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HOMEOWNER'S INSURANCE provides financial protection in the event that your home is destroyed or damaged due to an unforeseen or catastrophic event. In addition to your home, Homeowner’s Insurance also covers your personal property. It can also reimburse you for medical expenses and liability claims resulting from property damage and personal injury to other people caused by you or members of your family. A Homeowner’s Policy will also pay for Additional Living Expenses (ALE). ALE covers your expenses if you are forced to temporarily move into a temporary dwelling because of a covered loss to your home.
Two ways a Homeowner’s Policy can cover a loss to your property:
· All Risk (also called Comprehensive Coverage or Open Perils Coverage) offers broad protection and covers all perils unless specifically excluded by the policy. You should carefully review the excluded causes of loss section in your policy. Even the most comprehensive policy can exclude certain types of loss (for example, damage caused by flood).
· Named Perils (also called Specified Perils Coverage) offers narrower protection than an All Risk Policy and covers only perils specifically named under the policy. A policy offering Named Perils protection will also contain exclusions named under the policy. If you are thinking about purchasing a policy that provides Named Perils only, it is vital to be certain the policy provides coverage for the perils most essential to you. It is not uncommon for a Homeowner’s Policy to provide All Risk on the dwelling and Named Perils for personal property.
A Homeowner’s Policy also offers different methods of settling your claim and repairing or replacing your property:
· Replacement Cost pays for all necessary expenses associated with rebuilding or repairing damaged property, up to the policy limits, less any applicable deductible amount.
· Actual Cash Value (ACV) factors in depreciation costs to your items and pays you the amount to replace or repair the damaged property, less depreciation and any applicable deductible amount. Most insurance companies offering Replacement Cost will initially pay for the loss on an Actual Cash Value basis. The company will then pay additional costs associated with the “replacement”.
Remember, before claims are paid out, all losses may be subject to a deductible. In the past, flat dollar deductibles on insured homes were common. Insurance companies have gradually shifted to percentage deductibles. Most Homeowner’s Policies today have a 1% deductible for all causes of loss. However, it is important to know a typical Homeowner’s Policy has two different deductibles that apply, depending on the cause of loss. While both deductibles are often the same, they can vary. One deductible applies for wind or hail damage while a separate deductible applies to most other types of loss (fire, theft, water, etc.). The deductible is a percentage of your property’s insured value; not a percentage of the claim amount. This means it changes as your insured value changes.
To avoid surprises after a claim, we want to help you understand and be aware of any and all out of pocket expense up front. When considering a Homeowner’s Policy, feel free to discuss deductible options with us. An uninformed decision could cost thousands of dollars when filing a claim.
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