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The
Policy
The paper policy
you receive from your insurance company will typically have four parts:
- The declaration/information
page identifies the policy number, the effective dates, the
address of the insured property, the mortgage holder, the coverages,
coverage limits, the premium and any discounts.
- The insuring
agreement summarizes the policy coverages. This form is
typically a general listing and can be modified by endorsements later in
the policy, which should be listed on the declaration page. The insuring
agreement will also explain the types of perils—or losses covered. The
policy will be either a named-perils policy,
which will list the types of losses covered, or an all-risk policy,
which lists the types of coverages excluded by the policy.
- The exclusions
section outlines specific coverages or perils not covered by
your policy. This section can modify coverages in the insuring
agreement. Typically flood and earthquake are excluded from homeowners
and renter's policies. Personal property, like automobiles and animals, are
also typically excluded.
- The general
conditions section explains what you are expected to do in
case of a loss. This section also contains definitions for the terms
used on the declarations page and in the insuring agreement.
What
to Look for on a Declarations or Information Page
Many factors
are used to determine your homeowners or renter's insurance premium. To
ensure your company has used accurate information and has provided the
coverage you want, check the following on your policy declarations page:
- Name and Property Location – Confirm the address and
names listed on the policy are correct. In most cases, the names of all
parties involved in the mortgage should be named as insureds. Also,
check the address of the insured property; any errors in this address
could cause problems if you need to file a claim.
- Effective Dates/Policy Period – These are the dates
the policy is in force. Your lienholder or mortgage company will be
checking to make sure the policy continues without interruption. If
there is a break in the coverage, your mortgage holder can force you to
pay for insurance they purchase on the property.
- Property
Coverages – The property section will include the amount of coverage
you have on the dwelling (attached structures, plumbing, heating, and
electrical); other structures (detached garages, sheds, fences);
personal property (contents of the home, other personal items) and loss
of use (living expenses if you cannot live in the home). Note: The
manner in which the property will be replaced should also be described
here. Check to see if claims will be paid with replacement cost (the
amount it would take to replace or rebuild your home or repair damages
with materials of similar kind and quality, without deducting for
depreciation) or Actual Cash Value (often written as ACV, meaning you
will be reimbursed the amount it would take to repair or replace damage
after depreciation). These amounts should be reviewed annually and
adjustments made as new purchases are added to the house.
- Liability
Coverages – The liability section includes the amount of coverage
you have for personal liability (protection for the named insured
against liability for accidents that cause injury to other people or
damage to their property) and medical payments (pays medical expenses
when people are injured on the insured's property). Liability insurance
covers the named insured, so make sure these limits are in line with the
amount of protection you may need. For extra coverage, you may consider
a personal umbrella policy, which provides additional liability coverage
on top of the homeowners/renter's policy.
- Endorsements – If you have increased coverage or
added coverage outside the basic policy, you will find those additions
in this section.
- Deductibles – Declarations pages vary from company to
company, but all declarations pages specify the amount you are
responsible to pay when you have a loss. In some cases this will be a
dollar amount, in others it will be a percentage. If you have questions
about how the deductible is applied to the different types of coverages,
talk with your agent or insurance company.
- Discounts – Check the list of discounts to see what
was included in your overall premium. If you think you are eligible for
a discount you are not receiving, call your agent or insurance company.
- Premium – This is the cost for the term of the
policy, generally after the discounts have been applied.
- Lienholder Information – The address of the
lienholder listed on your policy is where the proof of coverage will be
mailed. Make sure this matches the information provided by your mortgage
company.
- Agent/Insurance Company Contact – This should be
either the name and contact information for the agent from whom you
purchased your policy or the company that wrote the policy.
What
Renters Need to Know About Their Policy
Renter's
insurance varies slightly from homeowners insurance because it only covers
the insured contents of a home and the insured's personal liability. As a
renter, you do not insure the structure.
However,
for the contents and liability coverage the same considerations apply as for
homeowners. Make sure the limits of personal property coverage are enough for
all the belongings in the house. If you own antiques, art, jewelry or
electronics, check the limits of the basic renter's policy; it may be
necessary to purchase additional coverage if your belongings exceed the
limits of the policy. As with a homeowners policy, the liability coverage in
the policy protects the named insured from legal recourse as a result of an
injury on the property. If the basic limit of liability will not protect you
sufficiently, then an umbrella policy is an option for additional coverage.
Other
Things to Know About Your Homeowners/Renter's Insurance
- Leisure Items – Backyard items, such as a trampoline
or pool, may require you to increase your liability coverage with an
umbrella policy. In some cases, these items may even lead a company to
cancel your policy. Talk with your agent before you purchase
recreational items to find out what coverage your company offers.
- Valuables – As you acquire more valuables – jewelry,
family heirlooms, antiques, art – additional coverage can be purchased
to cover these special items. Typical homeowners or renter's policies
have limits on these types of belongings.
- Claims history – When you apply for a policy or when
a current policy is renewed, it is normal for an insurance company to
check the insured's claims history. For new customers, companies often
run a Comprehensive Loss Underwriting Exchange (C.L.U.E.), Colossus, or
similar report. This information is used to help determine the cost of
insuring your home. Ask your agent or insurance company how long
previous claims can adversely affect your premium.
- Credit history – In some states, a credit-based
insurance score can be used as a factor to determine your premium. It is
a good idea to check your credit report annually to ensure the
information is correct. If you find errors, check with the credit
reporting company about how to make necessary amendments and then ask
for a review of your premium. You can find more information about credit
based insurance scores here.
Create
a Home Inventory
A home inventory
will help you figure out how much personal property insurance your policy
should include. It will also help you file a claim in the event of a loss. An
inventory should include all of the vital information about your belongings
(brand name, price, date of purchase, model, serial number and receipts) and
should be accompanied by photos of the items. The NAIC has a free smart phone
app that can walk you through creating a home inventory. The iPhone® version
is available here,
the Android version here.
A simple-to-use home
inventory checklist is also available on the Insure U website.
Once you
have made your inventory and taken photographs of your home, e-mail the
information to family or friends, or to your insurance agent.
More
information
Understanding
your options will help you make smart insurance choices to protect you and
your family. For more information about homeowners or renter's insurance, go
to InsureUonline.org and chose the
life situation that best fits you. You can also call your state insurance
department. Find the phone number here.
July 2012
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