Homeowner's Insurance FAQ

What is Homeowners insurance and who should buy it?
Homeowners Insurance is one of the most popular forms of personal insurance on the market. The typical Homeowners policy has two main sections: Section I covers your property, and Section II provides personal liability coverage (to cover you in case of lawsuits arising from things that happen on your property). Almost anyone who owns or leases property should have this type of insurance. Homeowners insurance is required by lenders as a requirement to obtain a mortgage.

But not all homes will qualify for a Homeowners policy. Insurance companies will look closely at the age of a house and determine if adequate repairs and updates to the home have been done. A few of the most important updates to homes over 25 years of age are the replacement of the roofing and the wiring system using only copper wire and circuit breakers. Companies will also reject houses with indications of negligent repairs and needed exterior maintenance.

Many people mistake a Homeowners insurance policy for a maintenance contract, so they expect everything that happens at their home to be paid by the policy. A Homeowners policy is designed to be used for direct damage to your property that will cause you a significant amount to repair or replace.

What determines the policy limits in the standard Homeowners policy?
You, the insured, set the limit for Coverage A–Dwelling when you buy the policy. This is required to be at least 80% or more of the cost to rebuild the home. The insured will usually get the assistance of the agent and Construction Cost estimators provided by the companies. Most agents will insist that the insured choose an amount that is 100% of the estimated cost to rebuild.

The Coverage B-Other Structures limit is usually equal to 10% of the policy limit on Coverage A. Coverage C-Personal Property covers losses to your personal property at 50% of Coverage A and is on a "named perils" basis, which means you're covered for all the perils specifically named on your policy. Coverage D-Additional Living Expense covers additional costs you may incur when your home can't be used because of an insured loss. The policy limit for Coverage D is equal to 20% of the policy limit on Coverage A. Coverage E-Personal Liability is a minimum limit of $100,000 and Coverage F-Medical Payments to Others is a minimum of $1000 per injured person. Coverage B, C, D, E and F can be increased at the time of purchase or during the policy term.

Where and when is my personal property covered?
Coverage C, with Named Perils coverage, applies to all of your personal property (except property specifically excluded) anywhere in the world. For example, suppose that while traveling, your bags were stolen. You would just report it to local police then you can contact your agent when you arrive back home with the details.

What is the difference between an "Open Perils" coverage and "Named Perils" coverage?
An Open Perils policy covers losses that are due to any direct physical loss to property with a few named exclusions. This policy provides much broader protection than a named perils policy. A Named Perils policy covers losses that are due to only the 16 perils listed in the policy. Those typically include fire, windstorm, hail, theft and other physical losses.

The most common homeowners form – HO 03 – provides Open Peril for the Dwelling and Other Structures and then has Named Peril coverage for Personal Property

What can I do to lower the cost of my homeowners insurance?
Even with the extremely tight property insurance market in North Carolina, many companies can be competitive on their preferred homeowner policies. As part of your regular review, ask your agent to check with the other companies they have to see if a better price is available. You can also check with other agents.

Another way to cut costs is to look for discounts that apply to you. For example, many insurers will offer a discount when you bundle your automobile and homeowners coverage, if you have deadbolt exterior locks on all your doors or if your home has a security system.

An easy way to save is to raise your policy deductible. Increasing your deductible from $500 to $1000 or higher will lower your premium, sometimes by as much as ten to fifteen percent. However, you should be sure you have enough cash on hand to cover the larger deductible in case of emergency. Most people these days would not consider filing a claim for less than $1000 anyway.

If I have an occurrence that I think is covered under my homeowner's policy, what should I do?
We encourage our clients to report their losses to us as soon as possible so that we may assist them in knowing the expectations of how the company will handle their claim and what impact a claim may make on their insurance account.

Insurance contracts are conditional contracts, which means that policy owners have certain responsibilities to meet if a covered loss occurs. Not completing these can result in nonpayment by the insurance company for losses that otherwise would have been covered.

These include:
1. notifying the insurance company or the agent that a loss has occurred --this should be done as soon as you discover the loss;
2. protecting the property from further damage and/or making any emergency repairs necessary to prevent further damage;
3. preparing a detailed list of the personal items damaged that contains descriptions, the items age, and their replacement cost.
4. being prepared to show the company and/or the insurance agent the damaged items; 5. completing a statement for the insurance company that explains how the loss occurred -- for example, the time the damage occurred, the cause, etc.

What can I do to make sure my property is fully covered in a loss?
Take pictures of any collections, antiques or high valued items – if possible do entire rooms. (remember to update these regularly) Many people video tape each room and the contents. Keep receipts for all "big ticket" items as well as instruction books if possible. Because the cost of replacing your house rises each year, review your policy limits annually and contact your agent with questions.

What kind of claims would my policy typically not cover?
All Homeowner policies will exclude Earthquake and Flood. You can buy earthquake coverage by endorsement which will cover your home only, not your personal property. The cost is based on the area of the state where your home exists. The coverage also has its own deductible.

Flood insurance is a Federal Program and is managed through the Dept of Homeland Security/FEMA. Most agents can provide you a quote for a Flood policy and everyone can buy Flood insurance, but not everyone is in a flood hazard area. Your agent can give you the information on your home and what your premiums may be. Always ask about flood information when you change homes.

Many of the more frequent losses that impact homeowners is not have the proper amount of coverage on certain kinds of property, such as jewelry. If you own a piece of jewelry that is valued $1000 or more, you should ask to have it scheduled on a special Inland Marine Floater aka Scheduled Items coverage. See – Insuring you Valued Possessions.