Q: What are the policy limits (i.e. coverage limits) in the standard homeowners policy?

A: There are a number of different homeowners policy types, but the most prevalent is a homeowners type 3 policy which provides coverage for virtually all perils with specific exclusions to coverage as listed. The most notable coverage exclusions in Minnesota are flood and earthquake.

The policy limit for the dwelling is usually determined after reviewing the replacement cost of the dwelling. The replacement value should not be confused with the homes market value or its tax/assessable value. The replacement value is what it should cost to rebuild the home with today's costs for building materials and labor. The replacement value should take into consideration the specific features of the home including the number of bathrooms, fireplaces, built-in appliances, finished basements, walk-out basements, decks and any other unique attributes of the home. The features are used in conjunction with the square footage of the dwelling and any additions it may have to determine its actual replacement cost.

Additional consideration for higher liability limits might be prudent if the insured owns a dog (dog bites) has a pool or has lakeshore. In addition, perceptions of wealth, business ownership and other hazards on the property could create a need to consider higher liability limits.

The policy limit for other structures is usually equal to 10% of the policy limit for the dwelling. Other structures relates to detached garages and storage buildings.

Losses to your personal property are covered on a "named perils" basis. "Named perils", means that you have coverage only when your property is damaged or destroyed by an incident, which is specifically listed in the policy terms. Thus contents coverage is usually more restricted than the actual dwelling, since the list of covered perils is not all-inclusive for contents coverage.

As an example the dwelling coverage has no restriction for loss due to birds flying into and breaking windows. However, if the bird breaks a valuable china cabinet door the repair/replacement of the door will typically be uncovered since the listed perils of coverage do not specifically identify this type of loss as being applicable. The policy limit on the contents coverage is usually equal to 50-70% of the policy limit on the dwelling.

Limits for the coverage for the additional expenses that the policy owner may incur when the residence cannot be used because of an insured loss is equal to 20% of the policy limit on the dwelling, or in some cases the actual loss sustained for a specific period of time usually 12 months. Some typical expenses applicable for this coverage would be temporary housing such as a hotel or added expenses associated with the need to have a phone hooked up at a new residence which may be rented while the repairs are being made on the damaged house.

Your policy also includes liability protection. This portion of the policy provides protection in case you or a member of your household is responsible for injuring someone or damaging someone's possessions. Every insured should take the time to consider the appropriate level of coverage based on their particular financial situation. This is an area where the amount of the loss can fluctuate immensely, and could cause the greatest hardship to an insured if the coverage levels are inadequate. We recommend $300,000 for liability as a standard coverage amount, but higher levels are available and in many situations increased limits are advisable. Some policies are issued with $500,000 of liability coverage.

Medical payments coverage is provided at levels ranging from $1000 to $10,000. The primary purpose of this coverage is to take care of injuries incurred by others while on the premises. Negligence is not normally a concern since this is an initial coverage and is only intended to take care of minor short-term medical bills. Large long-term medical expenses would fall under the liability section of the policy and would require some form of negligence on the part of the named insured.

Q: Where and when is my personal property covered?

A: Personal property subject to certain off premises limits (except property that is specifically excluded) is covered anywhere in the world. For example, suppose that while traveling, you purchased a dresser and you want to ship it home. Your homeowner's policy would provide coverage for the named perils while the dresser is in transit - even though the dresser has never been in your home before.

Q: Do I need earthquake coverage? How can I get it?

A: The standard insurance policy does not pay for direct damages caused by "earthquake movement." "Earthquake movement" is a much broader term than earthquake. It includes earthquake, volcanic activity and other earth movement. This coverage may be available by endorsement for an additional charge. If you live in an area that is more likely to have an earthquake, you'll pay more than if you live in an area that is unlikely to have an earthquake.

Q: What about flood insurance?

A: If flood insurance is needed you will need to purchase a separate policy for flood coverage. Flood is not a covered peril on the homeowner's policy. An endorsement for water & sewer backup can be purchased at a relatively low cost, but the coverage is restricted to water & sewer backup through the drains and the amount of coverage available is usually less than $20,000.

Q: What factors should I consider when purchasing homeowners insurance?

A: There are a number of factors you should consider when purchasing any product or service, and insurance is no different.

Here is a checklist of things you should consider when you purchase homeowners insurance.

1. Determine the amount and type of insurance that you need. The coverage limit of your house should equal 100% of its replacement cost. If your policy limit is less than 80% of the replacement cost of your home, any payment from your insurance company will be less than the full cost to replace your home - you'll have to pay the rest out of your own pocket. Also, decide if the personal property and personal liability limits are adequate for your needs.
   
   
2. Determine which, if any, additional endorsements you want to add to your policy. For example, do you want an endorsement for water & sewer backup or coverage for a boat or an all terrain vehicle, such as a 4 wheeler.
   
   
3. Once you have decided on the coverage you want in your homeowner's insurance policy, consult us. We will be able to help you determine if there are any gaps in coverage you might not have been aware of, explain the details of the policy's exclusions and limitations as well as recommend an insurance company that will live up to your expectations.
   

Q: What is the difference between "actual cash value" and "replacement costs"?

A: Covered losses under a homeowner's policy can be paid on either an actual cash value basis or on a replacement cost basis. When "actual cash value" is used, the policy owner is entitled to the depreciated value of the damaged property. Under the "replacement cost" coverage, the policy owner is reimbursed an amount necessary to replace the article with one of similar type and quality at current prices. The replacement price will not be given to an insured who suffers a covered loss until he/she actually replaces the item.

Q: Are there any items in my home not covered by my homeowner policy?

A: Most items are covered for loss or damage as a result of specified perils or subject to stated limits. Take jewelry, for example. In the case of a jewelry theft, in most instances, the company will reimburse you up to $1,000. However, loss or damage resulting from losing a bracelet or dropping a vase, for example, would not be covered unless that item was specifically insured, also know as scheduled. There are also limits on such things as money, securites, watercraft, trailers, grave markers, furs and guns. Please check your policy for the specific coverage limits.

Q: If my home or personal belongings suffer water damage as the result of a pipe bursting in my plumbing or heating systems, what coverage do I have?

A: You are covered up to your policy limits for the resulting damage to your home and personal property, and for any additional damage caused in the course of repairing the faulty system.

Q: If my home or belongings suffer damage from the freezing of my plumbing or heating systems, what coverage do I have?

A: You are covered for resulting damage to your home or personal property as well as for damage to the plumbing or heating system itself. If your home is vacant or unoccupied at the time the freeze-up occurs, you may not have coverage as vacancy may eliminate many perils of coverage.

Q: If my pets cause damage to my personal belongings, what coverage do I have?

A: There is no coverage on the homeowner policy for loss or damage to personal belongings caused by a pet or other domestic animal.

Q: Is there any limit on the insurance for my silverware?

A: There is a limit to the amount of coverage applicable to silverware and typically it ranges from $1,000 to $5,000 depending upon the company providing coverage.

Q: If my home suffers damage from vandalism or malicious mischief, what coverage do I have?

A: You have coverage up to the limits of your policy, unless your house was vacant for 30 or more consecutive days immediately preceding the loss.

Q: If I or a member of my household sustain injury on my property, what coverage do I have?

A: There is usually no coverage on your homeowner policy for injury sustained on your property by you or a member of your household. However, liability coverage may apply if an insured is legally liable for the injury.

Q: If a neighbor or visitor sustains injury on my property, what coverage do I have?

A: You have coverage, up to your policy limits, under the liability portion of your homeowner policy if you are legally liable for the injury. In addition, the company will pay, up to applicable limits, any bills or reasonable medical expenses of the neighbor or visitor's injury. However, certain exclusions my apply, depending upon state law or policy provisions.

Q: If I conduct a business at home, is my business property covered by my homeowner policy?

A: There is coverage up to $2,500 for property on the "residence premises" that is used at any time or in any manner for a "business" purpose. A personal computer used or an incidental basis for business will be considered business personal property so it is very easy to exceed the $2,500 policy limit. In addition, liability concerns for business conducted at your home will need to be disclosed and endorsed on to your policy if coverage is to be provided.

Q: If there is a windstorm and the trees in my yard are damaged, what coverage do I have?

A: There is no coverage under the homeowner policy for windstorm damage to trees or other shrubs.

Q: Does my policy cover removal of debris from my property?

A: Yes, it covers expenses incurred in removal of debris from your covered property resulting from a covered loss. An example of this would be the expense incurred in removing shingles that have blown off your roof.

Q: How can I insure special items?

A: The only way to obtain broader coverage, no matter what the cicumstance of the loss, is to schedule the item in your homeowner policy. Schedule means you specifically describe and insure the item. You will pay an additional amount of premium for the scheduled item depending upon its insured value, and you will be covered, in most instances, when any loss occurs. Items that are typically scheduled are jewelry, furs, art objects, silver, antiques, coin and stamp collections, and photographic equipment.

Q: Can my insurance company ask me for more money once we agree on a policy?

A: Most insurance companies write non-assessible policies. A non-assessible policy is one for which there is only one rate. Therefore, if an insurance company has a year full of catastrophes, it cannot ask the policyholder for more money. On an assessible policy, the insurance company could ask the insured for more money to cover losses.

Assessible policies are typically only used by small regional companies to protect the insurance company by allowing them to collect additional premiums for catastrophe losses which could force the insurance company into bankruptcy.

Q: What is "insurance-to-value"?

A: Insurance-to-value simply means having enough insurance to cover the actual replacement value of your home should a loss occur. If a loss occurs, you want enough insurance to cover the total costs of replacing your home. The cost to rebuild your house may be different from the actual market value of the property.

Q: May I cancel my homeowner insurance with my company?

A: Yes, you may cancel you insurance at any time and the appropriate amount of paid premium will be returned. No penalties are imposed on early cancellations.

Q: May my insurance company cancel my homeowner policy?

A: Yes, although this is someting that insurers rarely do. There are legal provisions that allow an insurance company to cancel you homeowner insurance. The most frequent reason for cancellation is non-payment of premium by the insured. Insurance companies must have good reason to cancel a policy, and ample notice must always be given.

Q: Does my homeowner policy provide protection against liability for my recreational motor vehicles?

A: It depends upon the circumstances. A recreational motor vehicle is a golf cart, snowmobile, or other motorized land vehicle designed for use off public roads and not subject to motor vehicle registration. Except in the case of a golf cart, you have liability protection as long as the bodily injury or property damage occurs on the insured premises. You have liability protection for your golf cart only while it is used for golfing purposes. Liability coverage for recreational vehicles used off the insured premises is not provided automatically but can be added by endorsement for an additional premium. Physical damage coverage for damage done to the recreational vehicle also requires endorsement or the issuance of a seperate policy if coverage is to be provided.

Q: What is coinsurance?

A: Coinsurance is a provision in your policy which states that if you fail to carry at least 80% of the replacement cost of the property, you may receive a reduced loss settlement. Please keep in mind that the coinsurance clause relates to the value of the property when the loss occurs, not when the policy was written In general, most policies have a coinsurance provision. Please refer to the next question for an example.

Q: Could you give me an example that explains coinsurance?

A: Assume that property valued at $100,000 is insured for only $40,000 and a loss of $40,000 occurred. If the policy had no coinsurance clause, you would get $40,000. If the policy contained the usual 80% coinsurance clause, you would get only $20,000. Because you carried only one-half ($40,000) of the 80% ($80,000) insurance required by the coinsurance clause, you would receive only one-half ($20,000) of the $40,000 loss.

Q: What is the definition of "deductible"?

A: Deductible is the initial portion of the loss for which the policyholder is responsible. If you have a $500 deductible on your homeowner policy, you are responsible for the first $500 of the loss. The company will only pay that portion of the loss in excess of $500.

Q: What are some practical things I can do to lower the cost of my homeowners insurance?

A: There are a number of things you can do to lower the cost of your homeowners insurance. The easiest thing to do is get a comprehensive review of your policy and needs from your local agent.

Another way to lower the cost of your homeowners insurance is to look for any discounts that you may qualify for. For example, many insurers will offer a discount when you place both your automobile and homeowners insurance with them. Other times, insurers offer discounts if there are deadbolt exterior locks on all your doors, or if your home has a security system. Be sure to ask us about any discounts for which you may qualify.

Another easy way to lower the cost of your homeowners insurance is to raise your deductible. Increasing your deductible from $250.00 to $500.00 will lower your premium, sometimes by as much as five or ten percent.

Q: What is the definition of "loss away from premises"?

A: Loss away from premises can be defined as a loss incurred by the policyholder while he or she is away from home. An example of this is a theft from a motel room, perhaps while a policyholder is on a vacation or business trip.