How can I avoid scams after a disaster?

If your home was destroyed by a hurricane, wildfire or other disaster, be cautious. Unfortunately, there are dishonest service providers that prey on disaster victims. They know that people who have lost their homes and valuables may not be thinking clearly. If you have suffered this type of loss, don’t make any rash decisions. Talk to your insurance agent, who may recommend service providers in your area.Here are some basic guidelines for hiring service providers:

Roofers and builders

1. Don't be rushed into signing a contract with any company. Instead, collect business cards and get written estimates for the proposed job.
2. Beware of building contractors that encourage you to spend a lot of money on temporary repairs. Payments for temporary repairs are covered as part of the total settlement. If you pay a contractor a large sum for a temporary repair job, you may not have enough money for permanent repairs. In most cases, you should be able to make the temporary repairs yourself. Ask your insurance agent. And remember to keep receipts.
3. Investigate the track record of any roofer, builder or contractor that you consider hiring. Look for professionals that have a solid reputation in your community. You can call your Better Business Bureau for help. Also, get references and never give anyone a deposit until after you have thoroughly researched their background.

A common fraud scheme is for a so-called "contractor" to convince a homeowner that a large deposit must be provided before repair work can begin. Frequently, the job will be started, but not completed. Unfortunately, these con artists are never seen or heard from again.

Public adjusters and attorneys

1. Don't make any rash decisions about hiring someone to handle your claim. Be especially wary of individuals who go door-to-door soliciting business in the aftermath of a catastrophe. Most importantly, don't let anyone scare you into signing a contract. You don't want to be victimized by someone who comes into town, hoping to make a fast buck. You could end up forfeiting a significant portion of your insurance dollars.
2. Before hiring a public adjuster or an attorney, try to settle your claim directly with your insurance company. Your insurer provides an adjuster at no charge to you. Ask your insurance agent or company representative to help you with your claim and don't be afraid to ask questions. If you decide to work directly with your insurer, you still have the right to hire a third-party professional to help you.
3. If your claim is complicated and you want to hire a public adjuster or attorney, make sure that person is qualified to handle your case. Ask your friends, relatives or business associates for the names of well-regarded professionals in your community. Also, call your state department of insurance regarding a public adjuster, and your state or county bar association about a prospective attorney.
4. Understand that you will have to pay a public adjuster 15 percent and an attorney as much as 30 percent of your total claim settlement.

What is a public adjuster?

Your insurance company provides an adjuster at no charge to you. Adjusters who have no relationship with your insurance company and charge a fee for their services also may contact you. These are known as public adjusters. You may use a public adjuster to help you in settling your claim.

1. Public adjusters may charge you as much as 15 percent of the total value of your settlement for their services. The fee isn't covered by your insurance policy. Sometimes after a disaster, your state’s insurance department sets the percentage that public adjusters may charge.
2. If you decide to use a public adjuster, first check his or her qualifications by calling your state insurance department. Ask your agent, a lawyer or friends and associates for the name of a professional adjuster they can recommend. Avoid individuals who go from door-to-door after a major disaster, unless you are sure they are qualified.

What can I do if I am having trouble settling my claim?

If you are unsatisfied with how your insurance company is handling your claim, you have several options:

Talk to the agent or company representative who sold you the policy
Let the agent know that you are dissatisfied and explain the specifics of your problem.

Contact the claims manager of the company
Provide a written explanation of your problem with copies of supporting documentation. Remember to send only a copy and not any original documentation. If you are insured with a smaller company, consider writing directly to the president. Going to the top can sometimes speed the process.

Contact your state insurance department
Insurance is a regulated industry and your state department of insurance should be able to help you resolve your problem.

Call the National Insurance Consumer Help line
This toll-free telephone service (800-942-4242) can help you work with your insurance company to solve the problem.

Consult an attorney
If you have tried all four of the above tips and still can’t resolve the claim, you may want to talk to an attorney. You may have to pay a consultation fee for your initial visit, so make sure you know how much this will cost. Meet with an attorney who has solid references or get the name of someone from your local bar association. Prepare for the visit by bringing a copy of your insurance policy and other relevant documents. Get the fee structure in writing before you decide to pursue the case.

How is the settlement amount determined?

The settlement amount depends on which type of policy you have. Having inadequate insurance can affect the amount of compensation you get.

Replacement Cost and Actual Cash Value

Replacement cost provides you with the dollar amount needed to replace a damaged item with one of similar kind and quality without deducting for depreciation—the decrease in value due to age, obsolescence, wear and tear and other factors. An actual cash value policy pays you the amount needed to replace the item minus depreciation.Suppose, for example, a tree fell through the roof onto your eight-year-old washing machine. If you had a replacement cost policy for the contents of your home, the insurance company would pay to replace the old machine with a new one. If you had an actual cash value policy, the company would pay only a percentage of the cost of a new washing machine because a machine that has been used for eight years would be worth less than its original cost.Suppose, also, that the tree damaged your 15-year-old roof so badly that it had to be completely replaced. If you had a replacement cost policy, the insurance company would pay the full cost of installing a new roof. If you had an actual cash value policy, it would pay a smaller percentage of the cost of replacing it.

Extended and Guaranteed Replacement Cost

If your home is damaged beyond repair, a typical homeowners policy will pay to replace it up to the limits of the policy. When the value of your insurance policy has kept up with increases in local building costs, a similar dwelling can generally be rebuilt for an amount that is within the policy limits.Some insurance companies offer a replacement cost policy that will pay a certain percentage over the limit to rebuild your home—20 percent or more, depending on the insurer—so that if building costs go up unexpectedly, you will have extra funds to cover the bill. These are called extended replacement cost policies. A few insurance companies still offer a guaranteed replacement cost policy that pays whatever it costs to rebuild your home as it was before the disaster. But neither a guaranteed nor an extended replacement cost policy will pay for a house that's better than the one that was destroyed.

Mobile Home Policies

If you own a mobile home, you may have a policy based on replacement cost, actual cash value or, in a few cases, a "stated amount." With a stated amount policy, the maximum amount you receive if your home is destroyed is the amount you agreed to when the policy was issued. The depreciation in the value of your home is not considered in the settlement. If you opt for the stated amount, update your policy annually to make sure that the stated amount will cover the realistic cost of replacing your mobile home. Check with local mobile home dealers to find out what similar homes sell for now.

How does the payment process work?

An adjuster will inspect the damage to your home and offer you a certain sum of money for repairs. The first check you get from your insurance company is often an advance against the total settlement amount. It is not the final payment.If you're offered an on-the-spot settlement, you can accept the check right away. Later on, if you find other damage, you can "reopen" the claim and file for an additional amount. Most policies require claims to be filed within one year from the date of disaster. Check with your state department of insurance.When both the structure of your home and personal belongings are damaged, you generally receive two separate checks from your insurance company, one for each category of damage. You should also receive a separate check for additional living expenses that you incur while your home is being renovated.

Structure
If you have a mortgage on your house, the check for repairs will generally be made out to both you and the mortgage lender. As a condition of granting a mortgage, lenders usually require that they are named in the homeowner’s policy and that they are a party to any insurance payments related to the structure.The lender gets equal rights to the insurance check to ensure that the necessary repairs are made to the property in which it has a significant financial interest. This means that the mortgage company or bank will have to endorse the check. Lenders generally put the money in an escrow account and pay for the repairs as the work is completed. You should show the mortgage lender your contractor's bid and let the lender know how much the contractor wants up front to start the job. Your mortgage company may want to inspect the finished job before releasing the funds for payment to the contractor.Some construction firms require you to sign a form that allows your insurance company to pay the firm directly. Make certain that you're completely satisfied with the repair work and that the job has been completed before you let the insurance company make the final payment. Remember, you won't receive a check for the repair job. The construction firm will bill your insurance company directly and attach the "direction to pay" form you signed.Bank regulators have guidelines for lenders to follow after a major disaster. If you have any questions contact your state banking department.

Personal belongings
The first step is to add up the cost of everything inside your home that has been damaged in the disaster. Now is the time to review your personal inventory, to help you remember the things you may have lost. If you don’t have an inventory, look for photographs or videotapes that picture the damaged areas. For expensive items, you may also contact your bank or credit card company for proof of purchase. When making your list, don’t forget items that may be damaged in out of the way places such as the attic or tops of closets.If you have a replacement cost policy, you will be reimbursed for the cost of buying new items. An actual cash value policy will reimburse you for the cost of the items minus depreciation. Regardless of which type of policy you have, the first check will be calculated on a cash value basis. Most insurance companies will require you to purchase the damaged item before they will reimburse you for its full replacement cost.If you have financed your home, your bank may have received a check for both repairs to your home and your possessions. If you don't get a separate check from your insurance company for your belongings, ask the lender to send the money to you immediately.If you have a replacement cost policy, you may be required to buy replacements for items damaged before your insurance company will compensate you. Make sure to keep receipts as proof of purchase.If you decide not to replace some items, in most cases you’ll be paid the depreciated or actual cash value of the items that were damaged. You don't have to decide what to do immediately.Your insurance company will generally allow you several months from the date of the cash value payment to replace the item. Ask your agent how many months you are allowed before you must replace your personal possessions. Some insurance companies supply lists of vendors that can help replace your property.

Additional
living expensesYour check for additional living expenses should be made out to you and not your lender. This money has nothing to do with repairs to your home and you may have difficulty depositing or cashing the check if you can't get the mortgage lender's signature. This money is designed to cover your expenses for hotels, car rentals and other expenses you may incur while your home is being fixed.

Options for rebuilding
If your home has been destroyed, you have several options:

• Rebuild your home on the same site.The amount of money you’ll have to rebuild your home depends on both the type of policy you bought and the dollar limit specified on the first “declarations” page of your policy. Generally, you are entitled to the replacement cost of your former home, providing that you spend that amount of money on the home you rebuild. Remember, your insurance policy will pay to rebuild your home as it was before the disaster. It won’t pay to build a bigger or more expensive house. A similar rule applies to repairs.
• Decide not to rebuild or to rebuild in a different location. The amount you’ll get from your insurer will be determined by your policy, state law, and what the courts have ruled on this matter. If you decide not to rebuild, review your policy and ask your insurance agent or company representative what the settlement amount will be.

How do I file a homeowners claim?

If someone has become injured on your property or if a violent storm destroys your home, you will need to file a claim with your insurance company. Remember, a homeowners policy is a contract between you and your insurance company. And there are rules and procedures that you and your insurer must follow. Read your insurance policy to see what your responsibilities are.

Report any crime to the police

If you are the victim of a theft or your home has been vandalized or burglarized, report it to the police. Get a police report and the names of all law enforcement officers that you speak with.

Phone your agent or company immediately

Insurance policies place a time limit on filing claims. Find out what the time limit is. Ask questions: Am I covered? Does my claim exceed my deductible? (Your deductible is the amount of loss you agree to pay yourself when you buy a policy.) How long will it take to process my claim? Will I need to obtain estimates for repairs to structural damage?

Make temporary repairs

Take reasonable steps to protect your property from further damage. Save receipts for what you spend and submit them to your insurance company for reimbursement.

Prepare a list of lost or damaged articles

You are going to need to substantiate your loss. Avoid throwing out damaged items until the adjuster has visited your home. You should also consider photographing or videotaping the damage. Prepare a home inventory, make a copy for your adjuster and supply him or her with copies of receipts from damaged items.

If you need to relocate, keep your receipts

If your home is severely damaged and you need to find other accommodations while repairs are being made, keep records of all additional expenses incurred. Most homeowners insurance policies provide coverage for the “loss of use” of your home.

Get claim forms

Once your insurance company has been notified of your claim, the company is required to send you the necessary claim forms to you by the end of a specified time period. (The time period varies from state to state.) Return the properly filled out forms as soon as possible in order to avoid delays.

Have an adjuster inspect the damage to your home

Your insurance company will probably arrange for an adjuster to come and inspect your home.Once you and your insurance company agree on the terms of your settlement, state laws require that you be sent payment promptly. In most cases, your claim will be processed quickly. If you have any questions about the claim filing laws in your state, call your insurance agent or your state department of insurance.

HELP! I HAVE TO FILE A CLAIM

• How do I file a homeowners claim?
• How does the payment process work?
• How is the settlement amount determined?
• What can I do if I am having trouble settling my claim?
• What is a public adjuster?
• How can I avoid scams after a disaster?

Should I purchase an umbrella liability policy?

If you are ever sued, your standard homeowners or auto policy will provide you with some liability coverage, paying for judgements against you and your attorney's fees, up to a limit set in the policy. However, in our litigious society, you may want to have an extra layer of liability protection. That's what a personal umbrella liability policy provides.

An umbrella policy kicks in when you reach the limit on the underlying liability coverage in a homeowners, renters, condo or auto policy. It will also cover you for things such as libel and slander.

For about $150 to $300 per year you can buy a $1 million personal umbrella liability policy. The next million will cost about $75, and $50 for every million after that.

Because the personal umbrella policy goes into effect after the underlying coverage is exhausted, there are certain limits that usually must be met in order to purchase this coverage. Most insurers will want you to have about $250,000 of liability insurance on your auto policy and $300,000 of liability insurance on your homeowners policy before selling you an umbrella liability policy for $1 million of additional coverage.

How often should I review my policy?

There are four events that should trigger a review of your policy:
1. When your policy comes up for renewal
Don’t just automatically send a check to your insurance company. Take the time to review your coverage and call your agent with any questions or concerns that you may have regarding your homeowners insurance. Ask yourself the following questions:

• Has the company made any changes in coverage since last year?
• Does my policy now include a separate deductible for risks like hurricane or hail?
• Should I raise the deductible to save money?
• Am I taking advantage of all available discounts?
• Do I need to raise the amount of coverage for liability, personal possessions or the structure?
• Should I comparison shop for a cheaper rate?
• Do I need flood, earthquake or an umbrella policy?

2. Major purchases or alterations/improvements to your home

If you have made any major purchases, make sure that you have the proper coverage. And, don’t forget about gifts. If you have received a diamond engagement ring or if a member of your family has bought you expensive artwork or a computer, talk to your agent about either increasing the amount of insurance you have for your personal possessions or purchasing a floater/endorsement for these items. A floater will give you higher and broader coverage for these items than you have under your homeowners policy.

If you have made major improvements to your home, such as adding a new room, enclosing a porch or expanding a kitchen or bathroom, you risk being underinsured if you don't report the increase in square footage to your insurance company. Don’t forget about new structures outside of your home. If you have built a gazebo, a new shed for your tools or installed a pool or hot tub, you need to speak to your agent. Keep receipts and records in case you need to forward copies to your company.

3. You have made your home safer

If you have installed a state-of-the art fire/burglar alarm system or upgraded your heating, plumbing or electrical system, make sure that your insurance company knows about these improvements. You may qualify for a discount.

4. Major lifestyle changes

Marriage, divorce, or adult children who move back into the family home, can all affect your homeowners insurance. When people move in or move out, they take their belongings with them. And you may need additional coverage if there is a sizable increase in the value of the belongings in your home. Starting a home-based business can also trigger changes in your coverage. You will need to get additional coverage for business liability and equipment. If the business is your primary source of income, you may need a Businessowners Package Policy (BOP). You may also need professional liability coverage, which is excluded under in-home business and businessowners policies. For more information, see Business Insurance.

What if I can't get coverage?

If you live in a home that is considered "high-risk" or plan to move to a high-risk location, you may have difficulty obtaining an insurance policy.

What constitutes high-risk?

• Your home is located in an area prone to severe weather such as hurricanes, windstorms, tornadoes or hail.
• You live in an urban area with high crime, vandalism and theft.
• Your home has an old plumbing, electrical and/or heating system—these represent a higher chance of causing fire or water damage.

If one or two insurers turn you down, don’t despair. You do have other options. If you are buying a new home, ask the real estate agent, mortgage lender or builder for names of companies that write in your area. If it’s an existing home, ask the previous owners who insured the house. If you still can’t find coverage, consider the following:

Ask for help from your current insurance professional.

Talk to the agent or company representative that previously insured your home or is currently insuring your car, boat or business. If the problem is not where the house is located, but the condition that it is in, find out what type of improvements or disaster-resistant features would be needed to make your home more insurable. The Institute for Business & Home Safety (IBHS) also provides information on natural hazards, community land use and ways you can protect your property from damage. It can be reached at http://www.ibhs.org

Talk to your neighbors and find out which insurers they use.

Get the names of any agents who may be knowledgeable about the specific risks in your neighborhood.

Call your state insurance department.

It can generally provide you with a list of insurers that write in your area. It might also have information regarding community groups that help homeowners with insurance problems such as the Neighborhood Reinvestment Corporation ( http://www.nw.org/nrc/ ).

If you still can’t get insurance, find out if your state has a special insurance plan known as shared market. Generally, two types of plans exist:

1. FAIR

PlansFair Access to Insurance Requirements (FAIR) Plans were created in the 1960s to make insurance available in areas that had abnormally high exposure to risks over which they had no control. These plans are insurance pools that sell property insurance to people who can’t get coverage in the voluntary market.

FAIR Plan policies may cost more than private insurance and may offer less coverage, but they offer insurance protection where none would otherwise exist. All FAIR Plans cover losses due to fire, vandalism, riot and windstorm. About a dozen states have some form of a standard homeowners policy, which includes liability. In California, the Plan covers brush fires. Georgia and New York provide wind and hail coverage for certain coastal communities. In order to qualify for FAIR Plan coverage, you must:

• Make improvements that limit the risk of fire, theft or water damage, such as upgrading your electrical wiring, heating or plumbing systems, repairing your roof or improving security.
• If you do not correct conditions that make your home prone to losses, the FAIR Plan administrator has the right to deny insurance coverage.

2. Beach and Windstorm Plans

In seven Atlantic and Gulf states, there is a counterpart to the FAIR Plans called Beach and Windstorm Plans. They provide residents and business owners, in designated areas, with coverage against hurricanes and other severe windstorms. Windstorm Plans in Florida, Mississippi, South Carolina and Texas offer coverage only against wind and hail damage. Plans in Alabama and North Carolina offer coverage for fire as well. In New York, the Coastal Market Assistance Plan helps homeowners get coverage if their application has been rejected by at least three private insurers.

What information do I need to provide to my agent?

Your agent will ask you what kind of home you own or rent, roughly how much your possessions are worth, and what kind of liability coverage you will need. The agent will also want to know how many people live in your household, what pets you own, and the general condition of your house. You should also tell him if you own any particularly valuable items that might need special coverage called a floater.

What does my credit rating have to do with purchasing insurance?

Credit scores are based on an analysis of an individual’s credit history. These scores are used for many purposes such as securing a loan, finding a place to live, getting a telephone and buying insurance. Insurers often generate a numerical ranking based on a person’s credit history, known as an “insurance score,” when underwriting and setting the rates for insurance policies. Actuarial studies show that how a person manages his or her financial affairs, which is what an insurance score indicates, is a good predictor of insurance claims. Insurance scores are used to help insurers differentiate between lower and higher insurance risks and thus charge a premium equal to the risk they are assuming. Statistically, people who have a poor insurance score are more likely to file a claim.

As a result, establishing a solid credit history can cut your insurance costs. To protect your credit standing, pay your bills on time, don’t obtain more credit than you need, and keep the balances on your credit cards as low as possible—ideally, try to pay off the bill in full each month. Also, check your credit record regularly, and request that any errors be corrected immediately so that your record remains accurate.

The Fair Credit Reporting Act (FCRA) requires each of the nationwide consumer reporting companies—Equifax, Experian, and TransUnion—to provide you with a free copy of your credit report, at your request, once every 12 months. For more information, go to the Federal Trade Commission’s Web site on credit.

How can I save money?

The price you pay for your homeowners insurance can vary by hundreds of dollars, depending on the size of your house and the insurance company you buy your policy from. Here are some ways to save money.

Shop around

Prices vary from company to company, so it pays to shop around. Get at least three price quotes. You can call companies directly or access information on the Internet. Your state insurance department may also provide comparisons of prices charged by major insurers. Check the financial health of insurance companies by using ratings from independent rating agencies and consulting consumer magazines. Get quotes from different types of insurance companies.

Some sell through their own agents. These agencies have the same name as the insurance company. Some sell through independent agents who offer policies from several insurance companies. Others do not use agents. They sell directly to consumers over the phone or via the Internet. But don't shop price alone. You want a company that answers your questions and handles claims fairly and efficiently. Ask friends and relatives for their recommendations.

Contact your state insurance department to find out whether they make available consumer complaint ratios by company. Select an agent or company representative that takes the time to answer your questions. Remember, you'll be dealing with this company if you have an accident or other emergency.

Raise your deductible

A deductible is the amount of money you have to pay toward a loss before your insurance company starts to pay a claim. The higher your deductible, the more money you save on your premium. Consider a deductible of at least $500. If you can afford to raise it to $1,000, you may save as much as 25 percent. If you live in a disaster-prone area, your insurance policy may have a separate deductible for damage from major disasters.

If you live near the coast in the East, you may have a separate windstorm deductible, if you live in a state vulnerable to hail storms, you may have a separate deductible for hail, and if you live in an earthquake-prone area, your earthquake policy may have a deductible.

Buy your home and auto policies from the same insurer

Most companies that sell homeowners insurance also sell auto and umbrella liability insurance. (An umbrella liability policy will give you extra liability coverage.) Some insurance companies will reduce your premium by 5 percent to 15 percent if you buy two or more insurance policies from them. But make certain this combined price is lower than buying the coverages from different companies

Make your home more disaster-resistant

Find out from your insurance agent or company representative what you can do to make your home more resistant to windstorms and other natural disasters. You may be able to save on your premiums by adding storm shutters and shatter-proof glass, reinforcing your roof or buying stronger roofing materials. Older homes can be retrofitted to make them better able to withstand earthquakes. In addition, consider modernizing your heating, plumbing and electrical systems to reduce the risk of fire and water damage.

Don't confuse what you paid for your house with rebuilding costs

The land under your house isn't at risk from theft, windstorm, fire and the other perils covered in your homeowners policy. So don't include its value in deciding how much homeowners insurance to buy. If you do, you'll pay a higher premium than you should.

Ask about discounts for home security devices

You can usually get discounts of at least 5 percent for a smoke detector, burglar alarm or dead-bolt locks. Some companies may cut your premiums by as much as 15 or 20 percent if you install a sophisticated sprinkler system and a fire and burglar alarm that rings at the police, fire or other monitoring stations. However, these systems aren't cheap and not every system qualifies for a discount. Before you buy one, find out what kind your insurer recommends, how much the device would cost and how much you'd save on premiums.

Seek out other discounts

Many companies offer discounts, but they don't all offer the same types of discounts or the same level of discount in all states. Ask your agent or company representative about discounts available to you. For example, if you're at least 55 years old and retired, you may qualify for a discount of up to 10 percent at some companies. If you've completely modernized your plumbing or electrical system recently, some companies may also provide a price break.

See if you can get group coverage

Does your employer administer a group insurance program? Check to see if a homeowners policy is available and is a better deal than you can find elsewhere. In addition, professional, alumni and business groups may offer an insurance package at a reduced price.

Stay with the same insurer

If you've been insured with the same company for several years, you may receive a discount for being a long-term policyholder. Some insurers will reduce premiums by 5 percent if you stay with them for three-to-five years and by 10percent if you're a policyholder for six years or more. To ensure you're getting a good deal, periodically compare this price with the prices of policies from other insurers.

Review policy limits and the value of your possessions annually

You want your policy to cover any major purchases or additions to your home. But you don't want to spend money for coverage you don't need. If your five-year-old fur coat is no longer worth the $5,000 you paid for it, you'll want to reduce or cancel your floater (extra insurance for items whose full value is not covered by standard homeowners policies) and pocket the difference.

Look for private insurance if you are in a government plan

If you live in a high-risk area—one that is especially vulnerable to coastal storms, fires or crime—and you've been buying your homeowners insurance through a government plan, find out from insurance agents, company representatives or your state department of insurance which insurance companies might be interested in your business. You may find there are steps you can take that will allow you to buy insurance at a lower price in the private market.

When you're buying a home, consider the cost of homeowners insurance

The price you pay for homeowners insurance depends in part on the cost of rebuilding your home and the likelihood that it will be damaged by natural disasters or that it will burn down. You may pay less if you buy a house close to a fire hydrant or in a community that has a professional rather than a volunteer fire department. You may also pay less if your home’s electrical, heating and plumbing systems are less than 10 years old. If you live in the East, consider a brick home because it's more wind-resistant. If you live in an earthquake-prone area, look for a wooden frame house because it is more likely to withstand this type of disaster. Choosing wisely could cut your premiums by 5 percent to 15 percent.

Remember that flood and earthquake damage are not covered by a standard homeowners policy. If you buy a house in a flood-prone area, you'll have to pay for a flood insurance policy that costs an average of $400 a year. The National Flood Insurance Program provides useful information on flood insurance on its Web site at http://www.floodsmart.gov/ . A separate earthquake policy is available from most insurance companies. The cost of the coverage will depend on the likelihood of earthquakes in your area and the construction features.If you have questions about insurance for any of your possessions, be sure to ask your agent or company representative. For example, if you run a business out of your home, be sure you have adequate coverage. Most homeowners policies cover business equipment in the home, but only up to $2,500 and they offer no business liability insurance. For more information, see Business Insurance.

How much will it cost?

There are many factors an insurance company uses to determine the price of your policy:

• The square footage of the house and any additional structures.


• Building costs in your area.


• Your home's construction, materials and features.


• Amount of crime in your neighborhood.


• The likelihood of damage from natural disasters, such as hurricanes and hail storms.


• The proximity of your home to a fire hydrant (or other source of water) and to a fire station, whether your community has a professional or volunteer fire service and other factors that can affect the time it takes to put out fires.


• The condition of the plumbing, heating and electrical system.

If you rent your home or own a condo or co-op, your insurer will not consider the size of the dwelling or building costs. However, the insurance company will take into account factors that make damage to your possessions more likely.

How do I pick an insurance company?

There are many insurance companies, so choosing between them can be a challenge. Here are the main points to keep in mind when selecting an insurance company:

• Licensing -- Not every company is licensed to operate in each state. As a general rule, you should buy from a company licensed in your state, because then can you rely on your state insurance department to help if there’s a problem. To find out which companies are licensed in your state, contact the state insurance department.


• PriceMany -- companies sell insurance policies and prices vary greatly from one to another, so it really pays to shop around. Get at least three price quotes from companies, agents and from the Internet. Your state insurance department may publish a guide that shows what insurers charge for different policies in various parts of your state.


• Financial Solidity -- You buy insurance to protect you financially and provide peace of mind. Select a company that is likely to be financially sound for many years, by using ratings from independent rating agencies.


• Service -- Your insurance company and its representatives should answer your questions and handle your claims fairly, efficiently and quickly. You can get a feel for whether this is the case by talking to other customers who have used a particular company or agent. You may also want to check a national claims database to see what complaint information it has on a company. Also, your state insurance department will be able to tell you if the insurance company you are considering doing business with had many consumer complaints about its service relative to the number of policies it sold.


• Comfort -- You should feel comfortable with your insurance purchase, whether you buy it from a local agent, directly from the company over the phone, or over the Internet. Make sure that the agent or company will be easy to reach if you have a question or need to file a claim.

Where can I buy insurance?

You can buy insurance through your local insurance agent and through insurance companies that sell through their own employees, over the phone, by mail and over the Internet. Consult your state insurance department, the yellow pages of your phone book, and friends or relatives for the names of insurance companies doing business in your state.

In most states, there are dozens, sometimes hundreds of companies to choose from, depending on the type of insurance you're looking for. You can go to our Find an Insurance Company tool for help.

I’m installing a pool—what kind of insurance do I need?

Pools and Insurance

All pools—from a simple above-ground kiddy pool to an aquatic extravaganza—can be dangerous and need to be properly insured and comply with local safety standards.According to the Center for Disease Control, over 3,200 people drown each year. Among children, ages one to four, most drowned in residential swimming pools. Most of these young children had been out of sight for less than five minutes and were in the care of one or both parents at the time.

If you plan to purchase a pool, the I.I.I. suggests that you:

• Contact your town or municipality

Each town will have its own definition of a “pool,” often based on its size and water depth. If the pool you are planning to buy meets the definition, then you must comply with local safety standards and building codes. This may include installing a fence of a certain size, locks, decks and pool safety equipment.

• Call your insurance agent or company representative

Let your insurance company know that you have a pool, since it will increase your liability risk. Pools are considered an “attractive nuisance” and it may be advisable to purchase additional liability insurance. Most homeowners policies include a minimum of $100,000 worth of liability protection. Pool owners, however, may want to consider increasing the amount to $300,000 or $500,000.

You may want to talk to your agent or company representative about purchasing an umbrella liability policy. For an additional premium of about $200 to $300 a year, you get $1 million of liability protection over and above what you have on your home. It would also provide added liability protection when you drive. If the pool itself is expensive, or if you decide to install an in-ground structure, you should also have enough insurance protection to replace it in the event it is destroyed by a storm or other disaster.

Pool Saftey Tips

Here are some pool safety tips you should follow:

1. Put fencing around the pool area to keep people from using the pool without your knowledge. In addition to the fences or other barriers required by many towns, consider creating “layers of protection” around the pool, i.e. setting up as many barriers as possible (door alarms, locks and safety covers) to the pool area when not in use.
2. Never leave small children unsupervised—even for a few seconds. And never leave toys or floats in the pool when not in use as they may prove to be a deadly temptation for toddlers trying to reach them.
3. Keep children away from pool filters and other mechanical devices as the suction force may injure them or prevent them from surfacing. In case of an emergency, know how to shut off these devices and clearly post this information for easy use.
4. Be sure all pool users know how to swim. Learners should be accompanied by a good swimmer. If you have children, have them take swimming lessons as early as possible.
5. Don’t swim alone or allow others to swim alone.
6. Check the pool area regularly for glass bottles, toys or other potential accident hazards.
7. Keep CD players, radios and other electrical devices away from pools or nearby wet surfaces.
8. Don’t allow anyone who has been drinking alcohol to use the pool.
9. Pay attention to the weather. Excessive heat can cause dizziness, which can dangerous around a pool. And never swim during rain or lightning storms.
10. Never dive into an above-ground pool and check the water depth before plunging into an in-ground pool. Keep clear of the area near a diving board.
11. Don’t swim if you’re tired or have just finished eating.
12. In the event of an accident, clearly post emergency numbers on the phone. Keep a first aid kit, ring buoys and reaching poles near the pool. You may also want to consider basic first aid and CPR training.

Do I need separate coverage for jewelry?

A standard homeowners policy includes coverage for jewelry and other precious items such as watches and furs. These items are covered for losses caused by all the perils included in your policy such as fire, windstorm, theft and vandalism.

However, there are special limits of liability for certain items, meaning that the insurer will not pay more than the amount specified in the policy. One important limit is for the theft of jewelry. To keep coverage affordable because jewelry can be easily stolen, the standard policy has a relatively low limit of liability for theft: $1,500.

If you own valuable jewelry, there are two ways you can increase coverage: by raising the limit of liability or “scheduling” your individual pieces through the purchase of “floater” policies. Raising the limit of liability is the cheapest option; however, there may be a limit on the amount you can claim for the loss of any individual piece, say $2,000, when the overall limit is $5,000.

Scheduling each piece may cost more in premiums, but it offers broader protection because the floater covers losses of any type, including accidental losses—such as dropping your ring down the drain of the kitchen sink or leaving it in a hotel room—that your homeowners insurance policy will not cover. Before purchasing a floater, the items covered must be professionally appraised. The cost of this service varies by county or region according to the risk of theft.

How much homeowners insurance do I need?

You need enough insurance to cover the following:

1. The structure of your home.
2. Your personal possessions.
3. The cost of additional living expenses if your home is damaged and you have to live elsewhere during repairs.
4. Your liability to others.

The structure

You need enough insurance to cover the cost of rebuilding your home at current construction costs. Don't include the cost of the land. And don't base your rebuilding costs on the price you paid for your home. The cost of rebuilding could be more or less than the price you paid or could sell it for today.

Some banks require you to buy homeowners insurance to cover the amount of your mortgage. If the limit of your insurance policy is based on your mortgage, make sure it's enough to cover the cost of rebuilding. (If your mortgage is paid off, don't cancel your homeowners policy. Homeowners insurance protects your investment in your home.)

For a quick estimate of the amount of insurance you need, multiply the total square footage of your home by local building costs per square foot. To find out construction costs in your community, call your local real estate agent, builders association or insurance agent.

Factors that will determine the cost of rebuilding your home:

• Local construction costs
• The square footage of the structure
• The type of exterior wall construction–frame, masonry (brick or stone) or veneer
• The style of the house (ranch, colonial)
• The number of bathrooms and other rooms
• The type of roof and materials used
• Other structures on the premises such as garages, sheds
• Fireplaces, exterior trim and other special features like arched windows
• Whether the house, or parts of it like the kitchen, was custom built
• Improvement to your home–adding a second bathroom, enlarging the kitchen or other additions that have added value to your home

Standard homeowners policies provide coverage for disasters such as damage due to fire, lightning, hail, explosions and theft. They do not cover floods, earthquakes or damage caused by lack of routine maintenance.

Flood insurance is available from the Federal Insurance Administration ( http://www.fema.gov ) and earthquake coverage is available from private insurance companies or, in California, also through the California Earthquake Authority ( http://www.earthquakeauthority.com )

Replacement cost policies

Most policies cover replacement cost for damage to the structure. A replacement cost policy pays for the repair or replacement of damaged property with materials of similar kind and quality. There is no deduction for depreciation–the decrease in value due to age, wear and tear, and other factors. If you purchase a flood insurance policy, coverage for the structure is available on a replacement cost basis.

Guaranteed or extended replacement cost coverage

After a major hurricane or a tornado, building materials and construction workers are often in great demand. This can push rebuilding costs above homeowners policy limits, leaving you without enough money to cover the bill. To protect against such a situation, you can buy a policy that pays more than the policy limits. An extended replacement cost policy will pay an extra 20 percent or more above the limits, depending on the insurance company. A guaranteed replacement cost policy will pay whatever it costs to rebuild your home as it was before the fire or other disaster.

Building codes

Building codes are updated periodically and may have changed significantly since your home was built. If your home is badly damaged, you may be required to rebuild your home to meet new building codes. Generally, homeowners insurance policies (even a guaranteed replacement cost policy) won't pay for the extra expense of rebuilding to code. Many insurance companies offer an Ordinance or Law endorsement that pays a specified amount toward these costs. (An endorsement is a form attached to an insurance policy that changes what the policy covers.)

Inflation guard

Consider adding an inflation guard clause to your policy. This automatically adjusts the dwelling limit when you renew your policy to reflect current construction costs in your area.

Older homes

If you own an older home, you may not be able to buy a replacement cost policy. Instead, you may have to buy a modified replacement cost policy. This means that instead of repairing or replacing features typical of older homes, like plaster walls and wooden floors, with similar materials, the policy will pay for repairs using the standard building materials and construction techniques in use today. Insurance companies differ greatly in how they insure older homes. Some won't insure older homes for the replacement cost because of the expense of re-creating special features like wall and ceiling moldings and carvings. Other companies will insure older homes for the replacement cost as long as the dwelling is in good condition. If you can't insure your home for the replacement cost or choose not to do so–in some cases, the cost of replacing a large old home is so high that you might not want to replace it with a house of the same size–make sure the limits of the policy are high enough to provide you with a house of acceptable size and quality.

Your personal possessions

Most homeowners insurance policies provide coverage for your personal possessions for approximately 50 percent to 70 percent of the amount of insurance you have on the structure or “dwelling” of your home. The limits of the policy typically appear on the Declarations Page under Section I, Coverages, A. Dwelling. To determine if this is enough coverage, you need to conduct a home inventory. This is a detailed list of everything you own and information related to the cost to replace these items if they were stolen or destroyed by a disaster such as a fire (for more information see How do I take a home inventory and why). If you think you need more coverage, contact your agent or insurance company representative and ask for higher limits for your personal possessions.

Replacement Cost or Actual Cash Value

You can either insure your belongings for their actual cash value, which pays to replace your home or possessions minus a deduction for depreciation up to the limit of your policy. Or you can opt for replacement cost, which pays the actual cost of replacing your home or possessions (no deduction for depreciation) up to the limit of your policy.

Suppose, for example, a fire destroys a 10-year-old TV set in your living room. If you have a replacement cost policy for the contents of your home, the insurance company will pay to replace the TV set with a new one. If you have an actual cash value policy, it will pay only a percentage of the cost of a new TV set because the TV has been used for 10 years and is worth a lot less than its original cost. Some replacement cost policies also replace the item and deliver it to you.Generally, the price of replacement cost coverage is about 10 percent more than that of actual cash value. If you need a flood insurance policy for your belongings, it is only available on an actual cash value basis.

Insuring expensive items with floaters/endorsements

There may be limits on how much coverage you get for expensive items such as jewelry, silverware and furs. Generally, there is a limit on jewelry for $1,000 to $2,000. You should ask your agent or look it up in your policy. This information is in Section I, Personal Property, Special Limits of Liability. Insurance companies may also place a limit on what they will pay for computers. If the limits are too low, consider buying a special personal property floater or an endorsement. These allow you to insure these items individually or as a collection. With floaters and endorsements, there is no deductible. You are charged a premium based on what the item (or collection) is, its dollar value and where you live.You can determine the value by providing your agent with a recent receipt or getting the item or collection appraised.

Additional living expenses after a disaster

This is a very important feature of a standard homeowners insurance policy. This pays the additional costs of temporarily living away from your home if you can't live in it due to a fire, severe storm or other insured disaster. It covers hotel bills, restaurant meals and other living expenses incurred while your home is being rebuilt. Coverage for additional living expenses differs from company to company. Many policies provide coverage for about 20% of the insurance on your house. Some companies will even sell you a policy that provides you with an unlimited amount of loss of use coverage, for a limited amount of time. If you rent out part of your house, this coverage also reimburses you for the rent that you would have collected from your tenant if your home had not been destroyed.You should talk to your agent or company to make sure you know exactly how much coverage you have and how long the coverage will be in effect. In most cases, you can increase this coverage for an additional premium.

Liability to others

This part of your policy covers you against lawsuits for bodily injury or property damage that you or family members cause to other people. It also pays for damage caused by pets. It pays for both the cost of defending you in court and for any damages a court rules you must pay. Generally, most homeowners insurance policies provide a minimum of $100,000 worth of liability insurance, but higher amounts are available. Increasingly, it is recommended that homeowners consider purchasing at least $300,000 to $500,000 worth of coverage of liability protection.

Umbrella or Excess Liability.

You should buy enough liability insurance to protect your assets. If you own property and or have investments and savings that are worth more than the liability limits in your policy, you may consider purchasing an excess liability or umbrella policy. Umbrella or excess liability policies provide extra coverage. They start to pay after you have used up the liability insurance in your underlying home (or auto) policy. An umbrella policy is not part of your homeowners policy. You have to purchase it separately. In addition to providing a higher dollar amount, they offer broader coverage. You are covered for libel, slander, and invasion of privacy. These things are not covered under standard homeowners or auto policies.The cost of an umbrella policy depends on how much underlying insurance you have and the kind of risk you represent. The greater the underlying liability coverage, the cheaper the policy. This is becaue you would be the less likely to need the additional insurance. Most companies will require a minimum of $300,000 on your home and your car, if you own one.

BUYING AND SAVING MONEY

• How much homeowners insurance do I need?
• Do I need separate coverage for jewelry?
• I’m installing a pool—what kind of insurance do I need?
• Where can I buy insurance?
• How do I pick an insurance company?
• How much will it cost?
• How can I save money?
• What does my credit rating have to do with purchasing insurance?
• What information do I need to provide to my agent?
• What if I can't get coverage?
• How often should I review my policy?
• Should I purchase an umbrella liability policy?

What's the difference between cancellation and nonrenewal?

There is a big difference between an insurance company canceling a policy and choosing not to renew it. Insurance companies cannot cancel a policy that has been in force for more than 60 days except when:

• You fail to pay the premium
• You have committed fraud or made serious misrepresentations on your application.

Nonrenewal is a different matter. Either you or your insurance company can decide not to renew the policy when it expires. Depending on the state you live in, your insurance company must give you a certain number of days' notice and explain the reason for not renewing before it drops your policy. If you think the reason is unfair or want a further explanation, call the insurance company's consumer affairs division. If you don't get a satisfactory explanation, call your state insurance department.

The company may have decided to drop that particular line of insurance or to write fewer policies where you live, so the nonrenewal decision may not be because of something you did. On the other hand, if you did do something that raised the insurance company's risk considerably, like committing fraud, the premium may rise or you may not have your policy renewed.

If your insurance company did not renew your policy, you will not necessarily be charged a higher premium at another insurance company.

How do I take a home inventory and why?

Would you be able to remember all the possessions you’ve accumulated over the years if they were destroyed by a fire? Having an up-to-date home inventory will help you get your insurance claim settled faster, verify losses for your income tax return and help you purchase the correct amount of insurance.

Start by making a list of your possessions, describing each item and noting where you bought it and its make and model. Clip to your list any sales receipts, purchase contracts, and appraisals you have. For clothing, count the items you own by category -- pants, coats, shoes, for example –- making notes about those that are especially valuable. For major appliance and electronic equipment, record their serial numbers usually found on the back or bottom.

• Don't be put off! If you are just setting up a household, starting an inventory list can be relatively simple. If you’ve been living in the same house for many years, however, the task of creating a list can be daunting. Still, it’s better to have an incomplete inventory than nothing at all. Start with recent purchases and then try to remember what you can about older possessions.
• Big ticket items Valuable items like jewelry, art work and collectibles may have increased in value since you received them. Check with your agent to make sure that you have adequate insurance for these items. They may need to be insured separately.
• Take a picture Besides the list, you can take pictures of rooms and important individual items. On the back of the photos, note what is shown and where you bought it or the make. Don’t forget things that are in closets or drawers.
• Videotape it Walk through your house or apartment videotaping and describing the contents. Or do the same thing using a tape recorder.
• Use a personal computer Use your PC to make your inventory list. Personal finance software packages often include a homeowners room-by-room inventory program.
• Storing the list, photos and tapes Regardless of how you do it (written list, floppy disk, photos, videotape or audio tape), keep your inventory along with receipts in your safe deposit box or at a friend's or relative's home. That way you’ll be sure to have something to give your insurance representative if your home is damaged. When you make a significant purchase, add the information to your inventory while the details are fresh in your mind.

Can I get insurance if I rent my home?

Renters insurance provides financial protection against the loss or destruction of your possessions when you rent a house or apartment. While your landlord may be sympathetic to a burglary you have experienced or a fire caused by your iron, destruction or loss of your possessions is not usually covered by your landlord’s insurance. Because in most cases, renters insurance covers only the value of your belongings, not the physical building, the premium is relatively inexpensive.

By purchasing renters insurance, your possessions are covered against losses from fire or smoke, lightning, vandalism, theft, explosion, windstorm and water damage (not including floods). Like homeowners insurance, renters insurance also covers your responsibility to other people injured at your home or elsewhere by you, a family member or your pet and pays legal defense costs if you are taken to court.

Renters insurance covers your additional living expenses if you are unable to live in your apartment because of a fire or other covered peril. Most policies will reimburse you the difference between your additional living expenses and your normal living expenses but still may set limits as to the amount they will pay.

There are two types of renters insurance policies you may purchase:

1. Actual Cash Value – pays to replace your possessions minus a deduction for depreciation up to the limit of your policy
2. Replacement Cost – pays the actual cost of replacing your possessions (no deduction for depreciation) up to the limit of your policy

With either policy, you may want to consider purchasing a floater. A standard renters policy offers only limited coverage for items such as jewelry, silver, furs, etc. If you own property that exceeds these limits, it is recommended that you supplement your policy with a floater. A floater is a separate policy that provides additional insurance for your valuables and covers them for perils not included in your policy such as accidental loss.

Can I own a home without homeowners insurance?

Unlike driving a car, you can legally own a home without homeowners insurance. But, if you have bought your home and financed the purchase with a mortgage, your lender will most likely require you to get homeowners insurance coverage. That’s because lenders need to protect their investment in your home in case your house burns down or is badly damaged by a storm, tornado or other disaster.

If you live in an area that is likely to flood, the bank will also require you to purchase flood insurance. Some financial institutions may also require earthquake coverage if you live in a region vulnerable to earthquakes. If you buy a co-op or condominium, your board will probably require you to buy homeowners insurance.

After your mortgage is paid off, no one will force you to buy homeowners insurance. But it is not advisable to cancel your policy and risk losing what you’ve invested in your home.

What type of disasters are covered?

Most homeowners policies cover all disasters listed below. Some policies provide coverage only for the first 10 listed. Check your insurance policies for the "perils" covered.





Disasters not covered

1. Floods You can purchase flood coverage directly from your homeowners insurance agent. However, the policy is provided by the Federal Flood Insurance Program ( 888-379-9531, http://www.floodsmart.gov/ ). You can get replacement cost coverage for the structure of your home, but only actual cash value coverage is available for your possessions. There may also be limits on coverage for furniture and other possessions stored in your basement. Flood insurance is available for renters as well as homeowners. You will need flood insurance if you live in a designated flood zone. But also consider buying it if your house could be flooded by melting snow, an overflowing creek or water running down a steep hill. Don’t wait until the evening news announces a flood season warning to buy a policy. There is a 30-day waiting period before coverage takes effect.
   
2. Earthquakes Earthquake coverage can be a separate policy or an endorsement to your homeowners or renters policy. It available from most insurance companies. In California, it is also available from the California Earthquake Authority ( http://www.earthquakeauthority.com/ ). In earthquake prone states like California, the policy comes with a high deductible.
   
3. Maintenance damage It is your responsibility to take reasonable precautions to protect your home from damage. Your insurance policy will not cover damage due to lack of maintenance, mold, termite infestation and infestation from other pests.

Does my homeowners insurance cover flooding?

Standard homeowners policies do NOT cover flooding. You can purchase flood coverage directly through your homeowners insurance agent. However, the policy is provided by the Federal Flood Insurance Program ( 888-379-9531, http://www.floodsmart.gov ).

Replacement cost coverage is available for the structure of your home, but only actual cash value coverage is available for your possessions. Replacement cost coverage pays to rebuild your home as it was before the damage. Actual cash value is replacement cost coverage minus depreciation so that the older your possessions are, the less you will get if they are damaged. There may also be limits on coverage for furniture and other belongings stored in your basement.

Flood insurance is available for renters as well as homeowners. You will need flood insurance if you live in a designated flood zone. But flooding can also occur in inland areas and away from major rivers. Consider buying a flood insurance policy if your house could be flooded by melting snow, an overflowing creek or pond or water running down a steep hill. Don’t wait for a flood season warning on the evening news to buy a policy—there is a 30-day waiting period before the coverage takes effect.

The federal flood insurance program provides only limited coverage. If you need more coverage than the federal program provides, additional coverage known as “excess” flood insurance is available from specialized insurance companies. Depending on the amount of coverage purchased, an excess flood insurance policy will cover damage above the limits of the federal program on the same basis as the federal program—replacement cost for the structure and actual cash value for the contents.

Excess flood insurance is available in all parts of the country—in high risk flood zones along the coast and close to major rivers as well as in areas of lower risk—wherever the federal program is available. It can be purchased from specialized companies such as Lexington Insurance Company, part of American International Insurance Company, and Lloyd’s through independent insurance agents, or from regular homeowners insurance companies that have arrangements with a specialized insurer to provide coverage to their policyholders.

What type of insurance do I need for a co-op or condo?

If you have purchased a condo or co-op, the bank will require insurance to protect its investment in your home. You may, however, need more insurance to cover your personal items, liability or fees that may be charged to you regarding shared areas of the building like the lobby.

You will need two separate policies to protect your investment:

1. Your own insurance policy.This provides coverage for your personal possessions, structural improvements to your apartment and additional living expenses if you are the victim of fire, theft or other disaster listed in your policy. You also get liability protection.
2. A "master policy" provided by the condo/co-op board.This covers the common areas you share with others in your building like the roof, basement, elevator, boiler and walkways for both liability and physical damage.

To adequately insure your apartment, it is important to know which structural parts of your home are covered by the condo/co-op association and which are not. You can do this by reading your association’s bylaws and/or proprietary lease. If you have questions, talk to your condo association, insurance professional or family attorney.

Sometimes the association is responsible for insuring the individual condo or co-op units, as they were originally built, including standard fixtures. The individual owner, in this case, is only responsible for alterations to the original structure of the apartment, like remodeling the kitchen or bathtub. Sometimes this includes not only improvements you make, but those made by previous owners.

In other situations, the condo/co-op association is responsible only for insuring the bare walls, floor and ceiling. The owner must insure kitchen cabinets, built-in appliances, plumbing, wiring, bathroom fixtures etc.

Also ask your insurance professional about the following additional coverages:

1. Unit assessmentThis reimburses you for your share of an assessment charged to all unit owners as a result of a covered loss. For instance, if there is a fire in the lobby, all the unit owners are charged the cost of repairing the loss.
2. Water back-upThis insures your property for damage by the back-up of sewers or drains. Water back-up may not always be included in a policy. Check to see that it is included.
3. Umbrella liabilityThis is an inexpensive way to get more liability protection and broader coverage than is included in a standard condo/co-op policy.
4. Flood or earthquakeIf you live in an area prone to these disasters, you will need to purchase seperate flood and earthquake policies. Flood insurance is available through FEMA's National Flood Insurance Program ( http://www.floodsmart.gov/floodsmart/pages/index.jsp ). Both flood and earthquake insurance can be purchased through your insurance agent.
5. Floater or endorsementIf you own expensive jewelry, furs or collectibles, you might consider getting additional coverage since there is generally a $1,000 to $2,000 limit for theft of jewelry on a standard policy.

When purchasing insurance, it is important to find an agent or company that specializes in condominiums or co-ops. Also don’t forget to ask about all available discounts. You can reduce your rates by raising your deductibles and by installing a smoke and fire alarm system that rings at an outside service. If you insure your unit with the same company that underwrites your building’s insurance policy, you might also get an additional reduction in premiums.

Are there different types of policies?

Yes. A person who owns his or her home would have a different policy from someone who rents. Policies also differ on the amount of insurance coverage provided.

The different types of homeowners policies are fairly standard throughout the country. However, individual states and companies may offer policies that are slightly different or go by other names such as “standard” or “deluxe”. The one exception is the state of Texas, where policies vary somewhat from policies in other states. The Texas Insurance Department ( http://www.tdi.state.tx.us/ ) has detailed information on its various homeowners policies.

The chart below lists the disasters covered in each of the following types of policies:

If you own your home

If you own the home you live in, you have several policies to choose from. The most popular policy is the HO-3, which provides the broadest coverage. Owners of multi-family homes generally purchase an HO-3 with an endorsement to cover the risks associated with having renters live in their homes.

HO-1: Limited coverage policy This “bare bones” policy covers you against the first 10 disasters. It's no longer available in most states.

HO-2: Basic policyA basic policy provides protection against all 16 disasters. There is a version of HO-2 designed for mobile homes.

HO-3: The most popular policy This “special” policy protects your home from all perils except those specifically excluded. (Click on the link below for a sample HO-3 form; you will need Acrobat which you can download, free of charge, from the Adobe Web site: http://www.adobe.com/products/acrobat/).

HO-8: Older home Designed for older homes, this policy usually reimburses you for damage on an actual cash value basis which means replacement cost less depreciation. Full replacement cost policies may not be available for some older homes.

If you rent your home

HO4-RenterCreated specifically for those who rent the home they live in, this policy protects your possessions and any parts of the apartment that you own, such as new kitchen cabinets you install, against all 16 disasters.

If you own a co-op or a condo

H0-6: condo/co-opA policy for those who own a condo or co-op, it provides coverage for your belongings and the structural parts of the building that you own. It protects you against all 16 disasters.

Your level of coverage

Regardless of whether you are an owner or renter, you have the following three options:

• Actual cash value. This type of policy pays to replace your home or possessions minus a deduction for depreciation.
• Replacement cost. The policy pays the cost of rebuilding/repairing your home or replacing your possessions without a deduction for depreciation.
• Guaranteed or extended replacement cost. This policy offers the highest level of protection. A guaranteed replacement cost policy pays whatever it costs to rebuild your home as it was before the fire or other disaster–even if it exceeds the policy limit. This gives you protection against sudden increases in construction costs due to a shortage of building materials after a widespread disaster or other unexpected situations. It generally won't cover the cost of upgrading the house to comply with current building codes. You can, however, get an endorsement (or an addition to) your policy called Ordinance or Law to help pay for these additional costs. A guaranteed replacement cost policy may not be available if you own an older home.

Some insurance companies offer an extended, rather than a guaranteed replacement cost policy. An extended policy pays a certain percentage over the limit to rebuild your home. Generally, it is 20 to 25 percent more than the limit of the policy. For example, if you took out a policy for $100,000, you could get up to an extra $20,000 or $25,000 of coverage.

Even though a guaranteed/extended replacement cost policy may be a bit more expensive, it offers the best financial protection against disasters for your home. These coverages, however, may not be available in all states or from all companies.

What is in a standard homeowners insurance policy?

A standard homeowners insurance policy includes four essential types of coverage. They include:

1. Coverage for the structure of your home.
2. Coverage for your personal belongings.
3. Liability protection.
4. Additional living expenses in the event you are temporarily unable to live in your home because of a fire or other insured disaster.

The structure of your house

This part of your policy pays to repair or rebuild your home if it is damaged or destroyed by fire, hurricane, hail, lightning or other disaster listed in your policy. It will not pay for damage caused by a flood, earthquake or routine wear and tear. When purchasing coverage for the structure of your home, it is important to buy enough to rebuild your home.Most standard policies also cover structures that are detached from your home such as a garage, tool shed or gazebo. Generally, these structures are covered for about 10% of the amount of insurance you have on the structure of your home. If you need more coverage, talk to your insurance agent about purchasing more insurance.

Your personal belongings

Your furniture, clothes, sports equipment and other personal items are covered if they are stolen or destroyed by fire, hurricane or other insured disaster. Most companies provide coverage for 50% to 70% of the amount of insurance you have on the structure of your home. So if you have $100,000 worth of insurance on the structure of your home, you would have between $50,000 to $70,000 worth of coverage for your belongings. The best way to determine if this is enough coverage is to conduct a home inventory.This part of your policy includes off-premises coverage. This means that your belongings are covered anywhere in the world, unless you have decided against off-premises coverage. Some companies limit the amount to 10% of the amount of insurance you have for your possessions. You have up to $500 of coverage for unauthorized use of your credit cards.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 $2,000 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 it's appraised value. Coverage includes “accidental disappearance,” meaning coverage if you simply lose that item. And there is no deductible. Trees, plants and shrubs are also covered under standard homeowners insurance. Generally you are covered for 5% of the insurance on the house—up to about $500 per item. Perils covered are theft, fire, lightning, explosion, vandalism, riot and even falling aircraft. They are not covered for damage by wind or disease.

Liability protection

Liability covers you against lawsuits for bodily injury or property damage that you or family members cause to other people. It also pays for damage caused by your pets. So, if your son, daughter or dog accidentally ruins your neighbor’s expensive rug, you are covered. However, if they destroy your rug, you are not covered.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.Liability limits generally start at about $100,000. However, experts recommend that you purchase at least $300,000 worth of protection. Some people feel more comfortable with even more coverage. You can purchase an umbrella or excess liability policy which provides broader coverage, including claims against you for libel and slander, as well as higher liability limits. Generally, umbrella policies cost between $200 to $350 for $1 million of additional liability protection.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 family or your pet.

Additional living expenses

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. Coverage for additional living expenses differs from company to company. Many policies provide coverage for about 20% of the insurance on your house. You can increase this coverage, however, for an additional premium. Some companies sell a policy that provides an unlimited amount of loss-of-use coverage, but for a limited amount of time.If you rent out part of your house, this coverage also reimburses you for the rent that you would have collected from your tenant if your home had not been destroyed.

HOMEOWNERS BASICS

• What is homeowners insurance?
  
• What is in a standard homeowners insurance policy?


• Are there different types of policies?


• What type of insurance do I need for a co-op or condo?


• Does my homeowners insurance cover flooding?


• What type of disasters are covered?


• Can I own a home without homeowners insurance?


• Can I get insurance if I rent my home?


• How do I take a home inventory and why?


• What's the difference between cancellation and nonrenewal?

What is homeowners insurance?

Homeowners insurance provides financial protection against disasters. A standard policy insures the home itself and the things you keep in it.

Homeowners insurance is a package policy. 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.

Damage caused by most disasters is covered but there are exceptions. The most significant are damage caused by floods, earthquakes and poor maintenance. You must buy two separate policies for flood and earthquake coverage. Maintenance-related problems are the homeowners' responsibility.

How to get the best home insurance quote

There are four main options when searching for the best home insurance deal:

• Home insurance brokers – Brokers have been with us for decades but are limited as they can only contact the insurers they have deals with.
• Direct insurers – Also known as direct writers - they ‘cut out the middle man’ in the form of the broker. Commissions sent to the broker can now be savings for the consumer.However, direct insurers will spend massive amounts of money on marketing.
• Branded providers – Large UK brands, such as supermarkets or retail chains, use their brand recognition to branch into other areas. However, your choice is still limited to their products from a direct insurer or broker.
• The ‘Full Search’ provider – The full search provider allows you to enter your details and returns quotes from a wide list of insurers, direct insurers, brokers and UK brands. By examining the market in just minutes you can save time and money.

So if it’s the cheapest and best home insurance deal you’re looking for, then why not enter your details now on the price comparison tool at moneysupermarket.com? Within minutes you will see a list of quotes suited to your needs from more than 60 insurance providers.

Cutting the risk

One of the best ways to reduce your home insurance premium is to cut the risk of the insurer having to pay out. This can be done in a number of ways:

• Security measures to reduce theft risk – Fit a burglar alarm, change locks, install time-switch lights, join a neighbourhood watch scheme, install security lighting, etc. NACASS standard alarms can get you up to a 7.5% discount.


• Reduce fire risk – Fit and maintain smoke alarms.


• Increase the standard policy excess – If you are willing to cover more of the cost of any claim then you will reduce your home insurance premium.


• No claims – The fewer the claims, the lower your premium. Also see which home insurance companies offer a no claims discount. This can save you up to 20% on your premiums.

For more money-saving ideas read the moneysupermarket.com top tips section.

Do your research

The best way to cut the cost of your home insurance is to get the best deal available for you. To do this, you will need to shop around. Using the price comparison tool at moneysupermarket.com will save you time, effort and money. Just fill out the form and in two minutes it will compare prices from more than 60 different home insurance companies to help you find the cheapest home insurance quote available.
This does not mean however, that you should simply accept the cheapest quote you find. The reputation of an insurance provider is also very important so you might wish to pay a bit more if an insurer is highly recommended by a friend or family member.
Another way to cut your home insurance premium might be to move house. A nationwide survey by the AA showed premiums could differ by 300% depending on where you live. Moving away from these postcode hotspots might be the best way to cut your premium.
Now you know how to get the right home insurance deal for you, the next step is to consider how to make a claim.

Making a claim

When it comes to making a claim you should notify the insurance company as quickly as possible. There is often a clause in your contract that makes it mandatory for you to contact the company as quickly as possible, though in the case of a theft, it is necessary to contact the police first.
Decide which policy to claim under and then contact your insurance provider. They should then send a claim form, which needs to be filled out with estimates for your repairs/replacements. If you have ‘new for old’ cover you can claim for the full cost of replacement items. If you have an indemnity policy you must deduct an amount to represent wear and tear.
For a major claim a company could send around their own loss adjustor to assess whether you are in compliance with the terms of the policy. This can potentially lead to the company refusing to pay out, which is why it is vital to read the small print and always make sure you give the company accurate information.

Exclusions

It is crucial to be aware of elements that might threaten your claim. These can include:

• Falsified information.


• Lack of maintenance – any repair work due to your negligibility is unlikely to be covered.


• Failure to install security systems.


• Failure to carry out repair work on previous claims.

Also bear in mind that it can sometimes make more sense to pay for relatively inexpensive repairs yourself than make claims on your insurance. This will allow you to build up your no claims bonus.