PERSONAL SAFETY. homeowners insurance

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1 PERSONAL SAFETY homeowners insurance 1

2 our mission To lead and inspire actions that improve financial readiness for the military and local community.

3 table of contents Protecting Your Largest Investment Choosing The Right Company & Coverage Types Of Coverage Home Maintenance & Filing A Claim

4 protecting your largest investment: your home 2

5 Of all the investments you re likely to make in your lifetime, your home is the biggest. It s also your most important investment. If you re like most people, you spend almost two thirds of your life at home. It only makes sense then to insure your home and its possessions against damage or loss. Unlike owning a car, you re not legally required to have homeowner s insurance. However, if you plan to finance your home, your lender will likely require you to carry insurance to protect you (and them) from damage, theft, loss, etc. In addition, if you live in an area prone to floods or earthquakes, you may be required to carry additional coverage against these events. If you purchase a condominium or co-op, the board may require you to purchase insurance as well. In short, insurance is a fact of life that comes with owning a home. All the more reason to choose the insurance company and coverage that s right for you. Factors affecting your insurance premiums Your homeowners insurance premium is affected by several factors. They may include: CHARACTERISTICS OF YOUR HOME The age, style and condition of your home all affect your insurance premium. Older homes may cost more to insure. Insurance costs for homes made of brick or stone often differ from those with synthetic siding. LOCATION If your home is exposed to extreme weather or located in a neighborhood prone to crime, your insurance premium may reflect this. PROTECTIVE SYSTEMS If you install smoke detectors, fire extinguishers, sprinkler systems, burglar alarm systems or deadbolt locks, you can lower your insurance premium. CLAIMS HISTORY If you ve made previous claims on your homeowner s insurance, you may have to pay a higher premium. YOU If you re a smoker or have a poor credit history, you may have to pay a higher premium. 3

6 choosing the right company & coverage 4

7 Choosing the right insurance company Getting the right policy There are local, regional and national companies that offer homeowners insurance. Before you choose an insurer there are several factors you ll want to consider: COVERAGE Most homeownership policies cover the basics, such as fire and water damage (not flooding), personal possessions, personal liability, theft and loss. Compare what each company offers to determine which will best meet your needs. RATES Rates vary greatly depending on the company and type of coverage you re looking for. Find out if any of the companies you re considering offer discounts that apply to you. Do your homework and compare. REPUTATION As you check out policies, also check out the companies that offer them. Ask family and friends if they have dealt with the companies you re considering. Contact one of these agencies to check out the consumer ratings on different companies: A.M. Best Company, Inc. (908) Moody s Investor Services, (212) Standard & Poor s, (212) SERVICE Is the company friendly and responsive to your needs and questions? Choose a company that provides prompt, professional, and courteous service. SHOP AROUND Get quotes from at least three different companies. You have many options when it comes to a homeowners insurance policy. But which one is right for you? Here are things you ll want to do and consider to make sure you choose a policy that meets your specific needs: Familiarize yourself with the types of coverage that are available. The most comprehensive insurance policy is guaranteed replacement cost coverage, which will pay to rebuild your home, even if the rebuilding cost exceeds your policy limit. Straight replacement cost coverage, which costs about 25% less than guaranteed replacement, will pay to rebuild your home, but only to the policy limit. Ask your insurer if you may be required to purchase special coverage, especially if you live in a flood or earthquake zone. Have the needed documents ready when applying for insurance. You ll need: Your Social Security number The age and location of the home The proximity of the home to a fire station The age and condition of the home s plumbing and electrical systems Start researching policies as soon as you sign the purchase contract so you have options in case one insurance carrier refuses to insure your home. Educate yourself. Read and understand the details of each policy. For instance, an insurance carrier may try to sell you on mortgage life insurance, which only pays off the lender in the event of your death, leaving nothing for your survivors. 5

8 types of coverage A homeowners policy is a contract between you and the insurance company. It provides protection against events theft, damage, loss, etc. as identified in your insurance policy. In short, if you want something specifically protected, make sure you have it in writing. ADDITIONAL LIVING EXPENSE (ALE) If your home is damaged or destroyed, you ll need a place to stay. This type of coverage provides for additional living expenses food, lodging, utilities, etc. you incur while your home is unlivable. PERSONAL PROPERTY COVERAGE This coverage covers the contents of your home, including your personal possessions. Most policies of this type cover 50% to 75% of the amount of the insurance on a home. DWELLING COVERAGE As the name implies, this type of coverage provides funds to cover the repair or replacement of your home. How much is covered is based on the value of your home, which is determined by the cost of labor and materials to rebuild it precisely how it is today. LIABILITY INSURANCE In the event that someone sustains injury or damages on your property, this type of policy may provide coverage for claims or lawsuits filed against you. ENDORSEMENT, RIDERS AND FLOATERS If you own more than your basic homeowners policy will cover, you may want to consider some kind of additional coverage: A rider or endorsement covers you in the event of a specific event, such as an accidental death rider, which would pay out in the event of the insured s death by accident. A floater offers broad coverage for personal property, whether it s in the home or not. For instance, a jewelry floater provides broad coverage for damage to jewelry such as a chipped diamond. UMBRELLA LIABILITY INSURANCE This type of policy extends liability coverage to people with considerable assets or high income. It may also cover against libel, slander, false arrest, etc. 6

9 How much coverage do you need? What does my coverage cover? Does it make sense to insure everything that s in your home? Should you cover that old outdated TV? Or that heirloom clock your aunt left to you? Deciding what you should insure and for how much requires a lot of forethought. It starts by conducting a home inventory. When you purchase a home, create a list of all your possessions, describing each item, noting the make and model and where each item was purchased. Include sales receipts, appraisals, purchase contracts, etc. Here are a few tips to consider: List big-ticket items like artwork, antiques and jewelry. Take pictures of rooms and important items. Make a video of your home and its contents, describing what you re seeing. Put your master list of possessions, photos and video in a safe deposit box. Have a homebuilder walk through your home with you to estimate the cost to rebuild the home exactly as it is. Once you ve completed a home inventory, you should have a clear understanding of what kind of coverage you need. With your home inventory in hand, you re ready to shop policies. Each policy offers a specific level of coverage. These are the different levels of coverage: NAMED-RISK POLICY This covers only events listed specifically in the policy. OPEN-RISK POLICY This covers all events, except those specifically excluded. These policies typically cost more than named-risk policies. ACTUAL CASH VALUE This covers the cost of replacing your home or possessions, minus depreciation. In other words, it pays out for what your old washing machine is worth today, not how much you originally paid for it. REPLACEMENT COST COVERAGE This covers the cost to replace or repair something at current prices. So if you needed to replace your old washing machine, this policy would cover the cost of buying a new one. 7

10 When do you need additional coverage? A standard homeowners policy doesn t cover everything. Depending on your home, its condition or location, you may need to purchase additional coverage. Here are some of the additional coverages available by endorsements or a separate policy you may need to consider: Flood Insurance If you live in a flood-prone area, you may be required to obtain this kind of coverage through a separate policy. Even if you re not required to carry flood insurance, you should consider it, because heavy rains and melting snow cause floods too. NOTE: Basic homeowners policies typically cover water damage but NOT water damage caused by floods. Mold Coverage Mold can create a lot of damage to walls and flooring and may cause health issues for your family. You may want to consider this kind of policy if your home has conditions favorable for mold growth. Storm Coverage Most basic policies cover damages or losses due to tornadoes and windstorms. However, if you live in an area prone to hurricanes or tornadoes, you may need to buy this extra coverage. Earthquake Coverage If you live in an earthquake area, you may be required to carry this kind of coverage. Computer Coverage Most basic policies cover the loss of a home computer. You may consider broader coverage if you work from home and have more extensive and valuable equipment and files. Extra Replacement Cost Coverage If your home is in an area at risk of natural disasters, you may want to obtain coverage that extends beyond your basic policy. Ask your insurer for details. 8

11 home maintenance & filing a claim While you can t prevent natural disasters from damaging or destroying your home, you can take steps to avoid some accidents or issues in the home that can cause damage. Here are some tips to consider regarding home maintenance: EVERY MONTH: Check fire extinguisher to make sure it s fully charged Clean out debris from sink and tub drain holes Flush out your garbage disposal with hot water and baking soda EVERY THREE MONTHS: Clean faucet aerator Clear debris from tub drain assembly, inspect rubber seal Clear debris from floor and outdoor drain grates EVERY SIX MONTHS: Test batteries in smoke detectors; replace if needed Check for leaks and water run-on in toilet Check water softener salt drum and replenish if needed Inspect caulking in tubs, showers, and sinks Change furnace air filters Tighten garbage disposal s drain connections and fasteners EVERY TWO MONTHS: Clean and inspect washing machine s filters and hoses Clean wall furnace grills Vacuum lint from clothes dryer s ducts Clean range hood s grease filter Check for frayed cords and wires on appliances (e.g. vacuum cleaner) Wash range hood s fan blades and housing 9

12 home maintenance pt.2 EVERY FALL: Inspect roof surface, flashing, eaves, and soffits EVERY SPRING: Inspect roof surface, flashing, eaves, and soffits Clean gutters and downspouts Clean gutters and downspouts Inspect and clean siding Inspect and clean siding Inspect exterior caulking Inspect exterior caulking Caulk needed areas around windowsills, doorsills and thresholds Caulk needed areas around windowsills, doorsills and thresholds Clean and repair window and door screens Clean and repair window and door screens Clean chimney flue and stovepipe Clean and repair storm windows and doors Inspect weather stripping on windows and doors Clean heat sensor and contact points on thermostat If you live in a cold climate, shut off valves to outdoor faucets, open spigots and drain ANNUALLY: If you have a septic tank, have a professional inspect and, if necessary, pump it Drain water in water heater until is it clear of sediment Have a professional tune up your heating/air conditioning system

13 How to file a claim Know your rights Whenever there s a loss of property or possessions, you want to file a claim as soon as possible. Here are some tips to follow: If the loss is due to a crime, contact police immediately and file a report. Contact your insurer. Review your policy and ask what s covered. Ask what information is needed to process the claim. Provide that information. Keep copies, receipts, photos anything that will help to prove your loss. Ask questions. If you re unsure or don t agree with something, speak up. While you want to settle your claim quickly, you also want to make sure you re being treated fairly and you re being covered to the full extent of your policy. If you don t agree with your claims adjuster, follow these steps: 1 Ask to speak to the claims department manager and provide adequate information regarding your claim. 2 If you re still dissatisfied, you may need an independent appraisal of your loss. A mediator would work with you and your insurance company to reach a settlement. 3 If your claim is still unsettled, you may contact your state s department of insurance. 11

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