Choosing a Home Owner Insurance Company
The first consideration in choosing home insurance is what you have to protect. If you lease rather than own your own home or condominium, renters insurance should suffice. Such insurance will protect the value of your furniture and other personal property, but does not protect the structure itself. If you own your residence it is important to insure not only your possessions, but also the property itself. If the property is subject the a mortgage, the mortgage holder will normally require the homeowner to maintain insurance on the property, and to name the mortgage holder on the policy. The mortgage holder will force place insurance of the property owner fails to secure the necessary insurance.
When the property is initially insured, it is important that it be insured for its current value. The insurance agent or insurance company should be notified when substantial changes are made to the property that increase the value and, consequently, the cost of repairing or replacing the property. Structures that are not attached to the home, such as detached garages and storage sheds, should also be listed when securing insurance.
For the maximum protection, insurance should be secured on a replacement cost basis rather than on an actual cash value basis. Replacement cost means the cost to replace the property on the same premises with other property of comparable material and quality used for the same purpose. The term "replacement cost" may be defined in the policy of insurance, so it is important to review the actual policy language. The term "actual cash basis" is usually not defined in the policy, and may be subject to differing interpretations. The term is frequently interpreted as the cost to replace damaged property with new property of a like kind and quality, less depreciation. When insurance is afforded on an actual cash basis the insurance proceeds may not be sufficient to fully repair or replace the property. Replacement cost insurance will normally cover the complete repair and/or replacement.
When securing insurance on a home, it is important to disclose any use of the home that is not purely residential. Some policies of insurance will not cover independent structures that are used in whole or in part for business purposes. Thus, a freestanding garage that has been converted to use as a commercial workshop would generally not be insured unless the use is disclosed and insurance specifically secured.
When securing home insurance, attention should also be paid to the contents being insured. While home insurance normally covers cash, jewelry, firearms and watercraft stored on the premises, the limits available for the loss or damage to such property is severely limited. If expensive jewelry, a large collection of firearms or any other objects of significant value are kept on the property it is important the existence of the item and its value be disclosed to the insurance company. If appropriate, a rider to the policy will be issued specifically insuring the property for its actual value. An appraisal may be needed to establish the value, which will be listed on the policy itself. A premium is usually charged for such additional insurance, but it is normally minimal in comparison with the additional insurance afforded.
As certain types of damage claims become more and more common, and therefore increasingly costly to insurers, insurance companies are increasingly adding exclusions to their policies. Exclusions for mold and mildew damage to homes are examples of such exclusions. Therefore it is important to review the policy of insurance or to be advised thoroughly of its contents by an insurance agent to confirm the property is properly protected. In some instances it may be possible to purchase back the excluded coverage for an additional premium.
The property insurance provided by a homeowner’s policy is typically accompanied by liability insurance. Liability insurance does not protect the home or its contents, but rather protects the homeowner in the event the homeowner is sued. Such insurance provides protection against claims for injury to a person or damage to property caused by an accident. For example, an insurance company would normally be required to defend a homeowner sued for injuries sustained when a visitor slips and falls in the insured home as well as paying any damages awarded against the homeowner. Additional liability insurance, called personal injury insurance, may also be offered at an additional premium. This insurance applies to offenses that result in harm other than bodily injury, such as damages resulting from libel or slander.
Regardless of the type of insurance purchased it is critical to review the conditions portions of the policy. This section imposes responsibilities upon the homeowner to notify the insurer promptly of damage to the property, or of the occurrence of an accident on the premises that may subject the homeowner to liability. A duty of cooperation is also imposed upon the homeowner in this section. The failure to comply with the policy conditions could allow the insurance company to deny a claim that might otherwise be covered.