When
considering the purchase of homeowners and/or automobile
insurance the primary consideration should be the ensuring
the adequacy of coverage.
Considering that a home is usually an individual’s single largest asset,
here is some basic information you should be aware of:
I.
Dwelling Insurance- Replacement Cost
Nationwide, the HO-3/HOB form is the preferred form as it provides “all
risk” replacement cost coverage on the physical structure. Additionally,
10% of the dwelling insurance is extended to detached premises structures which
can include out buildings, fences, and garages. Optional higher limits are available
for an additional premium.
Warning: All risk replacement policies require the homeowner to maintain
at least 80% of the dwelling replacement cost (coinsurance requirement). Otherwise,
the homeowners can be subject to an under insurance penalty which will affect
the
amount paid by the insurance carrier when a claim occurs.
II. Dwelling Insurance- Actual Cash Value
The HO-2/HOA form provides named peril, actual cash value (depreciated) coverage
on the dwelling. For an additional premium, this policy form can be amended to
include replacement cost coverage along with limited water damage (HOA+).
III. Personal Property/(Contents)
Both HO-3/HO-B and HO-2/HO-A forms will provide on premises, named peril, actual
cash value coverage for your personal possessions. Also, limited coverage is
provided for specific classes of property (i.e. jewelry, watch, furs, business
property, computers, fine arts, money and securities) but can be increased for
an additional premium.
-Away from premises coverage is limited to 10% of the total personal property
coverage and is available on a worldwide basis.
Note: Replacement cost coverage for personal property requires the purchase of
the replacement cost endorsement for an additional premium.
An umbrella policy is especially valuable as excess insurance above the coverage
limits on both automobile and homeowners policies. Exposures such as serious
automobile, swimming pool, or rental property activities can easily exhaust primary
coverage limits making you personally liable for the excess claim amount owed.
IV. Additional Living Expenses (Loss of use)
Pays up to 20% of the dwelling insurance amount for additional costs included
due to covered loss under the HO-3/HO-B Policy. The HO-2/HO-A form has a lesser
limit of 10% and is limited to named perils coverage.
V. Trees, Shrubs, Plants, and Lawns
Limited named peril coverage for loss caused by aircraft, vehicles
(not-owned by family member), vandalism, theft, malicious mischief, theft, riot,
civil commotion, fire and lightning. Coverage is limited to $500 per item with
the total amount not to exceed 5% of the total dwelling coverage.
VI. Section II Liability Insurance
-Provides coverage for the cost of defense and potential loss due to you or family
members acts of negligence.
-Coverage is provided on a “third party” basis to others (except
household members) for bodily injury and property damage subject to the policy
limit.
-Coverage applies for the acts of pets along with unintentional acts while you
or qualified family members are engaged in recreational activities.
-Limited, no fault coverage applies for guest injuries and/or property damage
of others in your possession.
VII. Steps You Need to Follow
1) Select the best dwelling coverage available.
When available, the HO-3/HO-B should be preferred over HO-2/HO-A form. This is
because the HO-3/HO-B form provides all risk replacement cost for the dwelling
whereas the HO-2/HO-A form provides less coverage and requires a number of endorsements
to become comparable in coverage.
2) Obtain
full replacement cost on your personal property.
You will need to purchase the replacement cost coverage endorsement along with
adequate personal property limits. Pay particular attention to coverage limitations
on certain classes of personal property and adjust limits through scheduling
or increasing your limits to the amount available.
3) Obtain
adequate liability limits and extend coverage.
The difference in premium for higher liability limits is nominal so always
opt for the maximum available. If available, obtain coverage for personal injury
and additional premises. Besides libel and slander, the personal injury endorsement
provides wrongful eviction coverage which is especially valuable if you own
rental properties on an “incidental business” basis. Also, most
carriers will allow homeowners to extend their residence liability insurance
to a limited number of rental properties.
4) Consider
an umbrella policy.
An umbrella policy is especially valuable as excess insurance above the coverage
limits on both automobile and homeowners policies. Exposures such as serious
automobile, swimming pool, or rental property activities can easily exhaust
primary coverage limits making you personally liable for the excess claim amount
owed.
5) Verify
the financial solvency of the Insurance Carrier.
In the age of instant internet access, we strongly urge consumers to review
comparative financial strength ratings which are provided through independent
rating organizations such as A.M. Best (www.ambest.com) and Weiss Research.
These organizations provide a basis for consumers to assess an insurers long
term ability to meet its financial commitments. As a general rule, we strongly
recommend our clients to use insurance carriers who have an A.M. Best rating
of B+ (very good) or better. Another important consideration is purchasing
insurance from carriers who are “admitted” in your state. Each
state provides a website allowing the consumer to research state specific information
about individual carriers. For example, the Texas Department of Insurance website
http//tdi.state.tx.us/ can link you to valuable information about the significance
of carriers being “admitted.”
Important
Bonus Tip – Uninsured/Underinsured Motorists
Always secure maximum uninsured/underinsured bodily injury coverage available.
Generally speaking, you are allowed to purchase uninsured/underinsured motorist
coverage for equal to the amount of your automobile liability insurance.
Because of the potential for devastating injuries due to another driver’s
negligence, we strongly urge you to obtain maximum uninsured/underinsured motorist
coverage available. This coverage is invaluable when the coverage is provided
for you, qualified family members or any other person occupying your covered
automobile for bodily injury caused by the negligence of another motorist.
Compensation for reduced expenses, wage loss, disfigurement, disability, pain
and suffering is provided in the event of an uninsured responsible motorist
or an individual with inadequate liability limits
P.S. When
considering the purchase of a personal umbrella policy, we recommend using
a carrier who offers an increase uninsured motorist coverage option.
Warning: Please
note, completion of a form is not an offer to bind. Rather, an offer to bind
involves an agreed premium, acceptance by a specific insurance carrier, and
the payment of premium on a specified date.
If you are unclear concerning the purchase of insurance through us, please
contact our agency manager Delilah Vaughan. |
