FCS 3400
Cover Your Castle
Your home is your castle - and probably your major
investment. To get maximum value for your insurance
dollar, it is important that you understand home
insurance.
Where to start
Insuring to value
Estimate what it would cost to rebuild your house - at
current prices - should it be destroyed. An insurance
representative or professional appraiser can help you.
Your home could be underinsured if your insurance
protection isn't keyed to current costs. Make a note
to check the amount of your coverage at least once a
year to make sure you have enough.
Taking inventories
Next, make a list - an inventory - of the contents of
your home. Include furniture and important personal
belongings. Keep store receipts and note dates of
purchase where possible. Make a video tape with audio
notes or take photographs or major items. Store a copy
of your inventory in a safe place away from home.
What to do next
Learn about the various kinds of homeowners policies so
that you can select the one which best meets your
personal needs. You can insure your property against
different losses, from fire and theft to building
collapse and frozen plumbing.
Homeowners policies generally provide a "package" of
insurance, including money to cover:
· Repairs or replacement for your house, your furniture and other personal belongings
· Lawsuits against you and members of your household for injury or property damage you may cause
· Additional living expenses, should damage to your home force you to live temporarily in a hotel and eat in restaurants.
Property coverage
Your house, garage and other structures all are covered.
Your personal property is covered.
A homeowners policy generally covers furniture, clothing
and most other belongings for the "actual cash value"
(their original cost minus an amount subtracted for
wear and tear - depreciation) at the time of loss.
Another kind of policy provides "replacement cost
coverage" (what it would cost to replace the lost items
without subtracting anything for depreciation) for
personal property. Note that both kinds of policies
provide only limited coverage for furs, jewelry, silver
and other valuables including small boats. You may
wish to protect such valuables with a special addition
to your homeowners policy called a floater.
When you purchase a homeowners policy, your property is
insured against many perils, depending on which policy
terms you choose.
The Basic Form insures your home against events like
fire and theft, as shown in the
chart.
The Broad Form covers the items as shown.
A Special Policy covers the house for all perils except
those explicitly excluded by the policy.
There are also homeowners policies tailored specifically for renters or condominium owners.
Consumers with special or unusual needs should talk with an insurance representative to find out about policies designed for them.
The homeowners policy does not cover automobiles, nor
does it cover flood or earthquake damage. Flood
coverage is available only in communities that have
agreed to take steps to minimize future flood damage.
Both flood and earthquake coverage are sold by private
insurance companies.
Liability to others
The liability par of a homeowners policy applies at
home or elsewhere to legal obligations resulting from
injuries or damages caused by you, a member of your
family or even a pet. It includes the cost of defending
you if you are sued. This coverage does not apply to
liability resulting from the use of an automobile, which
must be covered separately by an auto insurance policy.
Additional living expenses
Your homeowners insurance will pay for any increase in
living expenses when you can't live in your home because
of damage caused by the kinds of losses covered by your
policy. For example, if your home is badly damaged by
fire, you may have to live in a hotel and eat in
restaurants while it is being repaired. Your insurance
company will reimburse you, up to the policy limits, for
the difference between these expenses and your normal
living expenses.
Shopping for insurance
Once you've determined what it would cost to replace or
rebuild your home and know something about the kinds of
coverage available, you are ready to shop for the best
insurance value.
· Ask friends or relatives to recommend insurance
agents or companies from whom they have had good
service. Or check the yellow pages for insurance
representatives in your community.
· Phone or visit several insurance
representatives. Take along your household inventory
and photographs. Discuss any concern you have about
special coverage for furs, jewelry, antiques or other
valuables. The representatives will recommend coverage
to suit your needs. Ask questions.
· Consider the largest deductible you can afford
- that is the amount of any loss that you agree to pay.
The higher the deductible, the lower the premium.
· Compare costs and coverage. Remember to
consider the service reputation of the insurance
representative or company, as well.
From: The Insurance Educator, Volume III, Number
1, January 1994