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California
Homeowners Insurance
| Homeowners Insurance
provides necessary protection for your home, personal
property, and family liability coverage.
HDA Insurance Brokerage has
many insurance programs available to fit the needs
of most risks. Earthquake insurance coverage is
also available for a very competitive rate.
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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.
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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
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.
2. Coverage for 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.
3. Liability protection
This 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 their filing a liability claim 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.
4. Additional living expenses in the
event you are temporarily unable to live in your home
because of a fire or other insured disaster
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—for a limited amount of
time.
If you rent out part of your house, this
coverage will also reimburse you for the rent that you
would have collected from your tenant if your home had
not been destroyed.
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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.
You should consult with a professional insurance consultant
to determine which coverages best suit your needs
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 multifamily 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 policy
It 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.
• 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-Renter
Created 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-op
A 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.
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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 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 doesn’t
make sense to cancel your policy and risk losing what
you’ve invested in your home.
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How and why it is important to take
a home inventory!
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.
• Higher Value 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 Pictures!
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.
• Use a Video Recorder!
Walk through your house or apartment videotaping and
describing the contents. Or do the same thing using
a tape recorder.
• Using your computer!
Use your PC to make your inventory list. Personal finance
software packages often include a homeowners room-by-room
inventory program.
• Keep Your list, video, and photos safe!
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.
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What's the difference between cancellation
and nonrenewal?
There is a big difference between when
an insurance company cancels a policy and when it chooses
not to renew it. Insurance companies cannot cancel a
policy that has been in force for more than 60 days
except:
• If you fail to pay the premium.
• You have committed fraud or made serious misrepresentations
on your application.
Non-renewal 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 nonrenewal
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
an explanation, call your state insurance department.
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