I'm purchasing an expensive mountain bike. Will it be covered under my homeowners insurance policy?
Like most of your personal property, your mountain bike should be covered under the named perils section of your homeowner insurance policy for both on- and off-premises damage. In other words, if your bike is lost while you are on vacation or stolen from your home, it will most likely be covered under your homeowner policy.
One thing to keep in mind is that if something happens to your bike and you need to replace it, your policy deductible may exceed the actual value of your bike (e.g., your policy has a $500 deductible and your bike is valued at $400). Therefore, it might not always make sense to file a claim for your bike with your insurance carrier. You can always try lowering your deductible amount, but this usually increases the cost of your homeowner insurance coverage.
If you do file a claim for your bike, it's important to note that most homeowner insurance policies offer actual cash value coverage, which would reimburse you for the replacement value of your bike minus depreciation. This means that you could end up being reimbursed for less than what it would actually cost to replace your bike. To make sure that your bike is adequately covered, find out if your insurance carrier offers replacement cost coverage, which would reimburse you for the actual cost of your bike without taking depreciation into account.
My child is heading off to college this fall. What homeowner insurance issues does this raise?
As you send your children off to college, you probably have a lot of things on your mind—whether they'll eat right and get enough sleep, how to pay the tuition bills, what to do with that empty bedroom, etc. For most people, insurance concerns are pretty low on the priority list. But there are some important issues you should consider.
Make sure your child's possessions are covered. If your child lives in a dorm or other university housing, their personal property is typically covered under your homeowners insurance policy. Check your policy for coverage limitations on computers and stereos, if your child can't live without these. Once a student moves out of the dorms and into an apartment, they are usually no longer covered under your policy. Off-campus students should purchase a renters insurance policy to cover their possessions.
My neighbor's tree fell across my fence. Will their insurance cover the damage?
In most cases, your insurance will be the one to cover the damage. Although the tree fell from your neighbor's property, the damage affected your property. Your homeowners insurance covers damage to your property, so you should make a claim under your policy. Your policy probably also provides coverage to remove the debris from your property (typically up to $500).
There are a few exceptions to this general rule, however. For example, say you notice that your neighbor's tree has a large, dead branch hanging precariously over your property. You notify your neighbor in writing of this hazard and ask him to address the problem, but he chooses to ignore it. Two weeks later, the branch comes crashing down and destroys your fence. In this case, you may have some recourse against your neighbor's insurer, because your neighbor had notice of a potential hazard and did nothing to improve the situation. Make sure you keep records of all correspondence and actions regarding the situation. You'll have something to back up your story if you have to contact your neighbor's insurer.
Complications may also arise depending on what actually caused the tree to fall. If the tree fell in a windstorm, or if it was struck by lightning, there is little question that the damage will be covered. However, certain perils such as floods and earthquakes are not covered under standard homeowner policies. If the tree fell as a result of such an event, the damage may not be covered at all. To find out for sure, you'll have to contact your insurer.
I purchased several expensive shrubs and trees to plant in my yard. Are these covered under my homeowners insurance?
Homeowners insurance does provide coverage for damage to trees, shrubs, plants, and landscaping. However, the amount of coverage can vary significantly from one policy to another.
Standard homeowner insurance policies often have a per-item limit as well as a per-incident limit. A basic policy may cover $250 per item with a maximum of $1,000 per incident. More generous policies may provide coverage of $500 or more per item, with a limit of up to 5 percent of the house's insured value.
Landscaping coverage typically includes plants, shrubs, trees, and lawns. Mulch and supplies are generally not covered. Under a standard homeowner policy, your landscaping is protected from the following perils: fire, lightning, explosion, riot or civil disturbance, vandalism, criminal mischief, theft, and loss caused by motor vehicles or aircraft not owned or operated by the property owner.
Insect or pest infestation, wind damage, and other weather damage are typically excluded from coverage. Some endorsements may broaden the scope of coverage for landscaping.
Many homeowner policies provide a certain amount of coverage for removing downed trees following a storm. This coverage may be subject to a deductible and may only be applicable if the fallen tree caused damage to covered property.
I just got engaged and I'm worried about losing my diamond ring. Can I buy insurance to protect it?
Your diamond ring is probably covered to some extent for loss due to theft under your homeowners/renters insurance policy. However, check your policy. Most homeowners/renters insurance policies have limits for certain types of personal property—including jewelry.
If the value of your ring exceeds your homeowners/renters insurance policy coverage limits, you have a couple of options. First, you can purchase a floater, which will provide you with a specific amount of coverage for your ring based on its appraised value. Or, you can purchase a stand-alone policy that is specially designed to protect valuable items. Keep in mind, however, that your insurance company will most likely require you to have your ring appraised by a certified jeweler when you purchase either a floater or a stand-alone policy.
I'm building a new home. Do I need to insure it while it's under construction? How do I insure it?
You should consider home insurance for your new home during construction. If you don't, you may be exposing yourself to a great deal of risk if a fire, theft, or other event damages or destroys your partially-completed home.
One way to cover your new home during construction is by purchasing a standard homeowners insurance policy. This will cover you for any damage to the building as it's being built, and may also provide some coverage for theft of building supplies (although the contractor's insurance should also cover this). It also provides liability coverage, which may come in handy if one of your friends trips during a "tour" of your dream house and decides to sue you. However, the policy will not cover your personal property until the building is secure or "lockable." Once construction reaches this point, you can add on homeowner insurance coverage for your personal property.
Another option is to purchase a "dwelling and fire" policy. This type of policy covers damage to the physical structure, but provides no theft coverage. A dwelling and fire policy may be an appropriate choice if you are living in your old house during construction, because the homeowner policy on that house would cover theft of items from the construction site. Dwelling and fire policies also provide liability coverage, just like a standard homeowners policy.
Once the building is complete, you should re-evaluate your coverage. If you opted for dwelling and fire coverage, you may need to purchase a full homeowners policy. If you bought standard homeowners insurance, make sure you have purchased the right amount of insurance, especially if you have made alterations to the original building plans (e.g., adding on a room or upgrading building supplies).
My home was completely destroyed in a hurricane. Will my insurance company pay my living expenses until I can rebuild?
Most homeowner policies will pay for additional living expenses (e.g., food, lodging, moving, storage) that you incur while your home is being rebuilt. Keep in mind, however, that policies usually limit the length of coverage for living expenses. The amount of living expenses for which you are covered is usually limited as well (e.g., a percentage of your homeowner insurance coverage).
As for how the money is dispersed, insurance company practices vary. Some companies will give you the money up front, while others will wait until after you file a claim. In any case, be sure to keep your receipts. Before it will reimburse you, your insurance company will want to see them.
I don't live near water—is there any reason why I would need flood insurance?
You should consider purchasing flood insurance even if you don't live in a high-risk area for floods. Factors such as storms, inadequate drainage, and hurricanes can cause serious flooding even if you don't live near a river or other body of water. If you are purchasing a home in a designated ‘high risk’ flood zone, you may be required to purchase flood insurance before obtaining a mortgage.
Despite what you may think, your homeowner insurance policy doesn't cover damage from flooding. To complicate matters further, you can't simply buy flood insurance as an endorsement to your current policy. Instead, if you are eligible, you must purchase a separate flood insurance policy through an insurance company that participates in the National Flood Insurance Program (NFIP). Flood insurance is available for residents of approximately 19,000 communities nationwide.
A flood insurance policy offers flood protection for both your home and its contents. You can purchase up to $250,000 worth of coverage for the building itself, and up to $100,000 worth of coverage for the contents. However, a flood insurance policy is not a catch-all. For example, flood insurance offers some degree of protection for flood-related damage, but it doesn't cover all types of damage. Flood insurance does not cover events such as sewer backups unless they are directly related to a flood.
The average flood insurance policy costs around $350 per year. However, if you live in a lower risk area, you can typically reduce the cost by purchasing a lesser amount of coverage.
I am buying a home and there is a creek in the backyard. Does this mean I need flood insurance?
Even if the creek in your backyard were to dry up tomorrow, you should seriously consider purchasing flood insurance. According to the Federal Emergency Management Agency (FEMA), approximately 45 percent of all flood insurance claims come from areas that are at low to moderate risk for floods. Flooding doesn't happen only along the banks of rivers, creeks, or other bodies of water. It can also occur in low-lying areas or can result from heavy rains, melting snow, inadequate drainage, and hurricanes.
If you're obtaining a federally backed mortgage, your lender will require you to purchase flood insurance if your home is located in a high risk flood zone. To find out if this is the case, your lender will order a flood hazard search that will access FEMA flood zone maps. If your home is found to be in a minimal risk area, you won't be required to purchase flood insurance. However, you will still have the option to purchase it (often at preferred risk rates) if your community participates in the National Flood Insurance Program (NFIP).
Once you've applied and paid your premium, a 30-day waiting period generally applies before the policy is effective (unless the initial policy is issued in connection with a loan or because a flood map has been revised).
My house contains an in-law apartment. Does this raise any issues with my homeowners insurance?
An in-law apartment is typically attached to or built inside another home. It may have its own appliances, along with separate kitchen and bathroom facilities. Many have private entrances as well.
Determining whether an in-law apartment is covered under your regular homeowner insurance policy can be a bit tricky, however. In some cases, you may actually need a separate renters insurance policy to cover your in-law apartment. To complicate matters further, the criteria for this decision may vary from one insurer to another.
For some insurance companies, the presence of a private entrance is the deciding factor in determining whether a separate policy is needed. If there is a private entrance, these insurers consider the in-law apartment a separate living unit, and the house is deemed a two-family home. In this case, your standard homeowners insurance may cover the structure but not the contents belonging to the in-law apartment. Anyone occupying the unit will need to purchase renters insurance, even if they are members of your immediate family.
Other insurers take a more liberal stance where in-law apartments are concerned. Instead of using the separate-entrance test, some insurers look at whether the in-law apartment has its own address, or whether it has separate utility hookups. Others base their determination on whether the person occupying the in-law apartment is a relative. Insurers using these criteria are much more likely to consider the in-law apartment as part of your home and therefore include it in the coverage of your homeowner policy.
But what if you don't have a full-time occupant of your in-law apartment, and you own the contents? Again, the answer depends on which insurer you ask. To make sure your insurance coverage is adequate for your home and personal property, check your policy carefully and talk to your insurer.
Can you get specific insurance for jewelry or art? Would that be covered under a homeowners policy? If so, why do people buy additional insurance for these items?
Homeowners insurance does provide coverage for personal property, but this coverage is limited. Under a standard homeowner policy, the coverage for all your personal property is limited to 50-75 percent of the dwelling coverage amount on your home.
Homeowner policies also set specific dollar limits for particular categories of personal property. For some categories (such as jewelry, firearms, and furs), the policy specifies a coverage limit for theft, but not for damage or destruction. The reason is that these items are especially susceptible to theft, and insurance companies want to limit their exposure to these fairly common incidents. Damage or destruction of these items is less common, and insurance companies are willing to cover them up to their actual cash value.
Some standard coverage limits for particular categories of personal property are as follows:
- $200 for money, bank notes, bullion, gold, silver, coins, and metals
- $1,000 for securities, accounts, deeds, letters of credit, notes other than bank notes, manuscripts, personal records, passports, tickets, and some other related items
- $1,000 for the theft of jewelry, furs, watches, and precious and semi-precious stones
- $2,000 for the theft of firearms
- $2,500 for the theft of silverware, silver-plated ware, goldware, gold-plated ware, and pewterware
- $2,500 for property at the residence used for business purposes
- $250 for property used away from the residence for business purposes
Note that there is not a standard coverage limit for artwork (although your policy may vary). It usually would be included with all your other personal property, and the cumulative coverage would be limited to a maximum of 50-75 percent of the dwelling coverage amount. Keep in mind, however, that it could be difficult to convince your insurer of the value of your art collection without a professional appraisal.
You have the option of increasing your personal property coverage by purchasing either an endorsement or a floater. You may need an increased jewelry limit, for instance, for covering engagement or wedding rings. Or you might wish to purchase separate coverage for your art collection, because its value is far more than 50 percent of your dwelling.
In order to buy additional personal property coverage, you must be able to verify the cost and condition of the item. Photos or a video can be used to inventory your property; however, you should be sure to keep the inventory away from the premises (i.e., in a safe deposit box). Professional appraisals are needed for certain items, such as jewelry, antiques, art, and camera equipment (beyond a basic camera).
Is it true that mobile/manufactured homes are safer than they used to be?
If you own a mobile/manufactured home or are thinking of buying one, you'll be happy to know that mobile/manufactured-home safety has improved dramatically since the days when cars pulled homes from one place to another. As more and more people began using these homes as permanent residences, Congress saw the need to regulate their design and construction to improve overall quality and reduce personal injuries, deaths, and property damage.
In 1974, Congress passed legislation that authorized the Department of Housing and Urban Development to enact national mobile/manufactured-home safety standards. Any mobile or manufactured home built after June 15, 1976, must conform to the National Manufactured Home Construction and Safety Standards, also known as the HUD (Housing and Urban Development) Code. According to these standards, homes must be built using fire-resistant materials, must be able to withstand certain wind speeds, and must satisfy various other safety standards.
Unfortunately, despite efforts to improve their safety record, manufactured homes are still generally considered less safe than conventional homes by insurers. Because manufactured homes are much more vulnerable to wind damage, many states and insurers require that manufactured homes be erected on a permanent foundation or secured to the ground with anchors and tie-downs to help prevent the home from slipping off its footings or tipping over during a tornado or other severe storm. Manufactured homes are also more likely to suffer extensive damage when a fire breaks out.
To adequately protect yourself when you own a manufactured home, purchase a homeowner policy that covers both property damage and liability losses. If you are financing your home, your lender may require it. Consider purchasing a policy through a reputable company that specializes in manufactured-home insurance. These insurers may be more familiar with the special hazards associated with owning a manufactured home.
How much of the exterior of my property is covered by homeowners insurance—fencing, driveway, etc.?
Many people don't realize it, but homeowners insurance covers a lot more than just your house. A standard homeowner insurance policy provides broad protection for personal property and other structures located in and around your home.
Several different types of coverage are included in every standard homeowner insurance policy. Coverage A is strictly for the physical structure of your home, including additions permanently attached to the structure (such as an attached garage).
Coverage B insures other structures on the premises, including detached garages, fences, swimming pools, driveways, and sidewalks. The limit on this coverage is typically 10 percent of the Coverage A amount.
Coverage C insures your personal property, including all of your household possessions and other items such as awnings, outdoor antennas, and carpeting. The limit on Coverage C protection is typically 50 percent of the Coverage A amount. Additionally, all standard homeowner policies include various "additional coverages" for items such as debris removal, trees, and shrubs. Each of these coverages has its own dollar limit.
While homeowner insurance coverage is very broad, there are certain items which are not covered. For example, motorized vehicles (e.g., cars, motorcycles, go carts, golf carts, and snowmobiles) are not covered by your homeowners insurance. Animals, birds, and fish are not protected under homeowners insurance, either.
Keep in mind, too, that your homeowner insurance policy only covers the above-listed property if it is damaged or destroyed by an insured peril. Personal property is only protected against the perils listed in your policy, while your dwelling may be insured against named perils or open perils.
I want to rent out my home. Are there insurance issues to consider?
Absolutely! As you might have guessed, rental property owners have some unique insurance needs. A standard homeowner policy isn't appropriate for rental property, because:
- You don't need to insure the contents of the house, unless you provide furnished accommodations;
- You need to be more concerned about liability issues; and
- You need to protect yourself against the loss of rental income. Your tenants may purchase renters insurance, but even if they do, it won't provide any coverage for you as the owner of the property.
Fortunately, there's a policy designed especially to meet the needs of rental property owners. Most insurers who deal in commercial insurance can sell you a policy specifically for rental property. However, there are many variations among rental property policies. Some provide replacement cost coverage, while others only insure property on an actual cash value basis. Some policies only provide coverage for one or two named perils (such as fire), while others provide much broader coverage.
Because of these variations, you may have to shop around to find a policy that provides complete coverage. A good rental property policy should provide the following:
- Broad coverage for the physical structure of the house, on a named-peril or open-peril basis
- Coverage for other structures located on the property (garages, sheds, etc.)—this coverage is often limited to 10 percent of the coverage for the house
- Coverage for your property left on the premises (appliances, maintenance equipment, etc.)
- Coverage for loss of use, if you lose rental income as a result of a covered peril
- Liability coverage for injuries or property damage that occur on the insured property
- Medical payments coverage, for medical expenses that arise from injuries to others on the insured property
My friend and I share an apartment. Will her renters policy cover my possessions?
This is an increasingly common question among young singles and other unmarried individuals who choose to share a house or apartment. Unfortunately, renters insurance and other homeowner insurance policies are designed for single individuals and traditional families. So when unrelated individuals share a residence, insurance coverage can become complicated.
Insurance laws on this topic vary from state to state, and homeowners and renters insurance policies vary from one company to the next. However, most insurance companies recommend that each tenant maintain a separate renters insurance policy to cover his or her personal property. You should each create an inventory of your possessions, so there are no questions about which policy covers which items if you ever have to file a claim.
Things become even more complicated in the case of unmarried couples living together. In most cases, each partner will need to have a separate renters insurance policy to cover their personal property. But this is not a perfect solution, because even unmarried couples often have joint property. The best option in this case may be to keep detailed records of who actually purchased what, allowing you to make an accurate claim if the need arises.
If I install a home security system, will my insurance premium go down?
Most, if not all, insurers will give you a discount on your homeowners policy premium if you install a home security system. The performance and sophistication of the typical home security system varies dramatically depending on what you buy and how much you spend.
Similarly, the premium discounts will vary too. A simple burglar alarm is likely to get you yet 5 percent. If you decide to go with a more sophisticated home security system, complete with monitoring services, you can expect a discount of up to 20 percent.
In addition to discounts for security devices, you can also get discounts for installing safety devices such as smoke detectors or sprinkler systems. Check with your insurance agent to make sure you are currently receiving any discounts you qualify for, and to see if you can save any more on premiums by installing additional security equipment.
How long does an insurance company have to pay on a claim (such as a theft under my renters insurance)? Are there laws stating a certain period of time that a company would have?
Your state has some form of regulation that defines what is acceptable conduct in the insurance industry. Many states have enacted an "Unfair Insurance Practices Act" or an "Unfair Claims Settlement Practices Act". Or, the regulations may be found in a broader law that encompasses all trade practices.
The specifics of these regulations vary widely from state to state, but, generally speaking, an insurer is required to:
- acknowledge your claim within a certain time frame, such as 15 days,
- investigate your claim promptly,
- make a good faith attempt to process a prompt, fair, and equitable settlement of claims in which liability is reasonably clear.
Additionally, an insurer may not refuse to pay your claim without a valid reason.
If you feel that your insurance company's agent or claims adjuster has violated your state's regulations, talk to that person's supervisor. If you get no satisfaction, file a complaint with your state's insurance department. If the department receives enough similar complaints, it will conduct an investigation. If it finds that the insurance company has a pattern of misconduct, it may impose a fine, punitive damages, or, for especially grievous offenses, revoke the company's license.
A minority of states allow you to sue an insurance company privately for a regulations violation against you individually. If you find yourself in such a dispute, some legal rules may help you, such as:
- coverage provisions will be construed broadly,
- limitation and exclusion provisions will be construed narrowly, and
- ambiguities in the policy will be interpreted in your favor.
In some states, if you are successful in court, you may only recover the amount of your claim. But, in other states, you may also be awarded legal fees and punitive damages.
Here are a few tips that may be useful for dealing with an insurer about a claim.
Before you buy the policy:
- Take notes while the agent is explaining the proposed coverages, and save them for future reference
- Read the proposed policy and understand the key terms, such as deductibles, exclusions, and limitations
- Complete the application form honestly and thoroughly
Before you have a claim:
- Read your actual policy to understand coverages
When you have a claim:
- Review your policy and notes
- Promptly notify the insurance company of the loss
- Do not exaggerate the claim
- Keep a log of all correspondence with the insurance company (especially telephone calls)
- Gather materials to prove your claim (e.g. receipts)
- Always keep copies of any documents you give to the insurance company
- Get your own estimate of the loss
- Do not submit to an "examination under oath" without legal representation
- Do not sign a check or release until you are satisfied it is fair
