Homeowner Insurance FAQs

What are some practical things I can do to lower the cost of my homeowners insurance?

A: There are a number of things you can do to lower the cost of your homeowners insurance. The easiest thing to do is get a comprehensive review of your policy and needs from your local agent.

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.

Another way to lower the cost of your homeowners insurance is to look for any discounts that you may qualify for. For example, many insurers will offer a discount when you place both your automobile and homeowners insurance with them. Most insurers also offer discounts for protective devices such as security systems or backup sump pumps. Do you have a whole house generator? There’s another discount! Be sure to ask us about any discounts for which you may qualify.

Finally, you may want to consider your deductible. Increasing your deductible from $500 to $1,000, or from $1,000 to $1,500 may lower your premium by as much as 5 or 10%.

What does homeowners insurance cover?

A: The typical homeowners policy has two main sections: Section I covers the property of the insured and Section II provides personal liability coverage for the insured. Almost anyone who owns or leases property has a need for this type of insurance. Usually, homeowners insurance is required by a lender to obtain a mortgage.

What is the difference between “actual cash value” and “replacement cost”?

A: Covered losses under a homeowners policy can be paid on either an actual cash value basis or on a replacement cost basis. When “actual cash value” is used, the policy owner is entitled to the depreciated value of the damaged property. Under the “replacement cost” coverage, the policy owner is reimbursed an amount necessary to replace the article with one of similar type and quality at current prices.

Why is my home insured for more than it is worth?

A: You may notice that the limit of insurance on your homeowners policy is substantially higher than what you paid for your home or what you think you could sell it for. This is because most homeowners policies are written on a “Replacement Cost” basis, meaning that if your home is destroyed, the insurer will pay to build you a brand new home of the same size and scope as the one you lost. Building a new home from the ground up will generally cost more than buying an older home on the market and there are also additional costs to consider such as clearing debris, architect’s fees, and permits.

What factors should I consider when purchasing homeowners insurance?

A: There are a number of factors you should consider when purchasing any product or service, and insurance is no different.

Here is a checklist of things you should consider when you purchase homeowners insurance.

How much insurance do you need? The coverage limit of your house should equal 100% of its replacement cost. If your policy limit is less than 80% of the replacement cost of your home the policy may actually revert from replacement cost loss settlement to actual cash value claims payment. In addition to insurance for the home, be sure the limits for contents and other structures are high enough to meet your needs.

Determine which, if any, additional endorsements you want to add to your policy. For example, do you want to cover damage from water that backs up into your basement, earthquake coverage, or a jewelry endorsement?

Once you have decided on some of the basics, consult us. We will be able to help you look for gaps in coverage, explain some of the policy’s exclusions and limitations as well as recommend an insurance company that will live up to your expectations.

What are the policy limits (i.e., coverage limits) in the standard homeowners policy?

A: [Note: this answer is based on the Insurance Services Office’s HO-3 policy.]

The dwelling and other structures on the premises are protected on an “all risks” basis up to the policy limits. “All risks” means that unless the policy specifically excludes the manner in which your home is damaged or destroyed, there is coverage. The policy limit for the dwelling is set by the policy owner at the time the insurance is purchased. The policy limit for the other structure is usually equal to 10% of the policy limit for the dwelling.

Losses to your personal property are covered on a “named perils” basis. “Named perils” means that you have coverage only when your property is damaged or destroyed in the manner specifically described in the policy. The policy limit on the coverage is often equal to 60-70% of the policy limit on the dwelling depending upon the carrier. Limits for the coverage for the additional expenses that the policy owner may incur when the residence cannot be used because of an insured loss is equal to 20% of the policy limit on the dwelling.

The coverage limit on personal liability is determined by the policy owner at the time the policy is issued. $100,000 is a standard limit but there is very little additional cost involved in increasing that limit. The coverage limit on medical payments to others is usually set at $1000 per injured person but can be higher.

Where and when is my personal property covered?

A: Personal property (except property that is specifically excluded) is covered 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. There are a few limitations to this such as property that is in another home you regularly occupy or in a self-storage unit. In these scenarios sub-limits apply.

Do I need earthquake coverage? How can I get it?

A: The standard insurance policy does not pay for direct damages caused by “earth movement.” “Earth movement” is a much broader term than earthquake. It includes earthquake, volcanic activity and other earth movement. This coverage may be available by endorsement for an additional charge. If you live in an area that is more likely to have an earthquake, you’ll pay more than if you live in an area that is unlikely to have an earthquake. many of our clients live in Ohio where there is very infrequent seismic activity however even in Ohio there is an active fault line and earthquakes causing building damage have occurred multiple times in the last 100 years. Some experts also believe that increased “fracking” activity by oil and natural gas companies in eastern Ohio has increased the risk of damaging seismic activity. Buying earthquake coverage can be a puzzling decision but we can help you weigh the costs and benefits of this coverage before you decide to purchase.

What if I move out of my house?

A: If you vacate your home or move away and place it on the real estate market you should know that this can impact your insurance coverage. Be sure to contact us to discuss details and coverage solutions.

What if I want to start a business in my home?

A: It is always best to consult with us before beginning any home-based business. Some insurers offer endorsements to their homeowners policies to cover certain businesses. For many businesses a separate policy is advisable. In almost all cases, operating a business from your home has some impact on your policy. For instance, nearly all homeowners policies exclude coverage for a detached garage if it is being used for a business.

If I rent my home out to others does my homeowners insurance policy change?

A: Renting your home for others to occupy may void all coverage under a homeowners policy. If you plan to use your home as a rental we have affordable, comprehensive rental home policies that we can provide. Please let us know if you plan to do this so that we may arrange the appropriate type of policy.

Does my homeowners policy cover my ATV? Golf Cart? Dirtbike?

A: Homeowners policies exclude any vehicle that is subject to motor vehicle registration laws. In many states vehicles such as ATVs are subject to these laws and, thus are not covered on a homeowners policy. Additionally vehicles that are not subject to registration (such as lawn tractors) lose coverage once they are taken off the premises. It is advisable to take the time to provide us a list of service or recreational vehicles you have at your premises so that we can explain how coverage may apply and offer affordable specialty vehicle policies for those that are not covered under your home policy.