the valuation of a wind or hail claim on the roof surface by using a depreciation scale. If, for example, your 10 year old roof needs replacing after a wind or hail storm, the insurance company is going to pay the value of a 10 year old roof, not a new roof. This is referred to as “actual cash value” and could leave you paying thousands of dollars to have your roof replaced. And remember, that 1 or 2% deductible comes right off the top before they depreciate the value of your roof.

It is very interesting that lenders are not screaming about this issue. They are lending money on a very expensive asset that is not being insured to value. It surprises me that they are not demanding a 100% replacement cost policy.

Have these been sneaked into your policy? Have you had the coverage for years? I HIGHLY recommend you look at your most recent policy that was mailed to you and see what riders and exemptions exist. If you need help with that, contact us. We will be glad to let you know what homeowners insurance coverage you actually have.

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The Most Important Coverages for your Homeowner’s Insurance Policy to Contain

Most homeowner’s insurance policies are written as a package policy. By this I mean, there is a specific amount of coverage for the dwelling (house) and all other coverage is a percentage of that amount.

In other words, if the dwelling amount (coverage A) is $300,000, the contents are usually 50% or $150,000 and other structures is 10% or $30,000. There are however, three important topics that you want to consider when purchasing a homeowner’s hazard insurance policy.

Replacement Cost or Actual Cash Value

How the structure or contents are valued is a key part of the policy. Replacement cost valuation means that you would receive new for old. If your home or personal belongings are damaged as the result of a covered peril (fire, wind, hail or burglary) then you would be reimbursed for what it would cost to replace or repair those items at today’s cost. Actual Cash Value valuation means that for the same type of claim you would be reimbursed for the depreciated cost of the items. For example, if your air conditioning unit were damaged due to a lightning strike, you would want the unit to be replaced with a new one, not a used one that is the age of the damaged unit. Many insurance agents today, who are trying to offer the lowest price, will quote a policy with an “Actual Cash Value” valuation on contents since the rate is lower. This should be avoided since you are unlikely to be happy getting reimbursed for anything at the depreciated value. You are not likely going to want a used air conditioner if yours is damaged by a lightning strike. The same thing goes for the roof of your home down to your clothes.

Wind and Hail Deductible

wind deductable homeowners insurance coverageMost insurance companies today have a separate deductible amount for wind and hail than for all other perils. This can be confusing to the buyer since the wind/hail deductible is usually stated as a percentage of the dwelling amount. So then, if your home is insured for $300,000 and you have a 1% deductible, then the first $3,000 of the wind/hail claim is coming out of your pocket. Many insurance agents skim over this quickly when discussing coverages as this is what is normal in the market place in many states. In Florida for example, the wind/hail deductible may be quoted as high as 5% to get the rate down but this would be ridiculous in a state that sees few hurricanes or hail storms each year. Make sure you ask about this since it is the last thing you want is to find out about it when you are getting your roof repaired.

Water Backup

Another coverage that is overlooked by the consumer is water backup. Most policies do not contain this coverage and it must be endorsed onto the policy. Water backup coverage responds when water backs up into your home as the result of the city’s water or sewer lines failing. This is usually more common in older neighborhoods where the infrastructure is out dated. It can be a very messy and expensive situation which would be covered by your insurance if you paid an extra $50 or $75 per year for the coverage.

Your home is usually the most expensive purchase in your lifetime. It doesn’t make sense not to take the time to be informed when insuring it. So when getting quotes for homeowners insurance ask the right questions and don’t be focused on just the cost — focus on truly replacing your home for just about any contingency.

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