Do You Have Enough Insurance on Your Home?

The following information from the Insurance Information Institute explains what is covered by the most common homeowners' policy and what is not. The most common insurance in the U.S. is the Homeowners-3 (HO-3) policy. If you want to be certain you have enough coverage, find out what type of homeowners policy you have. If you have a different policy, you should talk to an insurance agent to make sure you get the coverage you need.

Question # 1: Am I covered for losses due to fire, lightning, tornadoes, windstorms, hail, explosions, smoke, vandalism and theft?

Yes. The HO-3 provides broad coverage for these and other disasters or “perils,” as they are called in the policy, including all those listed in the question. You should check the dollar limits of insurance in your policy and make sure you have enough insurance to cover all items.

Question # 2: Are my jewelry and other valuables covered?

The standard policy provides only from $1,000 to $2,000 for theft of jewelry. If your jewelry is worth a lot more, you should purchase higher limits. You may wish to add a floater to your policy to cover pieces of jewelry and other expensive items, such as electronic equipment, stamp collections or silverware.

Question # 3: If my house is destroyed in a fire and I have $150,000 worth of insurance to cover the structure, will this be enough to rebuild my home?

If the cost of rebuilding your home is equal to or less than $150,000 you would have enough coverage. If the cost of replacing your home is $120,000, then that is all the insurance you need. On the other hand, if the cost of rebuilding your home is $180,000, then you will be short $30,000.

If you live in an area hit by major storms, ask you insurance company about a replacement cost policy. If building costs rise, you will get extra to cover the bill.

If you choose not to rebuild your home, you will receive the replacement cost of your home, less depreciation. This is called actual cash value. You should make sure that the amount of insurance you have covers the cost of rebuilding your house. You can find out what this cost is by talking to your real estate agent or builders in your area.

Do not use the price of your house to choose the amount of insurance you buy. The market price of your house includes the value of the land on which the house is built. In almost all cases, the land will still be there after a disaster, so you do not need to insure it. You only need to insure the structure.

Question # 4: Am I covered for flood damage?

No.   If you live in an area that has many floods, it may be wise to buy flood insurance. The federal government sells flood insurance under a program run by the Federal Insurance Administration. Contact your agent to get this insurance, or call the Federal Emergency Management Agency at 1-800-427-4661, or visit its Web site at www.fema.gov.

Question # 5: A pipe bursts and water flows all over my floors. Am I covered?

Yes. The HO-3 covers you for water damage from a broken plumbing system.

Question # 6: What if water seeps into my basement from the ground. Am I covered?

No. Water that gets into your basement from outside is not covered under the HO-3. If the water is not from a flood, you will not be covered under a flood policy.   You should repair cracks on basement walls and waterproof the basement to keep water out of the basement.

Question # 7: A neighbor slips on my sidewalk or falls down my porch steps and wants to sue me. Does my policy protect me?

Yes. The policy will pay for damages, if a fall or other accident on your property is your fault. It will also pay for your legal costs. Also, part of your policy will cover medical expenses, if a neighbor or guest is hurt on your property. You should check to see how much insurance you have. The standard amount is $100,000. If you feel you need more, ask about buying higher limits.

Question # 8: A tree falls and damages my roof during a storm. Am I covered?

Yes. You are covered for the damage to your roof. You are also covered for the removal of the tree, often up to a $500 limit.   Question # 9: I have children away at college.   Are they covered by my homeowners insurance?

If they are full-time college students and part of your household, your insurance often provides some coverage in a dorm, about 10 percent of the contents limit. Most companies will not provide coverage if the student lives off campus and the apartment is rented in the student's name.

Question # 10: Am I covered for “Acts of God”?

Sometimes. The term “Acts of God” is not mentioned in homeowners insurance policies. It usually refers to natural disasters like tornadoes, not man-made acts, like theft and auto accidents. Some natural disasters, such as damage from windstorms, hail, and lightning are covered under homeowners insurance. Damage from floods and earthquakes is not.

Question # 11: What should I do if my policy provides less coverage than the HO-3?

Review your coverage with your agent. Some older policies provide less coverage than the HO-3. They may not provide coverage for water damage, theft, or liability. They may also provide coverage for the house on an actual cash value basis, rather than a replacement cost basis.

You should try to get an HO-3.

Source:   Insurance Information Institute and Federal Citizen Information Bureau