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How to Choose the Best Home Insurance Policy

You may already know in a general way that property and casualty insurance comes in many flavors. Perhaps you've had an “HO-3” insurance plan on a previous house but weren't quite sure what it actually covered. Or, you may be buying a new home … shopping for a more affordable policy for your current home … or researching to get a better understanding of how these policies work.

Here you'll find answers and important information that will help you make decisions in these areas:

·         Homeowner's Insurance – Facts and Details

·         Insurance for Condo Owners

·         Flood Insurance Issues

·         Other Factors to Consider

Homeowner's Insurance

Homeowner's insurance is actually a “bundle” of several kinds of insurance that protects you by paying for a variety of losses. In general, it pays for damages to your house and out-buildings as well as your personal possessions that may be damaged, lost or stolen. Many policies also cover the loss of your home's use – as when you need to pay for temporary quarters while your house is being repaired after, say, a fire or plumbing leak that causes serious damage.

Your policy may include “named perils” or it may use an “open perils” approach. In the first case, the policy lists the perils it covers – fire, windstorms, etc. On the other hand, an open perils policy pays for any loss that is not specifically excluded.

Some policies blend these two approaches. For example, your home – the structure itself – may be covered by an open perils approach, while your personal possessions are covered only when loss occurs from a named peril.

Homeowner policies also provide a specified level of liability coverage so that medical expenses are paid for people who injured while on your property (a handyman, delivery person, a neighbor or your child's playmate, for example). [1]

The homeowner's insurance industry has created many kinds of homeowner's insurance. [1] Some are designed for homeowners who rent their home to others or live in rented properties. However the most common plans are these:

·         HO-1. These are basic policies that carry high deductibles and are relatively inexpensive. They generally cover losses in 11 different categories. [2]

o    Damage from vehicles and aircraft

o    Fire or lightning

o    Glass breakage

o    Lightning

o    Personal liability

o    Riot of civil commotion

o    Smoke

o    Theft

o    Vandalism or malicious mischief

o    Volcanic eruptions

o    Windstorm or hail

·         HO-2. As an intermediate policy. It covers additional perils at a somewhat higher cost. [2]

o    Accidental damage from water or steam from within a plumbing, heating or air conditioning system or domestic appliance

o    Building collapse

o    Damage from the weight of ice, snow or sleet

o    Falling Objects

o    Freezing of appliances – plumbing, heating and air conditioning systems

o    Sudden failure from artificially generated currents (e.g., lightning or electrical surges) to electrical appliances, devices, fixtures and wiring

o    Sudden failure of a steam or hot water heating system

·         HO-3. This is a more comprehensive policy. It offers all the coverages of HO-1 and HO-2, and uses an “open perils” coverage for the structure. That means if your loss is due to a peril that is not excluded, then the policy pays for your loss to the structure. However, the contents of your home are covered only if loss occurs due to a “named peril” – fire, wind, etc. – specified in the policy. [3]

·         HO-5 is the most comprehensive, and it's known as an “open peril” policy. The insurance carrier pays for your loss to the structure and to your personal property (“contents”) whenever the reason for your loss is not specifically excluded. With these policies you don't need to prove the loss was caused by a specific peril. Instead, the insurance carrier would have to show you that a specific loss is excluded from coverage if they wished to deny a claim. In essence, this puts the burden of proof on the insurance carrier … not you. In that sense, HO-5 is a more “homeowner friendly” policy. However, it still pays to check the specific exclusions contained in the policy. [4]

If you're buying a new home or shopping for a better policy on your current home, contact us. This short explanation just begins to explain the basics of homeowner's insurance. Each carrier offers different options, coverage choices and discount opportunities. Our insurance professionals can help you find the best policy for your particular situation.

What If I Live in a Condominium Association? [5]

Choosing the proper insurance can quickly become a bit more complex.

Condo associations carry a “master policy” that sometimes covers your unit. More often, the association's master policy only covers losses that might occur in the common areas such as playgrounds, parking lots and recreational areas.

So your first step is to get a copy of that master policy to discuss with your insurance professional. You're likely to find the policy has high deductibles and low payout limits. Further, your association's master documents that set forth overall rules for the operation of the association may over-ride or supersede the association's insurance. Be sure to bring a copy of those documents with you to the meeting.

The standard insurance for condo owners like you is the HO-6 policy. It's similar to renter's insurance because it covers your personal property. However, it also covers the structure and improvements you might make to your unit.

Flood Insurance

While homeowner's policies cover the types of water damage discussed above, flood insurance is the only form of insurance that protects you against flooding.

The National Flood Insurance Program (NFIP) is a Federal program that defines a flood as: [6]

“A general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or of two or more properties (at least one of which is your property) from:

·         Overflow of inland or tidal waters;

·         Unusual and rapid accumulation or runoff of surface waters from any source;

·         Mudflow.

The entire coastal area of the U.S., as well as other geographies – for instance, the Mississippi River basin and areas near the Great Lakes – are at risk of flooding. The website defines three flood risk zones: high-risk, moderate-to-low risk and undetermined-risk zones. You will be required by your lender, and perhaps by Federal law, to buy flood insurance if you live in a high-risk zone. Further, your lender may require you to buy flood insurance if you live in a moderate-to-low risk zone.

The website [8] gives you an online tool (“How Can I Get Covered?”) you can use to determine whether you live in a flood zone.

For homeowners living in Florida and other flood-prone states, contact your insurance professional to determine how you can best insure your property against floods. The Biggert-Waters [7] Insurance Reform Act of 2012 has revised the original NFIP program, making flood insurance more costly than it had been.

The insurance professionals at Quoteasy are up-to-date on the consequences of that new law and can help you obtain the lowest cost flood insurance available.

Other Issues to Consider

As you know, insurance premiums are based on actuarial data that's been collected by the insurance industry over many decades. You'll find some perhaps-unexpected facts that influence the cost of your homeowner's insurance. For example:

·         You'll pay a higher premium for older homes than for a similar newer home. Even though the older home may have been substantially updated in the past year or two, the structure itself remains as it was originally built.

·         In areas like Florida and the Gulf Coast where severe weather and floods are more common, a framed house built with wood costs more to insure than a house of concrete or block construction.

·         The distance of your home from the nearest fire station affects the premium cost.

·         Maintaining an “attractive nuisance” such as a swimming pool or trampoline will increase your costs.

Our Professional Services Are Free

Get  Homeowners Insurance Quote or call us at 305-587-2410. We'll sit down and work through the issues you need to consider, answer your questions and offer you the best coverage available from our broad network of major national and regional insurance carriers. We'll offer tools to simplify inventorying your personal property, dig out every possible discount and give you the optimum level of protection you'll need. We're here to help.


(1) (2) (3) (4) (5) (6) see pg 1 of 19 (7) (8)
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