We will guide you in selecting the right homeowner’s insurance policy to protect you and your home, whether it is single family home, duplex where you occupy one unit, townhouse, condominium, or any of these types of property you rent. Our goal is to find you the best insurance policy at the best price without sacrificing coverage. We do this by educating you, so you can have a sense of knowing you have the right homeowner’s insurance policy to fit your needs and pocket.
To get you started, here is a general homeowner's insurance overview for you:
Depending on which company you choose, you may obtain one of several basic packages of homeowner's insurance in Florida to protect your home and belongings. Each package protects against a specified number of perils, or events that cause damage to your property, such as fire, windstorm or theft. Covered perils apply to four categories:
- Structure (the dwelling itself)
- Other structures (like sheds and fences)
- Personal property (the contents of the structures)
- Loss of use (also called Additional Living Expense or ALE)
The first three are defined as "property"
Property coverage helps pay for damage by covered perils to your home, the contents of your home and other personal belongings owned by you or family members who live with you. In some cases, it helps pay for damage to other structures, such as tool sheds, detached garages, small boats, guest houses and their contents. Your insurance agent or company can point out the items covered in a given policy. Your policy provides limited coverage for some personal property, such as antiques, jewelry, furs and electronics. You may need additional coverage as an endorsement, or addition to your insurance policy, to modify its original terms for an additional premium. You can insure your home and belongings for replacement cost or actual cash value.
Note: Homeowners policies do not cover vehicles. As your agent, I can help you find coverage for cars and large boats.
Additional Living Expense (ALE)
Homeowners packages provide additional living expense coverage that will pay some extra expenses if damage to your home prevents you from living there while it is being repaired. Most policies also will provide this coverage when a civil authority (law enforcement agency, emergency management service, etc.) prohibits the use of a residence due to direct damage to neighboring homes by a covered threat.
The items typically covered - above and beyond normal expenses - include extra costs for food, housing, telephone, transportation (to and from work or school), relocation and storage, utility installation and furniture rental for a temporary residence. Be sure to check your policy to find out what is specifically covered.
This coverage applies only to differences in expenses. For example, it would apply to the cost of restaurant meals minus normal food expenses. It does not cover your mortgage, groceries and utilities or the monthly cost of a telephone in a rented space (since you normally pay for the telephone in your house).
Your policy may designate a limit of coverage for additional living expenses, but your policy does not obligate your company to pay this amount up front or in full if you suffer a total or partial loss. For this reason, you must keep receipts for additional living expenses and submit these to your company for reimbursement.
Additional living expense coverage does not apply to your dependent children while they are away at college. It applies only to the primary insured structure in the event of a loss.
Policies generally offer ALE coverage without any deductible. Flood insurance policies, however, don't provide this coverage. For more information, contact your insurance agent or company.
Two additional types of coverage are known as personal liability and medical payments.
This coverage protects you against a claim or lawsuit resulting from (nonauto) bodily injury or property damage to others. For example, if a neighbor slips and falls in your house and sues you, and a jury finds you legally liable, this coverage would pay that claim plus legal fees up to the policy limits. This coverage applies to you and all family members who live with you. It does not cover intentional damage or harm caused by you or family members who live with you. Check your policy for any exclusions and discuss them with your agent.
Regardless of fault, this coverage pays for medical expenses, up to the medical payment limits, of persons accidentally injured at your home. It does not apply to your injuries or those of anyone living with you or to activities involving an at-home business.
When buying coverage, you may insure your property and belongings for actual cash value or replacement cost.
Replacement cost is the amount needed to replace or repair your damaged property with materials of similar kind and quality, without deducting for depreciation (the decrease in the value of your home or personal property due to normal wear and tear).
Actual Cash Value
Actual cash value is the amount needed to repair or replace damage to your home after depreciation. For example, your insurance company would deduct for the age and condition of a 17-year-old roof with a 20-year life expectancy.
Here is how the two types of coverage work in practice.
Let's say you bought a new television in 1994 for $700. In 2005, a lightning strike destroys the TV. A policy for actual cash value will only pay an amount that reflects the TV's current value - say $300.
A replacement cost policy would cover the entire cost of a new TV of the same type - say $900. However, you initially will receive only the actual cash value for your set ($300). When you buy a new television and present the receipt, you will receive the balance ($600).
For this reason, it is important to keep all receipts! Replacement cost coverage is triggered only when you replace the item that was damaged or lost. Your insurer will require proof of purchase for full reimbursement.
Your agent must offer you replacement cost coverage for your dwelling. If you reject this coverage, you must sign a statement on the application form indicating that you don't want it. Standard replacement cost depends upon the dwelling limit stated on your policy.
Insurance companies design most homeowners policies to require the policyholder to insure the dwelling for at least 80 percent of its replacement cost. And while it is rare, you can insure your home for less than 80 percent. If you do so, you will be charged a co-payment penalty, in addition to your deductible, when you file a claim. Some companies offer guaranteed replacement cost dwelling insurance - an option that costs only a few dollars more, and insures your home for an increased amount, even if it exceeds policy limits. Many companies will not offer guaranteed replacement benefits for older homes.
Inflation or room additions can increase the replacement cost of your home and its contents, while the actual cash value of your home may decrease over time. An inflation guard endorsement gradually increases your dwelling's coverage limit annually to keep your insurance coverage up-to-date with current prices and inflation. It also may keep the policy value in line with increases in local building costs per square foot. If your policy lacks this endorsement, you are responsible for periodically updating your coverage with your insurance agent or company.
No matter how you insure your home, you should keep track of its replacement cost evaluation. Check with your agent or company once a year to make sure your policy provides adequate coverage.
Most insurance companies cover the contents of a home (i.e., personal belongings) on an actual cash value basis. Though you can insure your belongings at replacement cost, you pay a higher premium. Be aware that even if you obtain replacement cost coverage for the contents, you may be paid only actual cash value until you provide receipts for the replaced items, at which time the difference between the replacement cost and actual cash value would be.
Most companies limit the amount to be paid out on certain types of items. These include such things as firearms, jewelry, antiques and electronics. Make an inventory list and review with your agent to find out whether any of your items have limited amounts of coverage. You may want to buy higher limits for these items, for an additional premium.
How Much Insurance to Buy
When you buy a home, you need enough insurance to protect the structure and your personal possessions in the event of a loss. Some insurance policies are written with a limit that is equal to at least 80 percent of the value of the home. This means that if your home is damaged, you will have to pay for the damages up to the deductible. If you insure at less than 80 percent, you will have to pay a co-insurance penalty as well, which means that you will be responsible for more of the cost of the damages.
Regardless of what percentage you choose, this should not reflect the cost of the land on which your home is built. Unfortunately, some banks and other lending institutions want you to buy insurance for the entire amount of the mortgage, including the cost of land.
For example, if you buy a $50,000 lot and build a $100,000 home, your mortgage would total $150,000, but you need insurance only for the $100,000 home. Your insurance company would pay $100,000 if a covered peril such as an accidental fire destroyed your home, but it would not pay for the lot. Remember: You need to buy enough insurance to protect your insurable interest, or the amount needed to replace your house.
You should contact the Department of Financial Services Consumer Helpline toll-free at 1-800-342-2762 if your bank tries to make you insure the entire mortgage amount if it includes the lot.
This information was provided by the Florida Department of Insurance