Homeowners Insurance

A standard homeowners insurance policy has four essential types of coverage. They cover structures and personal belongings, provide liability protection and pay for living expenses incurred because of displacement triggered by an insured disaster.

Coverage for dwellings pays to repair or rebuild a home if it is damaged or destroyed by fire, hurricane, hail, lightning or other disaster listed in the policy. It will not pay for damage caused by a flood, earthquake or routine wear and tear. It is necessary to purchase enough coverage to rebuild a home.

Most standard policies also cover structures that are detached from a home such as a garage, tool shed or gazebo. Generally, those structures are covered for about 10 percent of the amount of insurance on a home, but coverage can be increased if necessary.

Furniture, clothes, sports equipment and other personal items are covered if they are stolen or destroyed by an insured disaster. Most companies provide coverage for 50 percent to 70 percent of the amount of insurance on a dwelling. That means if there is $100,000 worth of insurance on a structure, coverage for belongings there would be between $50,000 and $70,000. To determine if there is sufficient coverage for belongings, conduct a home inventory.

Expensive items such as jewelry and furs are covered, but there are generally limits from $1,000 to $2,000. To insure the entire value of such items, purchase an endorsement or floater for the appraised value of the property.

In addition, trees, plants and shrubs are covered under homeowners policies. The standard coverage is 5 percent of the insurance on the house up to about $500 per item.

Liability protection covers against lawsuits for bodily injury or property damage that a homeowner, family member or pet cause to other people. The coverage pays for legal costs and court awards up to the limit of the policy.

Liability limits start at about $100,000, but Shove Insurance recommends at least $300,000 worth of protection. There is the option of purchasing an umbrella or excess liability policy that has broader coverage and higher liability limits. Umbrella policies also cover libel and slander and cost between $200 and $350 a year for $1 million of protection.

Furthermore, policies provide no-fault medical coverage. If someone is injured in the home or on the property of the policyholder, medical bills can be submitted to the owner’s insurance company. Coverage ranges between $1,000 and $5,000.

Additional living expense coverage pays for costs policyholders encounter when they are displaced because of a disaster such as a fire or storm. Expenses that are covered while a home is being rebuilt include hotel bills and meals, and coverage is usually limited to about 20 percent of the insured value on a home. More coverage is available for an additional premium.

Loss of use coverage also reimburses landlords for rent they would have collected if their property had not been damage or destroyed.   

 

Flood & Earthquake Insurance 

Standard homeowners insurance does not cover damage caused by flooding or earthquakes, so separate polices are required for protection from those disasters. Massachusetts and Rhode Island residents with property in flood zones must purchase flood insurance, which is available through the Federal Emergency Management’s National Flood Insurance Program (NFIP). Earthquakes do occur in New England, so homeowners might want to research what the chances are of one occurring here before deciding whether to purchase such coverage.    

Under the NFIP, which can be reached at (888) 379-9531, maximum coverage is $250,000 for the structure of the home and $100,000 for personal possessions. Shove agents can help homeowners determine if they need additional coverage and find the best available policy. The NFIP provides replacement cost coverage for a structure but only actual cash value coverage for possessions. Replacement cost coverage pays to rebuild a home as it was before the damage. Actual cash value is replacement cost coverage minus depreciation, meaning the older an insured’s possessions are, the less money the person will receive if they are damaged. In addition, there could be coverage caps on furniture and other belongings stored in a basement.

Beware that flooding can occur inland away from major rivers. Homes can be flooded by melting snow, an overflowing creek or pond or water running down a steep hill. Keep in mind there is a 30-day waiting period before flood insurance coverage takes effect.

Renters Insurance

Renters insurance provides tenants protection against the loss or destruction of possessions when leasing an apartment or a house. In most cases, landlords’ insurance policies do not cover losses suffered by tenants so they should have renters insurance, which is rather inexpensive because it only covers the value of belongings, not the structure in which they are housed.

Renters insurance covers possessions damaged by fire, smoke, lightning, vandalism, theft, an explosion, a windstorm and water (not including floods). Like homeowners insurance, policies for renters also cover a tenant’s liability when guests are injured in their home. Policies pay for damages and legal expenses.

In addition, renters insurance covers additional living expenses when a disaster makes a policyholder’s apartment uninhabitable. Most companies will pay the difference between the additional living expenses and the tenant’s normal living expenses but may set a cap.

The two types of renters insurance policies are:

• Actual cash value, which pays to replace possessions minus a deduction for depreciation up to the limit of the policy.
• Replacement cost, which pays the actual cost of replacing possessions up to the limit of the policy. There is no deduction for depreciation.

If tenants have belongings with values that exceed the policy limits, they can purchase a rider for added financial protection. Also, many riders include perils not included in a standard policy.

To learn more about homeowners and renters insurance, call (401) 722-1185 or send an e-mail to whunt@shove.com.