All about Home Insurance
Why do you need home insurance?
Home insurance protects you in case of fire, flood, tornado, hail, lightning, hurricane, wind damage or if someone is injured on your property. While no one plans on enduring any of these perils, these unfortunate events happen to people every day. Ask yourself: If your home was destroyed by fire, tornado or a major flood, how would you pay to rebuild? Protect your investment with home insurance.
What does a home insurance policy cover?
Standard insurance coverage includes: Your primary dwelling, other structures on your property, personal property and contents, loss of use, personal liability and medical payments for those injured on your property. Insurance policies can vary by company, or may vary by property type. Read your insurance policy carefully. More information: www.consumeraffairs.com/insurance/.
Is your home in a flood hazard area?
Unless your home is located at a very high elevation, you may be subject to flooding. You’ve probably heard about the "100 Year Floods" and "500 Year Floods". You know, the total washouts that seem to happen every year across the U.S. We often see news reports about microbursts, flash floods, raging rivers and tidal surges. It’s easy to get Flood Insurance. Don’t risk losing everything you own in a flood.
Ask all the important questions
Ask your insurance agent for several annual premium options, as premiums are impacted by the deductible. Example: You could select a $2,500.00 deductible instead of $1,000.00 deductible and obtain a significant annual savings. Ask if discounts apply for the following: Newer home, no dogs, no pool, no guns, excellent credit scores, or being located in close proximity to a fire department, or fire hydrant.
Antiques, jewelry, tools, instruments, technology, guns, etc.
Make sure to provide a written inventory of your valuables to your insurance agent. Most insurers require that valuables be documented by an appraisal, photos or video to record all items to be insured. Most insurance policies limit coverage on expensive or high risk valuables, so inquire regarding your insurance company’s limitations. An Insurance Rider may be required. Ask your agent for details.
High-risk properties, circumstances that impact coverage & premiums
Some properties are hard to insure. Certain risk factors may impact your ability to obtain insurance, or increase your insurance premiums. High-risk triggers include: Older homes, or homes in need of repair. Low credit scores, history of unusual claims or non-payment. High-risk dog breeds. Homes with pools, or properties with ponds or lakes. Properties near high-voltage towers. High crime areas. Area with no fire protection. Properties near fault lines, unstable soil history.
Opportunity: Protect Your Home with Flood Insurance
Last week, almost 200,000 California residents were evacuated when the Oroville dam almost failed. Residents were allowed to return home, but the risk of having homes and businesses flooded – and lives lost – remains high.
Residents in other parts of the country have to contend with flooding too, from hurricanes such as Sandy, Katrina, Ike, and Andrew, to name just a few. Anyone living in Tampa/St. Petersburg, Miami, New Orleans, Norfolk/Virginia Beach, Va., and Houston/Galveston, Texas, should be up to date with their insurance coverage and evacuation plan since they reside in the most vulnerable U.S. hurricane-prone cities, according to Climate Controls.
Whether it’s a dam giving way, or a historic storm, or simply a serious problem with a neighborhood drainage issue that causes water to backup in your home – you have an opportunity to obtain flood insurance now – before a disaster occurs.
It's critical that anyone living in a single-family residence or multifamily dwelling – owner or renter – understand the danger of flooding and prepare in advance since weather conditions can change indiscriminately and endanger homeowners and their possessions. Federal insurance (FEMA) and Private flood insurance coverage is available, but whatever course you take, be aware of the questions to ask and find out what's involved. John Dickson, president of NFS Edge Insurance Agency, which oversees delivery of private flood insurance options, offers seven guidelines:
It's not all about weather but changes in typography and structures, too. Mother Nature may be a major cause of foods, but humans also wreak havoc in both urban and suburban areas. For example, researchers have found that replacing native switch grass in the Houston area with more manicured traditional lawns significantly limits the ability of that land area to absorb water and respond to flood waters. It’s better to stay with what's native, and also install proper drainage systems as areas are developed.
Know the flood history in your area. People often ask about noise, crime or a number of other concerns when considering where to purchase or rent, but you may want to add flood research to that list. Ask evacuation authorities or county land use offices if your prospective residence has previously flooded. You may also want to research if the area’s municipal sewer systems are adequate. New construction areas should fare better in the face of flooding as most current building techniques and codes for water retention and water/runoff have vastly improved from years past. If a municipality has previously experienced flooding, current codes should require new homes to be elevated. These are considerations that could make the difference in your home and personal belongings remaining safe and dry if flooding occurs.
Be prepared to protect your property and finances. In advance of flooding, evaluate flood-readiness from two perspectives: 1) property readiness, and 2) financial resources. If you live in a flood area, you have an advance opportunity to mitigate the risk of flood damage by moving valuables to higher ground, to an attic area, or upper floor of a 2-story residence.
When it comes to financial readiness, the most effective strategy involves buying adequate insurance for peace of mind. Generally, homeowners' insurance policies don't cover losses caused by flooding. In high-risk flood areas, defined as Special Flood Hazard Areas, homeowners are required to purchase coverage through a National Flood Insurance Program (NFIP) if the property is secured by a federally-backed mortgage. But other homeowners may still want to buy flood coverage just in case weather changes, or a dam breaks like the recent occurrence in California.
The degree of difficulty associated with obtaining flood insurance varies by source. While the process to obtain NFIP flood insurance can be complicated, many private flood insurance programs offer more streamlined solutions. Properties may be rejected as the NFIP does not accept properties in non-participating communities and some private programs may exclude properties that are recognized as severe repetitive loss structures. Other private programs may only offer insurance in certain geographic locations.
Because the peril of flooding presents a broad spectrum of possibilities, the cost of flood insurance can range from just a few hundred dollars a year to thousands of dollars, depending on the size and value of the home. Premiums for commercial properties can also be higher. Private flood insurance may be as little as half the cost of federal flood insurance for certain properties, but similarly, there are properties where federal flood insurance may be the better solution. Homeowners should review all available flood insurance options and work with an insurance agent that’s familiar with flood coverage. Many states also maintain a consumer advocacy office in their insurance departments, which can provide additional assistance. Take a look at the risk of being in flood area according to FEMA's map.
Detail your belongings in advance. Generally, there’s very little time to plan for a flood. Flash floods or major storms hit without significant warning. It’s best to avert future problems by having a detailed inventory of your personal property via video or photos, and an updated appraisal list which is kept in a safe deposit box or flood-proof safe.
Evacuate: ready, set, go. Check with local authorities and neighbors to understand the specifics applicable to your community. In the event an evacuation is ordered, your priority is to protect lives, so know how to get out of your home fast and where shelters are located. You might even practice the route in advance. You should also have an emergency pack ready while you wait for evacuation notices. It should contain a first aid kit, sunscreen, water or water purification tablets, flashlights, spare batteries, etc. The American Red Cross website makes helpful suggestions and even offers supplies. Later, pay attention regarding when you can safely return.
Detail damage afterward. If your property is flooded, take pictures to document losses and immediately contact your insurer to start the remediation and recovery process.
Dot all i's and cross all t's. Again, if you live in a known flood-prone area, make sure you understand all options. When it comes to a claim, know that federal law regulating flood insurance dictates a rigid one-year statue of limitations and sets caps on dollars offered. Filing your claim isn't just a matter of being timely, it requires good documentation. You can read up on this topic at www.floodtools.com.
NFS Edge Insurance Agency, Inc. is a subsidiary of Aon National Flood Services (NFS), the largest processor serving insurance companies participating in the NFIP. NFS Edge offers a suite of private flood products: EZ Flood Standard®, EZ Flood Preferred®, FloodWrap® and Excess Flood. To learn more, please visit www.nfsedgeinsurance.com
It eases cost, hassles when something goes awry
What if your home literally goes up in smoke or incurs major damage from flood waters, hurricane winds, tornadoes, ice storms or other disasters? Where do you turn if an intruder carts off your most valuable possessions, and even some not so valuable but sentimental to you?
Homeowners insurance is your safety net, but there are different levels to consider under this umbrella.
It may seem expensive – especially flood insurance, but it's an essential protection, like medical, automobile, and life insurance. Certainly, if something goes awry, you’ll probably kick yourself for not purchasing it. Replacing an entire home or parts – a kitchen or bathroom – far exceeds the cost of your insurance premium.
Here are 10 issues that need to be addressed when you consult with an insurance professional:
- What will be the amount of the premium, so I know what I will pay monthly and annually for the policy? Oftentimes, this is included with your monthly mortgage payment, if you have an escrow account.
- Does the size of my house, the neighborhood, the building materials used (i.e. frame or brick), or the age of the dwelling affect the cost?
- What exactly does the policy cover – my home, detached structures, landscaping, valuables, and liability for accidents on my property?
- How much of a discount will I get if I have dead-bolt locks, a security system, smoke detectors, fire extinguishers, sprinkler system, and other safety features?
- What is the required deductible if I file a claim?
- How long will the policy last and will it be re-assessed annually?
- Will I get a better discount if I buy my home insurance from the same company that carries my car insurance?
- What will the policy exclude, if anything, such as sewer backups, or flooding?
- How difficult will it be to cancel my policy once I purchase it, for whatever reason?
- How easy is it for the insurance company to cancel my policy, if, for example, I file too many small or large claims? And how many am I permitted?
With your list of questions in hand, an updated list of the value of your home and its contents--including furnishings, jewelry, any special collectibles all based on recent appraisal values, interview at least three potential insurance companies or independent agents. You can buy from a direct underwriter, or an agent of an underwriting company, or you can go to an independent agency who represents several insurance companies.
You'll want to hear what they suggest and be sure you compare apples to apples – coverage, costs, deductibles and limitations. You'll also want to review the additional insurance topics listed below, to be sure you're fully protected:
Liability insurance: This is important if someone falls or is hurt on your property, as that person may file a lawsuit against you for medical and legal bills. This may be a matter of a few hundred dollars, but could be thousands upon thousands, and the total loss could wipe you out financially. “Umbrella and personal excess insurance policies, which are synonymous, are over and above the basic liability, and serve as a safety net of $1 million to $100 million (or more), depending upon one’s net worth,” explains Bryan Gold, principle of Gold Insurance Group, LLC, St. Louis.
Flood insurance:If your house is located in a Flood Hazard Area http://www.fema.gov/special-flood-hazard-area, you'll need flood insurance, and it’s required if you have a mortgage from a federally regulated or federally insured lender. Even if you don't live in a flood hazard area, you may want to purchase flood insurance as a precaution. We’ve all seen the national news stories in recent years, how flooding can occur almost anywhere at any time.
Replacement cost or actual cash value.This is an important topic to discuss since the depreciated (cash) value of a property varies considerably from replacement value. It’s best to obtain replacement coverage as this means your insurance will replace losses at today’s market value. Most lenders require replacement coverage, or at minimum coverage required to replace the dwelling and other structures considered in the appraisal of the collateral pledged as security for the loan.
Riders.If you have valuable jewelry, antiques, or other collectibles, you may want to buy a rider or personal articles floater to cover these items separately. You must separately schedule or list these items and show an updated, appraised value. Typically, these items are not subject to a deductible, but inquire with your agent.
Final advice.Don't file a claim for every small problem you have – like a broken window, perhaps, because a neighbor's child hit a baseball by accident onto your property and it went through your big picture window. Filing too many small and even large claims can lead to the insurance company canceling your policy. Then, finding a new insurance carrier can prove tough and may require excess or surplus lines coverage, which typically is very pricey.
Be prepared. If disaster strikes, it’s good to know you have obtained all coverages necessary and your insurance company has your back.
Barbara Ballinger is a professional writer, author, blogger and speaker who has long focused on real estate, design, and personal finance. She has co-authored many books, including Successful Homebuilding and Remodeling, The Kitchen Bible: Designing the perfect culinary space, and The Garden Bible: Designing the perfect outdoor space. She regularly contributes to the National Association of Realtors® Website and magazine.
Margaret Crane is a nationally known freelance writer, blogger and journalist who has co-authored with Barbara Ballinger several books and articles on real estate, design and family business. Her byline has appeared in Realtor® magazine. With more than a half-dozen titles to her credit, Margaret’s latest design book is The Kitchen Bible: Designing the perfect culinary space.