The purchase of your home may be the most important investment of your life. Understanding your policy and carrying adequate coverage is essential in lessening your out of pocket expense in the event of a loss. As your Insurance Professional, I can help you make sure that you have adequate coverage in place.
In Florida, Homeowners insurance can be written in several forms. It is sold as a package policy that provides financial protection against disasters. A standard policy insures the home itself (dwelling) and the things you keep in it (personal property). This means that it covers both damage to your property and your liability or legal responsibility for any injuries and property damage you or members of your family cause to other people. This includes damage caused by household pets.
Homeowners’ Policy Forms:
HO-3 Form is used for owner occupied single family dwellings.
HO-8 Form is written for older homes. It is similar to the HO-3 but excludes valuable coverage.
HO-6 Form also known as Condo/Contents Insurance is used for condominium units or townhomes where the Homeowners Association has a master policy that covers the roof and structure of the building. The unit owner’s policy then provides coverage to the inside of the unit from the walls in (flooring, bathrooms, kitchen, appliances, personal property, etc.)
HO-4 Form is written for tenants who want to insure their personal property.
DP-3 Form provides building coverage for tenant occupied dwellings. This is also known as landlord’s coverage, dwelling fire policy, etc.
DP-1 Form Similar to the DP-3 but excludes valuable coverage.
Your homeowner’s policy consists of these basic coverages:
A- Dwelling: covers the structure of your home.
B- Other Structures: covers structures not physically attached to the main dwelling. (Detached garage, tool sheds, gazebo) the limit is usually 10% of coverage A.
C- Personal Property/Contents: covers your furniture, clothes, sports equipment and other personal items are covered if they are stolen or destroyed by fire, hurricane or other insured disaster. Expensive items like jewelry, furs and silverware are covered, but there are usually dollar limits if they are stolen. Generally, you are covered for between $1,000 to $1,500 for all of your jewelry and furs. To insure these items to their full value, purchase a special personal property endorsement or floater and insure the item for its appraised value. The standard limit is usually 50% of coverage A.
D- Los of Use/Fair Rental Value: On owner occupied dwellings, this pays the additional costs of living away from home if you can’t live there due to damage from a fire, storm or other insured disaster. It covers hotel bills, restaurant meals and other living expenses incurred while your home is being rebuilt. On tenant occupied dwellings, it pays for loss of income/rent that a landlord suffers when the dwelling becomes inhabitable after a covered loss. Coverage limits may vary from company to company. This limit is usually 10 to 20% of coverage A.
E- Personal Liability: covers you against lawsuits for bodily injury or property damage that you or family members cause to other people. The liability portion of your policy pays for both the cost of defending you in court and any court awards—up to the limit of your policy. You are also covered not just in your home, but anywhere in the world. Limits are usually 100K to 300K.
F- Medical Payments: Your policy also provides no-fault medical coverage. In the event a friend or neighbor is injured in your home, he or she can simply submit medical bills to your insurance company. This way, expenses are paid without a liability claim being filed against you. You can generally get $1,000 to $5,000 worth of this coverage. It does not, however, pay the medical bills for your household members or your pet.
Additional coverage and endorsements available for an additional premium:
- Personal Property Replacement Cost: Insurance that pays the dollar amount needed to replace damaged personal property or dwelling property without deducting for depreciation but limited by the maximum dollar amount shown on the declarations page of the policy.
- Scheduled Personal Property: A list of individual items that are covered under the policy insured at their appraised value. Ex: Jewelry, Antiques, Fine Art, Guns, etc.
- New Home Construction (Newer building codes)
- Construction Type (Masonry vs. frame)
- Central Station Fire and/or Burglar Alarm
- Fire Sprinklers (Condos and Townhomes)
- Wind Mitigation Discounts (HIP roof, hurricane protection, etc.)
- Financial responsibility ( insurance scores, consumer reports)
- AOP- all other perils, such as fire, water damage excluding flood, theft and vandalism. Deductible amounts available are 500/1,000/2,500/5000
- Wind- 2% of coverage A-Dwelling (multiply by your policy’s dwelling limit)
Some companies offer a lower deductible option of $500 for a higher premium. Keep in mind that the lower the deductible the less out of pocket expense to you in the event you suffer a covered loss. The standard deductibles are $1,000 for All Other Perils and 2% of the dwelling limit for Hurricane losses.
These are some of the common issues that you need to consider which may cause an obstacle in obtaining insurance on your property and are considered as “ineligible risks” by most insurance carriers:
- Homes with trampolines.
- Home located in protection class 9 or 10.
- Properties located entirely over water
- Properties located in close proximity to known sinkholes. Ineligibility is based on a score determined by the number of known sinkholes within 1 mile of the property and the exact distance of the property to those sinkholes.
- Risks with dogs including Pit Bulls, German Shepherds, Akitas, Doberman Pinschers, Chows, Rottweilers, Great Danes, Caucasian Mountain Dogs, Staffordshire Terriers, American Bulldogs, Beaucerons, Wolf Hybrids or any mix thereof, or exotic animals, saddle animals or any animals with a bite history or considered vicious.
- Homes of unconventional construction including but not limited to Log Homes.
- Homes with wood shingled roofs.
- Homes having swimming pools with diving boards or slides.
- Homes without permanently installed heat source or with wood burning stoves or fireplaces as primary source of heat.
Flood: Standard homeowners’ policies do NOT cover flooding. This coverage is excluded under homeowners’ policies and many commercial property policies. However, flood damage to your vehicle is covered under the comprehensive portion of an auto insurance policy. If required, you can purchase flood coverage from the Federal Flood Insurance Program directly through us. Although your home may not be located in a flood zone, coverage is available to you under the preferred flood program at a lower premium.
Replacement cost vs. Market value
My home is only worth $120,000… Why does my insurance company want me to insure it for $275,000?
One of the biggest questions consumers have regarding homeowner’s insurance revolves around the
amount of insurance to place on their dwelling. When purchasing a house, the mortgage
company requires the homeowner to obtain insurance prior to closing. Most consumers assume the
amount of dwelling coverage will be equal to the amount they paid for their house. This is incorrect in
some cases. There are different methods to determine the value of a house and in most cases, these can be two completely different numbers:
Market Value is the price paid for your house. It is based on recent sales of similar homes around a particular area and is affected by current market conditions such as demad, foreclosures and short sales.
Replacement Cost is the price or cost it will take to rebuild your house in the same spot, same
size and same quality of construction, at today’s costs. Insurance companies use the replacement cost valuation.
For example, a home purchased in a depressed city neighborhood, may have a market value of $120,000. The exact house, located in a nice suburb, may have a market price of $285,000; however, the
cost to rebuild the house after a loss would be the same in either location. The insurance company is
looking to insure the home for the full replacement value, not the current market value. Remember,
they are going to pay to build you a new home, not buy one for you down the street.
Home in Thriving Suburb Home in Depressed Neighborhood
Square Footage of Home 2,500 2,500
Year Built 1920 1920
Market Value $285,000 $120,000
Cost to Replace/Rebuild Home $275,000 $275,000
For insurance purposes, you should insure your home to 100% of its replacement cost. This will ensure
the ability to rebuild the entire house, the way it is now, in the event of a total loss. One thing to
remember, you’re not insuring the land so leave this out of the replacement cost valuation of the
dwelling. Consult with your insurance agent and explain your home in detail regarding: square footage, number of bedrooms, bathrooms, kitchen, basement, fireplace etc. Insurance companies use a formula to generate the correct replacement cost.
The coverage amount and the premium may vary by carrier and might be a bit higher; however you will be properly insured. After a claim occurs is not the time to find out your insurance is not adequate. Having 100% replacement cost on the dwelling takes away this possibility.
REMEMBER, YOUR HOME IS ONE OF THE MOST IMPORTANT INVESTMENTS OF YOUR LIFE. ALLOW ME TO MAKE SURE YOU HAVE THE RIGHT COVERAGE FOR ALL YOUR INSURANCE NEEDS.