The purchase of your home may be the most important investment of your life. Understanding your policy and carrying adequate coverage is essential in lessening your out of pocket expense in the event of a loss. As your Insurance Professional, I can help you make sure that you have adequate coverage in place.
In Florida, Homeowners insurance can be written in several forms. It is sold as a package policy that provides financial protection against disasters. A standard policy insures the home itself (dwelling) and the things you keep in it (personal property). This means that it covers both damage to your property and your liability or legal responsibility for any injuries and property damage you or members of your family cause to other people. This includes damage caused by household pets.
Form is used for owner occupied single family dwellings.
Form is written for older homes. It is similar to the HO-3 but excludes valuable coverage.
Form also known as Condo/Contents Insurance is used for condominium units or townhomes where the Homeowners Association has a master policy that covers the roof and structure of the building. The unit owner’s policy then provides coverage to the inside of the unit from the walls in (flooring, bathrooms, kitchen, appliances, personal property, etc.)
Form is written for tenants who want to insure their personal property.
Form provides building coverage for tenant occupied dwellings. This is also known as landlord’s coverage, dwelling fire policy, etc.
Form Similar to the DP-3 but excludes valuable coverage.
Your homeowner’s policy consists of these basic coverages:
covers the structure of your home.
B- Other Structures
covers structures not physically attached to the main dwelling. (Detached garage, tool sheds, gazebo) the limit is usually 10% of coverage A.
C- Personal Property/Contents
covers your furniture, clothes, sports equipment and other personal items are covered if they are stolen or destroyed by fire, hurricane or other insured disaster. Expensive items like jewelry, furs and silverware are covered, but there are usually dollar limits if they are stolen. Generally, you are covered for between $1,000 to $1,500 for all of your jewelry and furs. To insure these items to their full value, purchase a special personal property endorsement or floater and insure the item for its appraised value. The standard limit is usually 50% of coverage A.
D- Loss of Use/Fair Rental Value:
On owner occupied dwellings, this pays the additional costs of living away from home if you can’t live there due to damage from a fire, storm or other insured disaster. It covers hotel bills, restaurant meals and other living expenses incurred while your home is being rebuilt. On tenant occupied dwellings, it pays for loss of income/rent that a landlord suffers when the dwelling becomes inhabitable after a covered loss. Coverage limits may vary from company to company. This limit is usually 10 to 20% of coverage A.
E- Personal Liability
covers you against lawsuits for bodily injury or property damage that you or family members cause to other people. The liability portion of your policy pays for both the cost of defending you in court and any court awards—up to the limit of your policy. You are also covered not just in your home, but anywhere in the world. Limits are usually 100K to 300K.
F- Medical Payments
Your policy also provides no-fault medical coverage. In the event a friend or neighbor is injured in your home, he or she can simply submit medical bills to your insurance company. This way, expenses are paid without a liability claim being filed against you. You can generally get $1,000 to $5,000 worth of this coverage. It does not, however, pay the medical bills for your household members or your pet.
Replacement cost vs. Market value
My home is only worth $120,000… Why does my insurance company want me to insure it for $275,000?
One of the biggest questions consumers have regarding homeowner’s insurance revolves around the amount of insurance to place on their dwelling. When purchasing a house, the mortgage company requires the homeowner to obtain insurance prior to closing. Most consumers assume the amount of dwelling coverage will be equal to the amount they paid for their house. This is incorrect in some cases. There are different methods to determine the value of a house and in most cases, these can be two completely different numbers:
Market Value is the price paid for your house. It is based on recent sales of similar homes around a particular area and is affected by current market conditions such as demad, foreclosures and short sales.
Replacement Cost is the price or cost it will take to rebuild your house in the same spot, same size and same quality of construction, at today’s costs. Insurance companies use the replacement cost valuation.
For example, a home purchased in a depressed city neighborhood, may have a market value of $120,000. The exact house, located in a nice suburb, may have a market price of $285,000; however, the cost to rebuild the house after a loss would be the same in either location. The insurance company is looking to insure the home for the full replacement value, not the current market value. Remember, they are going to pay to build you a new home, not buy one for you down the street.
Home in Thriving Suburb Home in Depressed Neighborhood
Square Footage of Home 2,500 2,500
Year Built 1920 1920
Market Value $285,000 $120,000
Cost to Replace/Rebuild Home $275,000 $275,000
For insurance purposes, you should insure your home to 100% of its replacement cost. This will ensure the ability to rebuild the entire house, the way it is now, in the event of a total loss. One thing to remember, you’re not insuring the land so leave this out of the replacement cost valuation of the dwelling. Consult with your insurance agent and explain your home in detail regarding: square footage, number of bedrooms, bathrooms, kitchen, basement, fireplace etc. Insurance companies use a formula to generate the correct replacement cost.
The coverage amount and the premium may vary by carrier and might be a bit higher; however you will be properly insured. After a claim occurs is not the time to find out your insurance is not adequate. Having 100% replacement cost on the dwelling takes away this possibility.
REMEMBER, YOUR HOME IS ONE OF THE MOST IMPORTANT INVESTMENTS OF YOUR LIFE. ALLOW ME TO MAKE SURE YOU HAVE THE RIGHT COVERAGE FOR ALL YOUR INSURANCE NEEDS.