What should I do if I have a homeowners insurance claim?
This depends – if you house is on fire, call 911 and let the homeowners insurance claim details take care of themselves after the fire is put out.
Once the fire is out, give your agent or home insurance company a call. They may direct you to a selection of disaster restoration companies that will help you preserve and protect your property until it can be restored.
Many disaster restoration companies work directly with your insurance adjuster to facilitate your homeowners insurance claim and the repair of your home.
If you have a burst pipe and water is leaking in your home, turn off the water main into your home. After the water has stopped flowing, call your agent to file a homeowners insurance claim.
Be sure to contact a water mitigation company as soon as possible. You want the moisture to be professionally dried out before MOLD has a chance to grow and make the damage worse!
If you receive papers that you are being sued, contact your agent to file a homeowners insurance claim immediately. Civil legal proceedings frequently follow strict timelines, so its important to contact your insurance advisors immediately if you are sued for a covered liability.
How do I know if I have the right amount of coverage on my Home Insurance?
The last person you want to call when you have a home insurance claim is your banker! This could be the situation if you don’t have the right coverage limits on your home.
You have several coverage limits on your home insurance policy!
Your home insurance policy has two parts and then a couple sections in each part.
Part 1 of the home insurance policy contains property coverage. Under property coverage you have the following Coverage Details:
Coverage A – Dwelling: the building you live in.
Coverage B – Other Structures: detached garages, sheds, your pool, etc.
Coverage C – Personal Property: all the belongings you own like appliances, furniture, clothes
Coverage D – Loss of Use: the additional cost of living caused by the claim, this can be rent for a hotel or apartment while your home is being fixed, or the extra cost to eat out all the time because you can’t use your kitchen
Part 2 provides Personal Liability coverage.
Common limits for personal liability coverage on your home insurance policy range from $100,000 to $500,000. An additional $1,000,000 or more of liability can be added with an Umbrella Policy.
Coverage E – Personal Liability: this protects you if you get sued for a variety of reasons, including a slip & fall on your property or if your pet injures someone.
Coverage F – Medical Expense: this is NO FAULT coverage for someone that hurts themselves at your property. It can be used to pay doctors bills due to an injury, and doesn’t require negligence or fault on your part to pay the injured person.
Deductibles represent the amount of risk you want to retain per homeowners insurance claim – they usually ONLY apply to Part 1 – Property coverages!
The home insurance deductible has been as low as $250 in the past, but today many companies require at least $1,000 per homeowners insurance claim.
While this may seem like a negative development, higher deductibles do reduce your premium. GO HERE to see if a higher deductible will save you on your home insurance.
An Alarming Trend in Dedutibles
Some very large homeowners insurance companies now require a percentage deductible.
A percentage deductible would look something like this on your home insurance declarations page:
Deductible: 1% $2550
In this example, that deductible is 1% of a $255,000 Coverage A – Dwelling home insurance policy.
What’s the Worst Feature of a Percentage Deductible for Your Home?
Most home insurance policies have an inflation guard adjustment to the building amount every year.
This means your Dwelling limit goes up by 1% – 4% every year.
When you have an annual increase in Dwelling coverage – you also have an ANNUAL INCREASE IN YOUR PERCENTAGE DEDUCTIBLE!!
A Percentage deductible means you will pay more out of pocket for each homeowners insurance claim!
Not Sure if You Have a Percentage Deductible!
Send Us Your Declarations Page and We’ll Check
The company that really pushes these deductibles does business in all 50 states, and the percentage deductible is a company wide initiative!
How Do I Know If I’ve Got Enough Home Insurance Coverage?
An age-old question, to be sure. To ensure that your home insurance provides adequate dwelling limits, especially if a total loss homeowners insurance claims happens, your agent will complete a Replacement Cost Estimator (RCE).
In the olden days, the agent would have to ask about 1 million questions in order to complete the form accurately.
With the advent of BIG DATA and connectivity, much of your home’s information can be downloaded from public data points like property tax assessments.
Public Databases Have Simplified the RCE Process
Just because acquiring an RCE for your home insurance has become much simpler, doesn’t mean it’s more accurate!
Your agent will confirm the number of bedrooms, bathrooms, square footage, condition of your property and a few other details in order to complete the RCE for your home insurance policy.
What if my home insurance RCE is less than I paid for the house?
Most times the RCE computed for your home insurance policy is greater than the selling price of your home. Sometimes the RCE is less, but that is unlikely.
Replacement Cost represents the dollar amount to entirely rebuild your home.
Home insurance policy limits do not include the price of land, and is less sensitive to location. For example, if you have five acres with a 1500 square foot house on it, the market value of the land may be higher than the RCE.
Another example would be a 800 square foot condo on Park Avenue in New York City. That apartment may cost $1 million dollars to buy but only need to be insured for dwelling value of $150,000 or so.
Market Value represents the Resale Price of your Home.
Resale value does not factor in labor or demolition and debris removal costs.
Market value probably discounts whether your home is of frame or masonry construction.
BOTTOM LINE: RCE and Market Value are totally unrelated!
So – What’s Actual Cash Value?
Actual Cash Value represents the lower, depreciated value of your property. Some policies will allow you to insure your home, or rental property, for actual cash value.
Don’t Do It!
The best example to illustrate how Actual Cash value would work on a home insurance policy involves your roof.
Most roofs are expected to last for 30 years, so we say they have a 30 year lifetime. This means each year of a $30,000 roof (I like to use round numbers because I am bad at math) is worth $1,000 of depreciation.
If you have a hail storm destroy your roof 15 years into the 30 year life of your roof, you will have to subtract $15,000 from your $30,000 claim before you subtract your deductible!
Whatever savings you recieve from choosing Actual Cash Value on your property insurance will disappear in the event of a major claim!
Still have questions about home insurance?
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Heritage Insurance Agency provides home insurance quotes in Pennsylvania, Maryland and Tennessee.
If you would like a Pennsylvania Home Insurance Quote, click here.
If you would like a Maryland Home Insurance Quote, click here.
If you would like a Tennessee Home Insurance Quote, click here.
Thank you for reading this post about Homeowners Insurance, I look forward to providing more information about important insurance coverage soon!
Nate Bunty, CIC