New
homeowners can be surprised with lots of different expenses that they don’t
really think of when dreaming of their first home. One of these expenses can be
homeowner’s insurance. What it is, what it covers, and how much it costs can
vary wildly. You can legally own a home without having insurance on it, however
if you use a mortgage to purchase your home, most lenders require insurance. I
will try and answer some of the big questions and guide you to people who will
know more than me!
Why should you get homeowner’s insurance?
It protects both
your house and your personal property, and it also provides protection
against liability for accidents that injure other people or damage their
property.
What
factors affect my premium?
Several things,
including your home’s characteristics and features, such as age, style, whether
or not you have a pool, a deck, made of brick, etc. The location of your home
can also affect the premium. Whether you live in a place prone to heavy snow,
tornadoes, floods, high theft rates, etc. can raise your premiums. Protective
devices, like burglar alarms and fire extinguishers, can lower your premiums.
Personal factors like credit history, whether or not you smoke, and your claims
history can also change the amount you pay.
What
does it not cover?
Depending
on your policy, most homeowner policies do not apply to animals (i.e. pets,
including birds and fish), automobiles, business property, for loss/damage
caused by flood, surface water, water that backed up because of sewers/ drains,
earthquakes, or nuclear damage (including war). When it comes to the personal
liability section, there are also some stipulations. It doesn’t apply to the
operation/ownership/use of any vehicle (air, water or wheeled) powered by more
than 50 HP, or any intentional act of bodily injury or damage (meaning if you
beat someone or their car up in your driveway, you’re not covered and are
probably going to get arrested). These are just basic things that are USUALLY
not covered. The only way you can be sure what is and isn’t covered is to have
a complete review of your policy with your agent. You should also talk about
the specific limits of coverage on your personal property under your policy on
things like jewelry, silverware and china, antiques, guns, etc. Be sure to
update your policy any time you add something to your home, be it new diamond
earrings for your wife or a new table saw for your husband (make sure your
garage is covered!). Make an inventory and keep it updated (the second link on
the sources list gives tips on how to make your inventory). You can always get
added on policies that cover other things in specific situations. You need to
speak with your agent/company to see what they offer and what is needed (if you
don’t live in Hawaii or Washington, you probably don’t need volcano insurance).
Are
deductibles required? What are they?
“Yes,
most homeowners forms contain deductible provisions applicable to losses
occurring under Section I (Section I losses include (a) dwelling, (b) appurtenant
structure, (c) unscheduled personal property, and (d) additional living
expenses). The type and amount of deductible varies by company. Deductible
provisions do not apply to Section II losses (Section II losses include
personal liability [bodily injury and property damage] and medical payments to
others). Some companies offer an optional deductible applicable only to wind or
hail losses. Most offer higher deductible options such as $500 or $1,000 at a
reduced premium.”
Can
an insurance company cancel my homeowner’s policy? When?
Yes
they can. It can be cancelled for not paying the premium, fraud (for
misrepresenting your materials, i.e. $15,000 earrings that really cost $1500),
being convicted of a crime that raised the hazard you’re insured against
(burning your house to the ground like a mob movie), purposely not getting
something fixed (like a gas leak), and many other reasons at the insurance
company’s discretion.
“Coverage — Details the extent of
protection for both property (house, structures, contents) and liability
(bodily injury or property damage to others for which you are liable) in your
homeowners insurance policy.
Exclusions — Explanation of what is not
covered by your homeowners insurance policy, under both property and liability
coverage.
Conditions — Outline the responsibilities
of both the insured and insurance company under the policy. Your duties in the
event of a loss and also the procedures the company will follow to settle any
losses are detailed here.
Endorsements — Riders, amendments or
attachments that alter the standard coverage provided by your home insurance
policy. If you choose endorsements for your policy, you may pay an additional
premium for them.”
In
New York State, the Department of Financial Services deals with insurance
issues. The contact information for them is as follows:
Benjamin
Lawsky, Superintendent
New
York State
One State Street
New York, NY 10004
(212) 709-3501
Other states – click here to find your state
department! Next week, I will cover renter’s insurance, which is very
similar but has a few differences.
