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Will my home policy cover the costs of bringing my home "up to code"?
A few policies include a building code endorsement that pays the costs of an upgrade. In most cases, though, home insurance policies simply cover the amount of the loss. The big difference in policies is between an "actual cash value" policy and one that covers the "replacement cost" of the lost or damaged property. In this context, the additional cost for a "replacement cost" policy is well worth it.
Do I need to give personal information to get insurance?
Yes. Insurance companies require information about you and your property. The insurance company needs to know that you have an "insurable interest" in the property; that is, that you have an ownership interest in the property that is worth protecting. To determine the insurance interest in property, lots of personal information is necessary.
Some policies include coverage for children away from home until they reach the age of 25; other policies are not so generous. Refer to your particular insurance policy to see what coverage is available. If there is any question, you may find that renter's insurance for your daughter is a good, relatively low-cost option.
How do I know if I have enough insurance on my personal property?
It is a good idea to inventory the contents of your home. In the event of a complete loss, it is difficult to reconstruct by memory the contents of your home. Some people videotape the contents of their home or apartment as a record of what it contains. If you have items of high value, get certified appraisals of them. Check to see if there is a limitation of coverage with respect to certain categories of personal property. As said earlier, if your insurance policy does not provide enough coverage to replace all of your personal property in the event of a total loss, purchase a rider to increase the coverage.
Will my property have to be inspected?
Most insurance companies have sufficient data accumulated to avoid the need for an inspection. Unusual situations (such as historic sites), however, may require a visual, on-site inspection before coverage will be provided ("bound") by the insurance company.
Continue reading "Will my property have to be inspected?" »
Most of us find that "enough" means enough to replace or rebuild your home. Though the insurance industry standard is to write home policies for at least 80% of the home's value, you don't want to be underinsured. It's often a better idea to increase the policy limits to 100% and offset the increase in cost by raising your deductible amount. For example, instead of insuring a $100,000 home for $80,000 worth of dwelling unit coverage with a $200 deductible, consider insuring the home for $100,000 with a $1,000 deductible. You may be able to afford a $1,000 loss as opposed to a $20,000 out-of-pocket loss.
Policy requirements - how much insurance am I required to have?
Most insurance companies require homeowners to have at least 80% of the actual value of your home (excluding the value of the land) in order to pay a claim in the event of a total loss. This is often referred to as "coinsurance." The results can come as a real surprise to a homeowner in the event of a loss. For example, consider a homeowner who has an older home that is insured for $60,000. Due to appreciation of home values, the home is now actually worth $100,000 -- which means the insurance company would today require the homeowner to carry at least $80,000 of coverage. Since the homeowner carried only $60,000 (60% of the home value), the insurance company may only provide 60% of the loss - a claim for $20,000 may result in payment of only $12,000.
When insurance is not available on the open market, there is typically a state-operated or-mandated "pool" of coverage so that no one will be forced to go without insurance. The cost of such insurance is typically higher than would be available in the open market. This is because the risk for property in the particular area is greater than in other areas.
My lender is requiring insurance. How much do I have to carry?
Lenders will ask you to carry insurance as security for their investment, just as they may require fire insurance and other types of coverage as investor protection. If you're financing, lenders will require you to carry at least 80% of the value of your home or up to 100% of the amount of the mortgage. It is not a good idea to try and save a few dollars by carrying the dwelling policy limit bare minimum amount of insurance. The value of your home may increase or a total loss may occur. The insurance company may apply the "coinsurance" principal and not fully cover a loss.
How much financial liability coverage is reasonable?
The amount of financial liability coverage you should consider depends upon the nature and extent of your assets. In addition to the value of your home, consider how much your business, personal property and other investments are worth. While there are exemptions as to the amount and type of property subject to a levy in the event of a judgment against you, it is better to have sufficient insurance to protect yourself and all your assets against any potential judgment. Liability limits of $300,000 are common, increased amounts of $1 million are also becoming commonplace.
How much dwelling coverage is needed?
The amount of coverage that you need depends on what it would cost to replace your home and land in the event of a total loss. While you may be able to get by with only 80% coverage, will you be able to take the other 20% out of your pocket in the event of a total loss? The incremental cost to insure a property to full "replacement cost value" is so low it would be fool-hearty not to fully insure your property at full value.
Will my home policy cover the costs of bringing my home "up to code"?
A few policies include a building code endorsement that pays the costs of an upgrade. In most cases, though, home insurance policies simply cover the amount of the loss. The big difference in policies is between an "actual cash value" policy and one that covers the "replacement cost" of the lost or damaged property. In this context, the additional cost for a "replacement cost" policy is well worth it.
Do I need to give personal information to get insurance?
Yes. Insurance companies require information about you and your property. The insurance company needs to know that you have an "insurable interest" in the property; that is, that you have an ownership interest in the property that is worth protecting. To determine the insurance interest in property, lots of personal information is necessary.