Homeowners Insurance Questions

Why buy homeowners insurance?

With homeowners insurance you are protecting your house and your personal property. Tenants can protect their personal property. Included in this purchase is liability which protects you against claims when accidents happen on or off your property if the injury or damage is caused by you, a member of your family, or your pet.

What is in a homeowners insurance policy?

Homeowners insurance applies to most single family homes and is modified somewhat to fit the needs of renters and condominium owners. Homeowners insurance is a package policy that combines several types of insurance coverage in a single policy.

The four primary coverages include:

  • Dwelling and Personal Property
  • Personal Liability
  • Medical Payments
  • Additional Living Expenses

Property coverage pays for damage to your home, garage and other structures, as well as damage to or loss of your personal property.

Personal Liability coverage pays for legal damages that are awarded to a third party when you, a member of your family, or your pet, are found to be liable for their bodily injuries or damage to their possessions. This coverage also helps pay your attorney fees and court costs up to the limits of your policy.

Medical Payments

Medical Payments coverage helps pay for medical bills incurred by visitors to your home who sustain bodily injury while on your premises or due to your personal activities regardless of fault.

Do I have to get homeowners insurance?

There are several compelling reasons to buy homeowners insurance: lender requirements, policy requirements and asset protection. If your home is mortgaged, the majority of financial institutions require insurance, usually until your loan is paid. Typically you are allowed to choose your own insurance company; you aren't required to purchase coverage from the insurance company the lender recommends. Some mortgage companies will supply a policy called "force-placed coverage" if a standard policy is not maintained. These policies are very expensive and protect only the structure itself. They do not protect you or your belongings and should be avoided.

How is the cost determined for homeowners?

There are many considerations when determining the cost of your homeowners insurance, so no two policies are likely to be the same. Cost can depend on the construction type, the location, and the amount of insurance. For example, concrete is more fire-resistant than a wood frame building, so you may pay more for wood frame. And a newer home can cost less to insure than an older one because newer homes are less likely to sustain damages in storms and fires. Some areas have greater crime and vandalism problems which can also increase costs.

How much is enough homeowners insurance for me?

There are many things to consider when determining the amount of insurance you need. You must determine the level of insurance you want on your home - this should include the cost of rebuilding the home in the event it is destroyed. Keep in mind, the value of the land should not be included in this cost. Your agent can help you find this information.

Next you will determine the amount of insurance on other structures and the contents within your home. Finally, it is important to consider how much liability insurance you will need to protect yourself from lawsuits.

Is it possible to have too much coverage?

It is possible to have too much coverage. This website and your agent can help you determine whether you are paying for coverage you don't need.

How much liability coverage is reasonable?

Most policies are sold with a fixed amount of liability coverage. However, you can purchase more than the standard amount if you choose. You should buy enough liability to cover what you are worth - that is, the value of financial assets such as your home, savings, etc. You are personally liable for anything above the amount of liability insurance you purchase.

What affects homeowners insurance costs?

There are many factors that contribute to the cost of homeowners insurance. For instance:

  • Age of Home: Newer houses usually have lower premium rates than older ones. Some insurers may not want to cover very old houses at all or may provide only limited coverage.
  • Construction Type: Brick or masonry houses usually have lower premium rates because they are less vulnerable to fire.
  • Amount of Coverage: The amount of coverage you buy will affect the price you pay.
  • Deductible Amount: The higher the deductible you choose, the lower your premium will be.
  • Fire Protection: Your home's distance from a fire hydrant and the quality of your local fire department affect the price you will be charged.

There may be discounts available for features like smoke alarms or security systems.

What is a deductible?

The deductible is the money you agree to pay out of your pocket before your insurance policy begins to pay for losses. The deductible applies only to property damage to your home or to its contents - not on liability. And while the higher the deductible, the lower the premium on your policy will be, it is important to remember that the deductible is money you will be responsible for in a time of crisis. When you shop for coverage, be sure to ask the agent how a larger deductible would affect the cost of the policy you're considering.

What is excluded from most homeowner policies?

Most homeowner policies don't include coverage for flood damage, surface water, water that backs up through sewers or drains, earth movement, nuclear damage, or war. They do not include coverage for animals, cars or business property. There's more, of course, so you should read your policy carefully. There are limits on your coverage, so always be aware of those too. Liability does not apply to the operation, ownership, use, etc., of any aircraft, automobile, recreational motor vehicle, water craft powered by more than 50 horsepower motor, or bodily injury or physical damage caused by your intentional acts.

Does my policy automatically pay the limit?

The limit is the top dollar your insurance policy will pay for a specific loss. If your loss does not reach the limit, your policy will cover only the amount of your actual loss, less your deductible.

Do I need an umbrella liability policy?

An umbrella liability policy provides protection for your assets, above the coverage found in the base policy, from a variety of possible liabilities and exposures to lawsuits. Your basic homeowners policy provides liability coverage for injuries or property damage when you are legally liable, but this coverage is limited. Umbrella policies kick in after the liability insurance in your homeowners policy runs out. This is important coverage you should discuss with your Bankers Agent.

When can an insurance company cancel my homeowner coverage during the policy term?

The following are examples of reasons that your homeowners insurance may be cancelled:

  • Fraud
  • Not paying your premium
  • Any crime that increases the chance of a claim, such as having illegal fireworks
  • Discovery of willful or reckless acts or omissions by the insured - which could increase the chance of a claim, like ignoring a gas leak
  • Moving away from the property without notifying your insurance company and increasing the chance of vandalism
  • When the policy places the insurance company in violation of the law