HOME AND RENTERS INSURANCE

What‘s in a homeowner’s policy?

  • Coverage A: Dwelling

    This is the primary coverage that will cover damage to your actual home, up to a limit that you and your agent calculate.  It is one of the primary drivers of your premium, since this value represents the estimated cost of re-building your home in the event of a total loss.

  • Coverage B: Separate Structures

    This part of your policy covers the separate structures on your lot, like sheds, detached garages, pools,  fences, etc that aren’t attached to your home and therefore not covered under coverage A.  This value defaults to a percentage of coverage A, often 10%, but can be adjusted at your request.

  • Coverage C: Personal Property

    This part of your policy covers your personal property and is subject to a separate limit from your dwelling coverage.  The trick to roughly determine if it falls under coverage A or coverage C goes like this:  if you turned your house upside down and shook it, everything that fell out would be subject to your  personal property limits.

  • Coverage D: Loss of Use

    This coverage, also known as “additional living expenses”, covers your expenses derived from having to live somewhere other than your home due to a covered loss.  Hotel/motel rent would be the big one, but this can also cover groceries, laundry and other amenities that you’d be forced to buy.  Some policies cover this on an “actual loss sustained” basis, others make it a percentage of coverage A.  With a Farmers NextGen home product, it’s 40% of coverage A, up to a full 24 months.

  • Coverage E: Liability

    This part of your policy covers you if you became legally liable for something that occurred on your property.  A slip and fall because you didn’t salt your sidewalks, a dog bite, a pool incident, etc.

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How To Navigate The Home Insurance Claims Process

Nobody wants to think about it, but damages to your home can happen. In fact, the average homeowner files a claim approximately every nine years. When you’re in the midst of a crisis, it can be difficult to think clearly. You’re worried about the future and how you’re going to get back on your feet. Luckily, having home insurance can help make the process a little less stressful.

Knowing the claims process, and steps to take after an accident or disaster can be incredibly beneficial. Knowledge is power in these situations; and the more you know, the better chance you have to get what you deserve from your claim, and do so within a timely manner.

Who is the Claims Adjuster?

The claims adjuster is the person working for the insurance company. They are the person who will evaluate your claim, looking at the damage incurred and what your policy covers. They will also decide how much your insurance provider will compensate you.

The adjuster plays such an integral role within your claim and it is important to work with them. You will be asked questions about the damage and the condition that your home was in before it occurred. The adjuster will basically serve as the intermediary between you and the insurance company. You will be giving them all of your documents and evidence that the insurance company requires for the claim.

The First Step

First, you should document your claim through pictures or videos as soon as you are able to in order to paint the most accurate picture of the damage incurred. When filing the claim, take all of the costs into account, including money that you might have to spend on a hotel, missing days of work, labor and materials for repairing the property, as well as the value of the items that were lost or damaged.

Having a third party assessment done is a great way to get another set of eyes on the damage and to come with even more ammunition when the claims adjuster comes to assess the damage and offer a settlement.

Evaluate the cost of all the damage and compare it to your deductible. You don’t want to fall victim to the $0-Pay. Discuss with your insurance agent to see if it’s worth filing the claim. If the cost of the damage is right around the cost of your deductible, you might want to hold off to avoid filing an unnecessary claim that will go against your record and affect future insurability.

How Payment Works

When getting a payout for your claim, you most likely won’t get the entire settlement amount at once. Instead, the initial check will probably be an advance of the total amount. However, there is always a chance for an “on-the-spot settlement” in which case you will get the total check right away. This settlement can be reopened if you find more damage down the line, typically within the year of the damage.

Additionally checks for property damage, damage to personal possessions and additional living expenses incurred as a result of uninhabitable property, should come in separately, not in one lump sum. This can help make sure that the money is going toward the right funds.

Personal Possessions

In the event that personal belongings are damaged, one of the first steps you should take is to try and find out the cost of everything inside your home. If you have an inventory of your possessions, that will be incredibly useful in the process. If you don’t have one, look back at old photos and videos to recollect the things that might have been damaged.

Next, depending on whether you have an actual cash value or replacement cost policy, you will either get reimbursed for the items (factoring in depreciation) or for the cost of buying new items, respectively. In many cases, your replacement cost policy will require you to buy the replacement items prior to compensation and then they will reimburse you, so keep those receipts.

Additionally, talk to your insurance company about how much time you have to replace your items. Oftentimes, you don’t have to make an immediate decision.

Property Damage

If there is property damage to your home and you have a mortgage, the check will most likely be made out to your lender. This is typically laid out as a condition of granting your mortgage. By receiving the insurance check, the mortgage lender can help ensure that appropriate repairs are made to the property, as this is also in their best interest to secure both of your investments in the property. Therefore, in most cases, the mortgage company will have to endorse the check, with the money typically being put in an escrow account, paying for the repair work as it is completed.

If you are in a situation in which you need to rebuild your home you can decide if you want to rebuild on the same site, a different location, or not at all. The money you are given to do this will depend on the policy you purchased. Typically, you’re entitled to the replacement cost of your home, keeping in mind that your insurance company will pay to have your home returned to the state it was in prior to the damage, not for a bigger or more expensive place.

Additional Living Expenses

In contrast to the payout for property damage, the check for any additional living expenses should be made out to you. Though you may still have to get the check endorsed by the mortgage lender, these expenses don’t have to do with repairs to your home. This can help cover the additional costs of living in a hotel or getting a rental car.

Tips

  1. Be thorough and document everything. This includes the inventory of your possessions, documents and conversations with the insurance company, and being on top of deadlines and appropriate forms.
  2. If you are able to, be present for inspections by the insurance adjuster or independent inspector.   
  3. Make sure that you understand your insurance policy and everything that you are covered for. Know your rights.
  4. Stand firm to your claim. The process may take a little longer than anticipated and you may not get the compensation you expected. You are able to dispute it if you believe you’re entitled to more. Don’t be forced into settling by the duration of the process either, be patient.
  5. Be honest with your claim. Lying won’t get you any farther in the process and is illegal.
  6. Cross your ‘t’s and dot your ‘i’s. Make sure you get all the appropriate information from your claims adjuster including your claim number, and the name and phone number they can be reached at. This can help ensure that your claim is properly filed and your forms are accurate.

When push comes to shove, home insurance has your back. The reason you purchased it was to protect your investment, so if you need to repair damaged property or possessions, make sure you stay calm and understand the process so that you are able to restore this investment.

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The Importance of Renters Insurance

One of the first steps you take when buying a home is purchasing homeowners insurance. Similarly, one of the first steps you take when renting a home is getting renters insurance. Just because you don’t own the property itself doesn’t mean that damages are any less likely.

However, many people don’t get renters insurance because they feel they don’t need it. One of the main reasons being, that they think their landlord’s insurance will cover them, when in fact, a landlord’s policy typically only covers them and their property.

To protect your possessions, renters insurance is one of the most essential tools you can purchase to reinforce your financial stability. It can be fairly inexpensive as well, costing less than a dollar a day (averaging 15 to 30 dollars per month) depending on your provider, geographic location, and additional insurance policies you carry.

What’s covered?

Renters insurance covers personal property and personal liability. So things like furniture, electronics and clothes, as well as medical expenses if a guest gets hurt while at your place, can be covered. Additionally, some policies will cover temporary living expenses if your rental property becomes uninhabitable.

Just like with H03 and HO5 homeowners insurance, not all situations are covered with renters insurance. If you’re looking for protection for natural disasters such as earthquakes or hurricanes, you will need to buy riders for additional coverage. If a natural disaster such as a wildfire, tornado, or hailstorm cause damage to the building, the landlord’s insurance will most likely cover the damage to the building, however, your personal property will probably not be covered, which is where your personal policy can come in handy.

Other riders can include sewer drainage damage (drain gets backed up and floods, ruining your possessions), extended theft coverage (items stolen outside of your home, such as a laptop from your car), and loss of use (living expenses if your property becomes uninhabitable).

Additionally, if you’re in a building with multiple units and you are responsible for an unnatural fire (i.e. you leave the stove on and a fire starts), you can also be responsible for the damage to the other tenants apartments including any of their property damage.

What types of coverage are there?

There are two types of coverage that renters insurance provides: personal property and liability. Personal property coverage covers repairing or replacing personal belongings in the case of theft or damage. Liability coverage covers you in the case of a claim or lawsuit if someone is injured or their property is damaged by an accident on your property.

Additionally, you can opt to get a broad form of coverage or a comprehensive form. The broad form is the typically the most common form purchased and is similar to HO3 coverage as it extends to specific events like fire or theft. Comprehensive coverage is more similar to HO5 in that it covers a more general range of events, with only specific exclusions.

Next, you get to decide if you would like actual cash-value coverage or replacement cost coverage. For actual cash value, your insurance provider will factor in depreciation before offering your claim amount. So if you bought a couch for 500 dollars five years ago, and now it is worth 300 dollars, your insurance company will compensate you 300 dollars.

For replacement cost coverage, your insurance provider will compensate you for the actual cost to replace the couch. So you would get 500 dollars for the couch, or however much it costs to get a comparable one. Replacement cost coverage typically has higher premiums than actual cash-value, but could save you some serious out of pocket costs down the line.

How much coverage should you get?

When deciding how much coverage you need you should evaluate a few things. First, take a look at your landlord’s insurance to see what they are actually liable for and what they will cover in the event of damage to the property. Additionally, take inventory of all of your possessions (beyond just those ‘big ticket’ items). It’s estimated that an average two-bedroom apartment contains about 30,000 dollars worth of stuff, which will be difficult to replace if something unexpected were to happen.

To save some money on your policy, look into installing a smoke detector, burglar alarm, and fire extinguisher to help reduce your risk of needing to file a claim. If you have roommates, check with them to see what their policies are and if you have the ability to purchase one together.

Why is it important?

Renters insurance is important because it can help protect you and your belongings from unexpected events. It also helps fill the gaps that other policies may lack. For example, if your car is broken into and your laptop is stolen, the window will most likely be covered under you auto policy, but the laptop probably won’t be. Your renters policy can help extend this coverage of your property.

Just because you don’t own the building you’re living in, doesn’t mean your other possessions are any less valuable, or your guests are any less accident-prone. Through purchasing renters insurance, you will be covered for personal property and liability claims throughout the duration of your rental experience, and you can do so without breaking the bank.

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Home Insurance Shopping 101 – The First Time Home Buyer’s Guide

A house is more than just a roof over your head; it’s an investment. For many people, it’s also one of the most expensive purchases they’ll make in their lifetime, which means this coincides with one of the biggest loans of their lifetime in the form of a giant mortgage. Right after that offer is approved on your new home, protecting it should be a number one priority. Home insurance quickly becomes one of the best ways to protect this investment. In fact, many insurance companies won’t even approve you for a mortgage to purchase your home without insurance.

When choosing your policy, you want to make sure you pick the one that’s right for you. Not all insurance is created equal and basic plans won’t meet your unique needs. Therefore, don’t procrastinate, do your research and prepare.

So, where do you start?

Figure out how much insurance you need at the very minimum.

It’s better to prepare for the worst to happen. Having deep coverage that can cover 100 percent of your home’s replacement cost is seen as a good place to start. Therefore, you help ensure that if something were to happen to your home, you wouldn’t lose out on the entire investment. Get an official assessment of the home and your belongings to value how much coverage you should purchase.

Know what’s covered and what’s not. The devil is in the details.

In most homeowners insurance policies you can expect damage to the interior or exterior of the house, damage to your personal belongings and liability protection to be included. However, you can also expect for flood, earthquake or poor home maintenance damage to not be covered. Homeowners policies may exclude certain circumstances, whether they’re not a named peril or they are explicitly excluded from a more encompassing plan. If this is the case, consider buying specific add-ons to tack on to your policy. If you’re in an area that is prone to earthquakes, getting separate earthquake coverage will help make sure there aren’t any surprises if you need to file a claim.

This is when riders and floaters come in. These provide additional coverage that basic home insurance policies do not. Floaters are good to purchase to insure your valuables as these assure that the full value of the item will be replaced if there is theft, loss or damage. A rider covers items that are either not cover or that have value that exceeds the per-item limit of your policy (i.e. jewelry, fine art, musical instruments). If your policy only covers 1,500 dollars in jewelry, but your wedding ring costs 10,000 dollars, taking out a rider to protect the value of that possession might be a good idea to consider. Make sure that there aren’t any fine print details in your policy that prohibit certain items from being covered or don’t cover the full value of the item.

The value of high deductibles.

A deductible is the amount of money you will pay out of the pocket in the chance you file a claim. For example, if you file a claim of 10,000 dollars and your deductible is for 500 dollars, your insurance company will pay 9,500 dollars, while you pay the 500. The higher your deductible, the lower your premium. By assuming more of your own risk, you are taking some of the burden off of insurance companies. Therefore, your deductible should be as high as you can reasonably afford in the event of a claim. By raising your deductible, you can cut the cost of your premiums up to 20 percent.

If raising your deductible even $1000 saves you $200/year on your annual premium, you only need to go 5 years to start ‘making money’ on your investment choice, if you will.  Couple this with the fact that the average homeowner makes a claim every 9 years and it becomes a wise decision for the long game of home insurance.  Dash suggests putting this deductible savings into a sort of “home maintenance slush fund” in case a small incident does happen so that you still have the money on hand.  Worst-case, that home maintenance fund becomes a vacation fund if you go multiple years without tapping into it!

Pick your battles.

The moment you file a claim, your rates are almost guaranteed to go up. In the eyes of many insurers, you become uninsurable after you file as few as two claims in three years. To insurance companies this looks like you have become a bigger risk of filing future claims, and to compensate for this risk, they will most likely raise your rates.

In Minnesota, the average premium increase after one claim is one of the highest in the nation. After filing just one claim, your annual premium cost increases at an average of 21.2 percent, far surpassing the 9 percent national average. On top of that, as a Minnesota resident, you’re already paying higher premiums to begin with due to the often times extreme winters, spring hail, tornado seasons and subsequent risk of damage to your home. In 2010, the average annual cost of homeowners insurance in Minnesota was 981 dollars, whereas the national average was 909 dollars.

Therefore, as Minnesotans we have to pick our battles wisely, understanding the implications of the small claims, or the $0-pay.

Let’s say there is a hailstorm one evening. You check the next day to assess the damage and realize that some shingles are missing or loose, costing about 700 dollars in damage. Now, let’s say your deductible is 700. If you file a claim, you’ll become a victim of the $0-pay. Minnesota law actually prohibits insurers from raising your premium based on an “act of God” type claim like wind or hail. However, this $0-pay still counts as a claim against you and can therefore make you ineligible to switch carriers because of the “two claims in three years” standard, meaning you’re essentially stuck with the insurer whether you like them or not for a certain period of time because you can’t go elsewhere.

If you raise your deductible, you can help avoid these small claims and save money every year through lower premiums.

Prepare.

One of the best things you can do to secure your investment is get the right type of homeowners insurance and be prepared. Take an inventory of what you own and continually update it. Other things to consider that might affect your insurance policy coverage are the breed of dog you have, if you have a wood furnace or stove, or if you have a swimming pool or trampoline. These can increase your liability, resulting in higher monthly premiums.

Additionally, look for discounts. Many newer homes qualify for discounts because the new materials can be more durable. If you have a smoke detector, alarm system, fire-sprinkler system, deadbolt locks or window security devices, this can help provide more security to your plan and lower your monthly premiums. If you bundle your homeowners insurance with your auto insurance, you can also save some money.

Don’t assume that the insurance you buy when your first purchase your home will be the same coverage you’ll need in a few years. As your possessions and value of your home change, your coverage should adapt along with them. Remember that you get what you pay for and if you choose a basic/low cost policy, your coverage will follow suit, and your investment will be less secure.