Home Insurance

Home Insurance

The home policy is a package policy that combines two separate coverages (property and liability insurance) into a single policy.  So, if the home suffers a fire loss, for example, the home policy provides coverage for the fire damage.  In addition, if a guest falls down the stairs of the home and sues the owner, the home policy provides liability coverage including any defense costs.

To be eligible for a home policy the owner must reside in the home. Most home policies are written on an open peril or all-risk basis. This provides the broadest coverage and does not list the covered perils but instead lists what perils are not covered. Within these 2 sections are several subsections.

Common Insurance Terms

Section I-Property – Any claims that are covered under this section are subject to the policy deductible. For a loss to be paid it must exceed the deductible and the insured is responsible for paying the deductible.

Dwelling – The dwelling refers to the home, itself.  The limit of coverage for the home is noted on the declarations page. The home is usually insured on a replacement cost basis.

Replacement Cost – To determine the replacement cost, the features of the home along with the specific location, soft costs, building code issues, and architectural variables are taken into consideration.  The replacement cost can vary by carrier and should not to be confused with the market value or the purchase price of a home. Replacement cost does not include the value of the land but does include demolition and debris removal.

Other Structures –  Includes coverage for any other structure on the premises that is not attached to the dwelling. Things like garden sheds, detached garages, guest houses and swimming pools are considered other structures. The limit for other structures is noted on the declarations page and is typically 10% of the Dwelling amount and can be written on a replacement cost or actual cash value (depreciated) value. Both the amount and the type of coverage can be changed so be sure to discuss with your agent the appropriate amount of coverage for your needs.

Personal Property If you picked up your house and turned it upside down anything that could fall out is considered personal property. The limit for personal property is noted on the declarations page and is usually written on an actual cost value. That means that if your 10-year-old television gets struck by lightning, the insurance carrier will replace it with a new television of similar size and features less your deductible and depreciation. Instead of actual cash value, the policy can be endorsed to include replacement cost. If replacement cost is added, that same television would be replaced, less the deductible with no depreciation.

Loss of Use –  In the event that you are unable to occupy your home due to a covered peril, your insurance will pay for you to live elsewhere; lodging and meal costs are included here.

Coverage Enhancements – Some coverage enhancements may be included in the home policy; however, coverages and limits vary by carrier, so you should discuss them with your agent. Some coverages may include increased building costs of the dwelling, extra building ordinance/law coverage, debris removal, fire department service charge, certain water damage, pollutant cleanup and removal, money, and identity theft.

Section II-Liability Coverage Any claims that are covered under this section are not subject to the policy deductible.

Liability – Liability covers the sum of money that the insured is legally liable to pay to others because of bodily injury or property damage caused by an occurrence.

Occurrence – An occurrence is defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions, which results, in bodily injury or property damage during the policy period”.

Bodily injury -The policy specifically defines “bodily injury” as bodily harm, sickness, or disease including required care, loss of services, and resulting death. Most policies do not include purely emotional or mental injury. Coverage for some forms of “emotional distress” such as libel and slander usually referred to as “personal injury” can be added by endorsement.

Property damage – Property damage is defined as physical injury, destruction or loss of tangible property.

Medical Payments – Pays medical expenses to third parties for expenses incurred at the insured’s premise or arising out of the insured’s actions.  Medical expenses are paid regardless of fault.

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