Homeowners Insurance

This is sometimes a very difficult question to answer. The first thing to remember is that you are only insuring the physical structures. You are not insuring the land. If you are a first time homeowner and purchase a home for $500,000, you do not necessarily need to buy $500,000 of coverage for the home.

Determining the cost to rebuild your home and appurtenant structures is something that should be discussed with an agent who specializes in homeowners insurance. PIA utilizes two software packages to determine the replacement cost of your home. There are several factors that will determine the homes cost to rebuild.

• • Location, what city is the home located in
    
  • Square Footage
  • Roof type
  • Design of home, custom vs. tract home
  • Foundations, the shape and soil conditions
  • Number of floors
  • Number of rooms
  • Number of Chimneys
  • Number of bathrooms
  • How many cars the garage will hold. etc

The reason this is so important is due to the fact that homeowners policies can contain co-insurance clauses or can have maximum limitations on how much coverage the home has. Although most policies contain a replacement cost endorsement, that endorsement may require the home to be insured for a 100% of the replacement cost. And the replacement cost endorsement may cap the amount paid in the event of a covered claim to 125% of the replacement cost stated in Coverage A of the policy declaration page.

When the Oakland Hills Fire hit, the claims settling process was a nightmare for most insurance companies. Almost all of the homes were under insured. Custom homes that cost $450,000 to rebuild were only insured for $225,000. They were underinsured because the homeowner had not notified their agents of upgrades done to the home. However the largest problem came from agents who insured homes for less than replacement cost value. By lowering the replacement cost value the agents were selling lower premiums. The agents were also advising their clients not to worry since they had “replacement cost” coverage. PIA does not condone this practice and it is not something we allow.

There are a number of things you can do to lower the cost of your homeowners insurance. The best thing to do is to shop around. It is not surprising to find quotes on homeowners insurance that vary by hundreds of dollars for the same coverage on the same home. When you shop, be careful to make sure each insurer is offering the same coverage. Many insurers use the ISO policy forms, but this is not always the case.

Another way to lower the cost of your homeowners insurance is to look for any discounts that you may qualify for.

• • Many insurers will offer a discount when you place both your automobile and homeowners insurance with the them.
  • Insurers offer discounts if there are deadbolt exterior locks on all your doors, or if your home has a security system.
  • Newer Home discounts. Some insurers offer discounts on homes that were recently built.
  • Renewal Discounts. Some insurers will lower your premium if you renew with them.
  • Another easy way to lower the cost of your homeowners insurance is to raise your deductible. Increasing your deductible from $250 to $500 will lower your premium, sometimes by as much as five or ten percent. However, be careful to make sure that you have the financial resources necessary to handle the larger deductible.

Building Ordinance is very important coverage for older buildings. In the event of a claim the insurance company may deny paying for increased costs or demolition expense incurred due to local building ordinances that may call for the destruction of an entire home or dwelling. If you own an older home find out from your agent if you can get this coverage added to your policy.

Most policies provide limited coverage for these items. To provide the best coverage for these items they should be “Scheduled” on your homeowners policy. There is an additional charge for scheduling these items. When you do schedule an item the deductible is typically eliminated. To schedule an item a current appraisal or sale invoice is required.

For example, if you notice one day that the diamond on your ring is chipped or lost, the loss will be fully covered without deductible. Coverage is limited to the value stated on the policy.

Coverage C applies to all your personal property (except property that is specifically excluded) 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. Coverage for property off premises is typically limited to 10% of Coverage C.

Most homeowners and dwelling policies exclude any business activities conducted from the home including day care. They may also exclude any business property.

PIA does have carriers that will insure certain types of businesses on the homeowners policy. In addition, our Business Insurance Department have companies to insure your in home businesses.

Contact us to see if your in home business can be added to your homeowners policy.

You need to make sure you have Personal Injury coverage to protect you from wrongful eviction of a tenant. This can sometimes be extended from your homeowners insurance or be included on the property policy for your rented dwelling.

The Standard Flood Insurance Policy (SFIP) Forms contain complete definitions of the coverages they provide.

Direct physical losses caused by “floods” are covered. Also covered are losses resulting from flood-related erosion caused by waves or currents of water activity exceeding anticipated cyclical levels, or caused by a severe storm, flash flood, abnormal tidal surge, or the like, which result in flooding, as defined. Damage caused by mudslides (i.e., mudflows), as specifically defined in the policy forms, is covered.