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Consumer's Guide To Homeowners Insurance

Table of Contents


Commonly Asked Questions

How Much Home Insurance Do I Need?
What Affects Home Insurance Prices?
What Deductible Should I Choose?

Basic Coverages Available

Property Damage
Additional Living Expenses
Personal Liability
Medical Payments

Insurance Forms

Home Insurance
Renters Insurance (HO-4)
Condominium Insurance (HO-6)
Manufactured Housing Insurance
Option Coverages to Consider

In Case of Loss

Repair of Your Home
To Report a Loss

Burglary Prevention

Glossary of Homeowner Related Insurance Terms


The coverages offered to homeowners are typically contained in a package of liability and property coverages. This Guide principally addresses the package of coverages found in a "homeowners" policy. It does not address other state programs established to ensure the availability of coverage. Contact Us for more details on these other plans.

Why Buy Home Insurance?

Owners: to protect both your house and personal property.
Tenants: to protect your furniture and other personal property.
Everyone: protection against liability for accidents that injure other people or damage their property

Commonly Asked Questions

How Much Home Insurance Do I Need?

  • Property Protection: The better your coverage, the less you will have to pay out of your own pocket if disaster strikes.
  • Self Protection: You need enough liability coverage to protect yourself from lawsuits resulting from your negligence.
  • Lender Requirements: Your lender may require you to cover the house for at least the amount of the mortgage. This may be either too little or too much coverage for your individual circumstances. For example, you needn't buy fire coverage for the lot on which your house is built. You are not required to purchase insurance from the insurer recommended by your lender.
  • Policy Requirements: Insurers may impose some coverage requirements for replacement cost protection (see below).

What Affects Home Insurance Prices?

Type of Construction: Frame houses usually cost more to insure than brick.

Age of House: New homes may qualify for discounts with some insurers. Some insurance companies either may not insure very old homes or offer a limited form of coverage.

Local Fire Protection: Your home's distance from a fire hydrant and the quality of your local fire department determine your fire protection class.

What Deductible Should I Choose?

  • The deductible applies only to coverage on your house and personal property. It is the amount you have to pay out of pocket on each claim.
  • A policy with $ 100 deductible will cost more than one with $250 deductible. Higher deductibles may be available at a reduced price.

Basic Coverages Available

Whether you own or rent, there are different packages of home insurance offered to protect your home and belongings.

Each package protects against a specified number of perils. Perils are events that cause damage to property. Three examples are fire, windstorm and theft.

In addition to coverage for named perils, each package policy usually contains coverage for property damage, additional living expenses, personal liability and medical payments. Homeowners policies apply to most owner occupied, single-family homes, and are modified slightly for apartments and condominiums. (chart)

Property Damage

Property damage coverage helps pay for damage to your home and personal property. Other structures such as tool sheds, detached garages, and their contents are also covered. You should check with us to determine if the amount of coverage on other structures is sufficient.

Personal property is the contents of your home and other personal belongings owned by you or family members who live with you.

Home insurance policies may provide limited coverage for small boats; however, most home insurance policies do not cover motorized vehicles unless they are unlicensed and used only to service your property. Separate coverage for this equipment can be purchased.

Some forms of personal property, such as, silverware, computers, guns, money, expensive antiques and jewelry, have limited coverage under your homeowner's policy. Additional coverage can be added to your policy as an endorsement.

You can choose to insure your home and belongings for either replacement cost or actual cash value. These terms are explained below.

Replacement Cost or Actual Cash Value?

Replacement cost is the amount it would take to replace or rebuild your home or repair damages with materials of similar kind and quality, without deducting for depreciation. Depreciation is the decrease in home or property value since the time it was built or purchased because of age or wear and tear.

Many insurers require homeowners to insure their homes for at least 80 percent of the replacement cost. If the homeowner fails to insure for at least 80 percent of the replacement cost, a penalty is applied to partial losses. For example, if it would cost $50,000 to replace your home and it is insured for $40,000 (80 % of its replacement value), and a fire causes $25,000 worth- of damage, then your insurance company win pay the full $25,000.

On the other hand, if your $50,000 home is insured for $30,000 (which is less than 80 % of its replacement value), and you suffer a $25,000 loss, your company would pay for only part of the loss. You would have to pay the balance out of pocket. Your company would pay for damages based upon the following formula:

(Amount of Insurance Carried) / (Amount of Insurance Necessary to cover assets (80% of $50,000))=
$30,000/$40,000 = 3 /4 or 75%

Using these figures, your company will only pay for 75 % of your $25,000 loss. Hence, 3/4, x $25,000 loss = $18,750 paid by the company. You would have to pay the balance: $6,250.

As you can see, insuring your home for at least 80 % of its replacement cost is very important. Check with us to see what is required. You may wish to insure at 100 % of replacement cost so you will have sufficient coverage in the event of a total loss.

Actual cash value is the amount it would take to repair or replace damage to your home after depreciation. For example, if your roof has a 20 year warranty and is 17 years old, there would be a depreciation for the age and condition of the roof.

Most standard home insurance policies cover the contents of your home (i.e., personal belongings) on an actual cash value basis. Many insurers offer an option for you to insure your belongings at replacement cost. The premium will be slightly higher for this coverage; however, you may want to consider the option.

Whether your home is insured for replacement value or actual cash value, it is important to keep track of its value. For instance, the addition of a room and yearly inflation both increase the replacement cost of your home, while the home's actual cash value may decrease over time. Check with us at least once a year to make sure your policy provides adequate coverage.

Additional Living Expenses

Most home insurance policies provide additional living expenses that will pay some expenses if your home is damaged by an insured event to the extent that you cannot live there while repairs are being made, or if you are denied access to your home by government order. These expenses could include limited motel, restaurant and warehouse storage.

Personal Liability

This coverage protects you against a claim or lawsuit resulting from (non-auto and non-business) bodily injury or property damage to others caused by your negligence. This coverage applies to you and all family members who live with you. You should check with us to determine if the amount of personal liability coverage is sufficient.

Medical Payments

Regardless of who is at fault, this coverage pays medical expenses for persons accidentally injured on your property by a member of your family or by your pets. Medical payments do not apply to your injuries or those of family members living with you or to activities involving your at-home business. You should check with us to determine if the amount of medical payments coverage is sufficient.

Insurance Forms

An insurance form is another name for an insurance policy, and it specifies what perils your home and belongings are insured against. The following are descriptions of the various insurance forms available for homeowners, renters and condominium owners. Not all insurers use these exact terms to describe their home insurance forms; however, the coverage provided will be similar

Home Insurance

The five homeowners package forms offered to owners of single family owner occupied homes are HO1, HO-2, HO-3, HO-3 with HO-15 and HO-8. These policy forms insure your home and belongings against at least 11 named perils. The more perils your policy covers, the more you will pay for the policy.
  • Basic Form (HO-1) insures your property against the first 11 basic perils shown in the chart.
  • Broad Form (HO-2) covers the 18 perils listed in the chart.
  • Special Form (HO-3), the most popular of all homeowner's forms, offers a broad range of coverage. This form provides comprehensive coverage on your home and broad named peril coverage on your contents (chart).
  • Comprehensive Form (HO-3 with HO-15) covers your home and personal property for everything that is not specifically excluded. This policy generally provides the broadest coverage available, but is not offered by all companies. It usually costs more. (chart)

Your home may not qualify for one of the five homeowners package policies; therefore, we may offer you limited coverage on your house. This coverage may be Fire and Extended Coverage. Your home and only your home would be covered for damage due to very specific perils or losses.

Renters' Insurance

If you rent an apartment or a house, you are responsible for liability coverage and for insuring your personal possessions. Liability coverage protects renters the same as it would if you were a homeowner.

The owner of the property is responsible for insuring the building and for obtaining his or her own liability coverage.

  • Tenants Form (HO-4), or a renter policy, insures your household contents and personal belongings against the perils included in the home insurance Broad Form (110-2). (Please see chart .) Like home insurance, it provides coverage for additional living expenses and includes personal liability protection.

Condominium Insurance

An individual unit owner policy is similar to homeowners' and renters' insurance. You will also have separate coverage for your structure and collective property through your condominium association.
  • Condominium Unit-Owners Form (HO-6) will cover a unit-owner who wishes to insure his or her property or to cover any items not insured by the association's policy. A unit-owner policy will also pay for property damage to personal belongings, wall, floor and ceiling coverings, and any accessories not originally installed in the unit. It also provides personal liability protection.

Manufactured Housing Insurance

Typical manufactured housing policies provide basically the same coverages as a HO-2 or HO-3 policy. (Please see chart .)

Generally it costs more to insure a manufactured home than a conventional home because of the difference in construction materials and the mobile home's greater susceptibility to wind damage.

If you own a manufactured home, you can select from two coverage forms to insure your dwelling. These options are:
  • Actual Cash Value: Policies written on an actual cash value usually have lower premiums. This coverage is the amount it would take to repair or replace your manufactured home after depreciation.
  • Replacement Cost: This coverage replaces a damaged or destroyed home without deducting for depreciation.

Optional Coverages You May Wish to Consider

  • Guaranteed Replacement Cost Coverage
    Guaranteed replacement cost coverage is the most complete coverage for your home. To obtain this type of coverage, you typically must meet specific underwriting rules and conditions of the company. This may include increasing the amount of your insurance on a monthly, quarterly or yearly basis to keep up with the inflation rate. Check with us to determine if an additional premium is required and if there are exclusions or conditions that apply.

  • Inflation Guard Endorsement
    If the replacement cost of your home is increasing with inflation, your policy limits must be periodically increased to maintain your coverage at 80% or higher. Even though the amount of homeowners insurance you carry is at least 80% of your home replacement cost, this amount of coverage may not be enough in the future.

    To aid you in keeping coverage at an adequate level, some companies offer an "Inflation Guard Endorsement." This endorsement will allow your insurance company to automatically change your policy limit during the policy period. Normally, the higher premium is not paid until the time of renewal.

    Even if you have this endorsement on your policy, you should check your coverage limits periodically to make sure you are adequately, but not excessively, insured. Not all companies offer this endorsement, so check with your agent or company if you are interested in purchasing it.

  • Increased Limits on Money and Securities
    This endorsement increases the coverage on money, bank notes, securities, deeds, etc.

  • Scheduled Personal Property Endorsement
    This endorsement is sometimes called a "personal article floater." A personal article floater covers possessions such as jewelry, furs, stamps, coins, guns, computers, antiques and other items that may exceed normal limits in your regular home insurance policy. A personal article floater itemizes each article, gives a description of the article insured and lists excluded perils. It often provides coverage that is broader than the coverage granted in the home insurance policy. There is typically no deductible applied to this coverage.

  • Increased Limits on Money and Securities
    This endorsement increases the coverage on money, bank notes, securities, deeds, etc.

  • Secondary Residence Premises Endorsement
    Homeowners coverage under this endorsement applies to a secondary residence (example: summer home).

    Remember that these secondary residences are not automatically covered by the home insurance policy on your primary or principal residence.

  • Watercraft Endorsement
    Applicable to small sailboats and outboard motor boats, this endorsement broadens personal liability and medical payments coverage on them.

  • Credit Card Forgery and Depositors Forgery Coverage Endorsement
    Loss, theft or unauthorized use of credit cards (with certain exceptions) is covered by this endorsement. Also covered is the forgery of checks, drafts, promissory notes, etc., again with certain exceptions. No. deductible applies to this endorsement.

  • Flood Insurance
    Standard home insurance policies do not cover flood damage. Depending on where your home is located, you may qualify for flood insurance through the National Flood Insurance Program. Some insurance companies also offer flood insurance. Your agent or insurance company can assist you with application forms for flood coverage. If your home is located in a flood plain, your lender should require flood insurance. Just because your home is not in a designated flood plain, don't assume you will never incur flood damage.

  • Earthquake Insurance
    Earthquake insurance is available through most insurance companies at an additional cost. It is normally issued as an endorsement and attached to your home insurance policy.

  • Windstorm Coverage
    Most home insurance policies cover damage caused by windstorm and hail. However, in some coastal areas, this coverage is excluded from the standard policy. For more information, ask us if this peril is covered by your policy.

In Case of Loss

Immediately report property damage to us (phone, on-line). We will provide you with claims forms and arrange for an insurance adjuster to visit your property and assess the damage.

Take precautions if the damages require you to leave your home
. Secure your property. Remove valuable items. Lock windows and doors. Contact your agent and leave a phone number and address where you can be reached. Take these same precautions if you are forced to evacuate before a storm.

Make emergency repairs and document them. Your policy probably requires you to make emergency repairs to prevent further weather-related damage to your home and its contents. Keep all receipts and take photographs of the damages, before and after emergency repairs, to submit with your claim. You will be reimbursed for your costs.

Don't make extensive repairs before the claims adjuster arrives. Don't throw out damaged furniture or other expensive items since the adjuster will want to see them. Make a list of everything you would like to show the adjuster when he or she arrives.


An adjuster is a person professionally trained to assess damage. There are two kinds:

  • Company adjusters are employees of larger insurance companies.
  • Independent adjusters are usually employed by independent adjusting firms, which contract with insurance companies to handle claims.

No matter which type of adjuster you use, be sure he or she is licensed. Ask to see identification, and if you are still uncertain, give us a call.

Appraisal and Settlement

You may settle personal property and structure claims at separate times. Filing separately allows you to take more time if necessary to determine the full extent of your losses.

If you and your company cannot reach a settlement figure satisfactory to both of you, both parties may hire an appraiser in order to come to a compromise on a figure. You split the cost. If you and the company still disagree, you may hire a third appraiser called an "umpire." The decision of any two of these people is binding.

It is advisable to use your settlement for its intended purpose, that is, for the repair of your home or the replacement of its contents.

Unless the cost of repairs is a small amount, your insurance company may initially pay you a sum equal to the actual cash value. It will withhold the balance of the full replacement cost amount until after the repairs are completed.

Repair of Your Home

You or your insurance company may contract for the repair of your home. It is advisable to hire only licensed and insured contractors. When possible, try to use local service people, as they can be more easily reached should a problem develop.

Consumers can call the state licensing board to find out if a contractor is licensed. Also, ask to see a contractor's insurance certificate to verify that the firm carries insurance. This can be extremely important should a worker become injured while working on your property.

Burglary Prevention

Light, Time and Noise

Light, time and noise are a homeowner's greatest weapons in the fight to prevent a home burglary. There are more than five million home burglaries each year and nine out of ten of these crimes are preventable. The possibility is reduced by making your home difficult to enter and less inviting to the potential criminal. Preventative measures include:
  • Exterior lights mounted out of reach can reduce the risk of a break-in. Motion-sensitive lights are now available at relatively low prices.
  • Make it time-consuming for a burglar to break into your home by installing simple security devices such as padlocks, grates and window locks.
  • Noise from barking dogs and burglar alarms can reduce the risk of a break-in.
  • Think like a burglar. "Case" your house the way a burglar would and look for easy ways to enter your home. Be sure valuables such as expensive electronic devices or artwork are not visible from the street.
  • Trim trees and shrubs near doors and windows so you don't provide a convenient hiding place for a burglar.
  • Don't leave ladders or tools in the yard or in an unlocked garage or shed. Your tools could be used to break into your home.
  • Examine your doors. Outside doors should be metal or solid hardwood and at least 13/4 inches thick. Frames must also be made of strong material. The best lock will not deter a burglar if it is installed in a weak door.
  • Display your house number conspicuously and have it well illuminated. This will help police and emergency personnel find your home quickly, if summoned.
  • Engrave your valuables with your driver's license number to deter burglary and to prove ownership should the article be stolen and recovered by the police.
  • Organize a Neighborhood Watch in your community.

For more information on residential burglary prevention, contact your local police department.


Additional Living Expense - Also called loss-of-use. This coverage pays for the extra, above normal costs of expenses such as food and lodging incurred while the policyholder's home is being repaired. These expenses are generally not applicable to children living away at college.

All-Risk Policy or "Special Form" - Covers the loss of property or damage that results from any peril except those which are specifically excluded in the contract.

Cancellation - Termination of an insurance policy by the insurance company or policyholder before a policy expires.

Claim - A request for reimbursement for a loss covered by the policy. For example, a claim for items stolen from the policyholder's home.

Deductible - The amount the policyholder must pay per claim or accident before the company will begin paying. Deductibles are fixed amounts specified in the policy.

Endorsement - A change added to an insurance policy which modifies the original terms.

Floater - Sometimes called a rider, this is additional coverage for special items such as expensive jewelry or antiques.

Insured Loss - A loss (theft, damage, etc.) that the insurance policy will pay for, in full or in part.

Liability - Any legal obligation.

Licensed - Agents and Companies - Agents and companies that are approved and monitored by the Department of Insurance to sell insurance in your state.

Limit - The maximum amount of benefits an insurance policy will pay in the event of a loss.

Named Perils - Specifically covered by a policy. For example, lightning and vandalism. (See "Peril")

Package Policy
- An insurance policy that includes several kinds of coverages. For example, a homeowners HO-3 policy includes living expenses, personal liability and medical payments.

Peril - The cause of a loss. Two examples are fire and theft.

Premium - What the policyholder pays for an insurance policy. Premiums are paid monthly or annually according to the payment plan offered by the company.

Risk - A chance of loss to insured persons, liabilities, properties or assets.

Loss Chart

Dwelling Contents
Fire or lightning
Loss of property removed from premises endangered by fire or other perils
Windstorm or hail
Riot or civil commotion
Vandalism and malicious mischief
Breakage of glass constituting a part of the building
Falling objects
Weight of ice, snow, sleet
Collapse of building(s) or any part thereof
Sudden and accidental tearing apart, cracking, burning, or bulging of a steam or hot water heating system or of appliances for heating water
Accidental discharge, leakage or overflow of water or steam within a plumbing, heating or air-conditioning system or domestic appliance
Freezing of plumbing, heating and air-conditioning systems and domestic appliances
Sudden and accidental damage from artificially generated currents to electrical appliances, devices, fixtures and wiring (TV and radio tubes not included)
All perils except flood, earthquake, war, nuclear accident and other specified in your policy. Check your policy for a complete listing of perils not covered.

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