INTRODUCTION

Home insurance also commonly called hazard insurance or homeowners

insurance (often abbreviated in the real estate industry as HOI), is the type
of property insurance that covers private homes. It is an insurance policy
that combines various personal insurance protections, which can include
losses occurring to one's home, its contents, loss of its use (additional living
expenses), or loss of other personal possessions of the homeowner, as
well as liability insurance for accidents that may happen at the home or at
the hands of the homeowner within the policy territory. It requires that at
least one of the named insureds occupies the home. The dwelling policy
(DP) is similar, but used for residences which don't qualify for various
reasons, such as vacancy/non-occupancy, seasonal/secondary residence,
or age.

It is a multiple-line insurance, meaning that it includes both property and

liability coverage, with an indivisible premium, meaning that a single
premium is paid for all risks. Standard forms divide coverage into several
categories, and the coverage provided is typically a percentage of
Coverage A, which is coverage for the main dwelling. [1]

The cost of homeowners insurance often depends on what it would cost to

replace the house and which additional riders—additional items to be
insured—are attached to the policy. The insurance policy itself is a lengthy
contract, and names what will and what will not be paid in the case of
various events. Typically, claims due to floods or war (whose definition
typically includes a nuclear explosion from any source), amongst other

1
standard exclusions (like termites), are excluded. Special insurance can be
purchased for these possibilities, including flood insurance. Insurance
should be adjusted to reflect replacement cost, usually upon application of
an inflation factor or a cost index.

The home insurance policy is usually a term contract—a contract that is in

effect for a fixed period of time. The payment the insured makes to the
insurer is called the premium. The insured must pay the insurer the
premium each term. Most insurers charge a lower premium if it appears
less likely the home will be damaged or destroyed: for example, if the
house is situated next to a fire station; if the house is equipped with fire
sprinklers and fire alarms; or if the house exhibits wind mitigation
measures, such as hurricane shutters. Perpetual insurance, which is a type
of home insurance without a fixed term, can also be obtained in certain
areas.

Contents

 1 In the United States

o 1.1 History
o 1.2 Types of policies
o 1.3 Coverage rates
o 1.4 Classes of coverage

2
 2 References

In the United States

In the United States, most home buyers borrow money in the form of a
mortgage loan, and the mortgage lender always requires that the buyer
purchase homeowners insurance as a condition of the loan, in order to
protect the bank if the home were to be destroyed. Anyone with an
insurable interest in the property should be listed on the policy. In some
cases the mortgagee will waive the need for the mortgagor to carry
homeowner's insurance if the value of the land exceeds the amount of the
mortgage balance. In a case like this even the total destruction of any
buildings would not affect the ability of the lender to be able to foreclose
and recover the full amount of the loan.

Home insurance in the United States may differ from other countries; for
example, in Britain, subsidence and subsequent foundation failure is
usually covered under an insurance policy. [2] Reportedly, United States
insurance companies used to offer foundation insurance, which was
reduced to coverage for damage due to leaks, and finally eliminated
altogether

3
 History

The first homeowners policy per se in the United States was introduced in
September 1950, but similar policies had existed in Great Britain and
certain areas of the United States. In the late forties US insurance law was
reformed and during this process multiple line statutes were written,
allowing homeowners policies to become legal. [4]

Prior to the 1950s, there were separate policies for the various perils that
could affect a home. A homeowner would have had to purchase separate
policies covering fire losses, theft, personal property, and the like. During
the 1950s, policy forms were developed allowing the homeowner to
purchase all the insurance they needed on one complete policy. However,
these policies varied by insurance company, and were difficult to
comprehend.[5]

The need for standardization grew so great that a private company based
in Jersey City, New Jersey, Insurance Services Office, also known as the
ISO, was formed in 1971 to provide risk information and issued a simplified
homeowners policy for resell to insurance companies. These policies have
been amended over the years.

4
 Types of policie

Currently, the ISO has seven standardized homeowners insurance forms in

general use:

HO1 – Basic Form Homeowner Policy

A basic policy form that provides coverage on a home against 11
listed perils; contents are generally included in this type of coverage,
but must be explicitly enumerated. The perils include fire or lightning,
windstorm or hail, vandalism or malicious mischief, theft, damage
from vehicles and aircraft, explosion riot or civil commotion, glass
breakage, smoke, volcanic eruption, and personal liability. Exceptions
include floods, earthquakes.
HO2 – Broad Form Homeowner Policy
A more advanced form that provides coverage on a home against 17
listed perils (including all 11 on the HO1). The coverage is usually a
"named perils" policy, which lists the events that would be covered.
HO3 – Special Form Homeowner Policy
The typical, most comprehensive form used for single-family homes.
The policy provides "all risk" coverage on the home with some perils
excluded, such as earthquake and flood. Contents are covered on a
named peril basis. (Note: "All Risk" is poorly termed as it is
essentially named exclusions (ie, if it is not specifically excluded, it is
covered))
HO4 – Renter's Insurance

5
The “Tenants” form is for renters. It covers personal property against
the same perils as the contents portion of the HO2 or HO3. [1]
HO5 - Premier Homeowner Policy
Covers the same as HO3 plus more (can also be achieved by
endorsing an HO15 to the HO3)
HO6 – Condominium Policy
The form for condominium owners.
HO8 – Older Houses
The “Modified Coverage” form is for the owner-occupied older home
whose replacement cost far exceeds the property’s market value.

 Coverage rates

According a 1998 NAIC report, 83% of homes were covered by owner-

occupied homeowners policies. Of these, 87% had the HO3 Special and
9% had the more expensive HO5 Comprehensive. Both of these policies
are "all risks" or "open perils", meaning that they cover all perils except
those specifically excluded. 3% were the HO2 Broad, which covers only
specific named perils. Others include the HO1 Basic and the HO8 Modified,
which is the most limited in its coverage. HO8, also known as older home
insurance, is likely to pay only actual cash value for damages rather than
replacement.[6]

The remaining 13% of home insurance policies were covered by renter's or

condominium insurance. Two-thirds of these had the HO-4 Contents Broad
form, also known as renters insurance, which covers the contents of an

6
apartment not specifically covered in the blanket policy written for the
complex. This policy can also cover liability arising from injury to guests as
well as negligence of the renter within the coverage territory. Common
coverage areas are events such as lightning, riot, aircraft, explosion,
vandalism, smoke, theft, windstorm or hail, falling objects, volcanic
eruption, snow, sleet, and weight of ice. The remainder had the HO-6 Unit-
Owners policy, also known as a condominium insurance, which is designed
for the owners of condos and includes coverage for the part of the building
owned by the insured and for the property housed therein. Designed to
span the gap between the coverage provided by the blanket policy written
for the entire neighborhood or building and the personal property inside the
home. The Association's by-laws may determine the total amount of
insurance necessary. In Florida, the scope of coverage is prescribed by
statute - 718.111(11)(f) .

In addition, about 2.4% of homes were covered by a dwelling fire

policywhich covers property damage to a structure and is typically sold to
noncommercial owners of rented houses. It may also cover the owner's
personal property (such as appliances and furnishings). The owner's
liability may be extended from their own primary home insurance and, thus,
may not comprise part of the Dwelling Fire policy.

Typically consumers can save money by purchasing their insurance directly

from a company rather than through an agent, but there are not many
companies which sell home insurance directly. However, an experienced
agent can provide expertise (especially expertise with the local insurance
environment) that a company may lack.

7
 Classes of coverage

For each policy, there are typically six classifications of coverage. These
are based on standard Insurance Services Office or American Association
of Insurance Services forms.

Section I — Property Coverages

Coverage A – Dwelling
Covers the value of the dwelling itself (not including the land).
Typically, a coinsurance clause states that as long as the dwelling is
insured to 80% of actual value, losses will be adjusted at replacement
cost, up to the policy limits. This is in place to give a buffer against
inflation. HO-4 (renter's insurance) typically has no Coverage A,
although it has additional coverages for improvements.
Coverage B – Other Structures
Covers other structure around the property which are not used for
business, except as a private garage. Typically limited at 10% to 20%
of the Coverage A, with additional amounts available by
endorsement.
Coverage C – Personal Property
Covers personal property, with limits for the theft and loss of
particular classes of items (eg, $200 for money, banknotes, bullion,

8
coins, medals, etc). Typically 50 to 70% of coverage A is required for
contents, which means that consumers may pay for much more
insurance than necessary. This has led to some calls for more
choice.[10]
Coverage D – Loss of Use/Additional Living Expenses
Covers expenses associated with additional living expenses (i.e.
rental expenses) and fair rental value, if part of the residence was
rented, however only the rental income for the actual rent of the
space not services provided such as utilities.
Additional Coverages
Covers a variety of expenses such as debris removal, reasonable
repairs, damage to trees and shrubs for certain named perils
(excluding the most common causes of damage, wind and ice), fire
department changes, removal of property, credit card / identity theft
charges, loss assessment, collapse, landlord's furnishing, and some
building additions. These vary depending upon the form.
Exclusions
In an open perils policy, specific exclusions will be stated in this
section. These generally include earth movement, water damage,
power failure, neglect, war, nuclear hazard, intentional loss, and
concurrent causation (for HO-3).[11]
A Consumer’s Guide

9
 Why You Need Insurance

Homeowners insurance is an important purchase for many people. There

are two major
reasons to buy homeowners insurance:

• To protect your assets

Homeowners insurance covers the structure of your home and your

personal
property, as well as your personal legal responsibility (or liability) for injuries
to
others or their property while they’re on your property.

• To satisfy your mortgage lender

Most mortgage lenders require you to have insurance as long as you have
a
mortgage and to list them as the mortgagee on the policy. If you let your
insurance lapse, your mortgage lender will likely have your home insured.
Compared to a policy you would buy on your own, the premium might be
much

10
higher and the coverage will be limited to damage to the structure of your
home.
The lender can require you to pay this higher premium until you get your
own
homeowners insurance again.
Coverages in a Homeowners Policy

Most homeowners insurance policies provide a package of coverages. The

main types
of coverage are described below. Keep in mind that you’re covered only if
the loss is
caused by a peril your policy covers. For example, if your home becomes
unlivable due
to an earthquake and your homeowners policy doesn’t cover earthquakes,
your policy
won’t pay for loss of use of your home. Review your policy for the limits of
your
coverage.

• Dwelling.

Pays for damage to your house and to structures attached to your

house. This includes damage to fixtures, such as plumbing, electrical
wiring,
heating and permanently installed air-conditioning systems.

11
• Other Structures.
Pays for damage to fences, tool sheds, freestanding garages,
guest cottages and other structures not attached to your house.
• Personal Property.

Reimburses you for the value of your possessions, including

furniture, electronics, appliances and clothing, damaged or lost even when
they
aren’t on your property, such as those at an off-site storage locker or with
your
child at college.

• Loss of Use.

Pays some of your additional living expenses while your home is

being repaired.

• Personal Liability.

Covers your financial loss if you are sued and found legally
responsible for injuries or damages to someone else.

• Medical Payments.

Pays medical bills for people hurt on your property or hurt

by your pets.

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 Types of Homeowners Policies

To be reimbursed for damage to your property, a covered peril (such as

fire, theft or
windstorm) must have caused your loss. Which perils your policy covers
depends on
the type of policy you buy. The most common types of homeowners
policies are listed
below. All of the policy types except the dwelling fire form cover your
dwelling and its
contents, as well as personal liability and medical payments. Read Table 1
to learn the
specific perils each type of policy covers.

• The Dwelling Fire Form covers only your dwelling. It does not cover your
personal property, personal liability or medical payments. It also covers
only a
few perils. It’s the type of policy your mortgage lender will buy for you if you
let
your homeowners policy lapse. It’s also used for vacation homes and when
you
can’t find other coverage.

13
• The Basic Form insures your property against only the list of perils
shown in
• The Modified Coverage Form is for older homes, where the cost to
rebuild is
greater than the market value. It covers the same set of perils as the Basic
Form.
• The Broad Form insures your property against the perils shown on Table
1.
• The Special Form is the most popular of all homeowners forms. It insures
your
property against all perils, except those the policy specifically names as not
covered. Perils commonly excluded are flood and earthquake.
• The Tenants Form is for renters. It insures your personal property
against all of
the perils in the Broad Form.
• The Condominium Unit Owners Form is for owner-occupants of
condominium
units. It insures your personal property and your walls, floors and ceiling
against
all of the perils in the Broad Form.
There are other types of insurance for other types of residences. If you own
a
townhouse, you may insure it through either an individual homeowners
policy or an

14
association master policy. If you live in a mobile home that has wheels
and doesn’t rest
on blocks or a permanent foundation, in most states you’ll buy a form of
automobile
insurance. This insurance offers far less coverage than homeowners
policies. If your
home is on land used for farming or raising livestock, ask about a
farmowners policy.

Limits of Coverage

Your insurance agent usually will help you decide how much dwelling
coverage to buy
when you first get homeowners insurance. Your coverage should equal the
full
replacement cost of your home. Note that replacement cost and market
value are not
the same. The market value, which includes the price of your land,
depends on the real
estate market.
You should review your dwelling coverage from time to time to be sure it
doesn’t drop
below the cost to replace your home. If it drops below 80% of the full
replacement cost

15
of your home, your insurance company may reduce the amount that it will
pay on a
claim.
The limits of your coverage for other structures, for personal property and
for loss of
use of your home are expressed as percentages of your dwelling limit. The
coverage is
usually a set percentage (see Table 2). For example, if your dwelling
coverage limit is
$150,000 and your coverage for personal property is limited to 50% of your
dwelling
coverage, your coverage for personal property would be $75,000. Check
your policy, as
coverage limits might be based on percentages different from those in
Table 2. You
choose your coverage limits for your personal liability and for medical
payments.

Table 2. Policy Limits

Deductibles
A deductible is the money you have to pay out-of-pocket on a claim before
the policy
pays the loss. The deductible applies to coverage for your home and
personal property

16
and is paid on each claim. Higher policy deductibles mean lower policy
premiums. A
policy with a $1,000 deductible will have a lower premium than the same
policy with a
$500 deductible. In some locations, there are also catastrophe deductibles,
which are
expressed as a percentage instead of a dollar amount.
Coverage Component Typical Limit of Coverage
Dwelling You Choose
Other Structures 10% of Dwelling Coverage LImit
Personal Property 50% of Dwelling Coverage Limit
Loss of Use 20% of Dwelling Coverage Limit
Personal Liability You Choose
Medical Payments You Choose

Having a higher deductible can be a good way to save money on your

homeowners
insurance premium and to submit fewer claims. However, be sure you can
afford the
deductible in case you have a loss.

Optional Coverages

You can add other coverages. Sometimes, you can add coverage by
buying an

17
endorsement; other times, you must buy another policy to cover a specific
peril or a
specific item of property. Some reasons you might want to add coverages
are:
• To cover perils most homeowners policies don’t cover. The National
Flood
Insurance Program writes most flood insurance policies, although some
insurance companies also sell it. Many insurance companies sell
earthquake
insurance as a separate policy or as an endorsement to your homeowners
policy.
While homeowners policies in most states cover damage caused by
windstorm
and hail, policies in coastal areas often exclude this coverage, in which
case you
would need to buy a separate policy to protect from this risk. You might be
able
to buy endorsements to cover damage caused by mold or by sewer or
drain
backups and sump pump overflow since most homeowners policies offer
limited
or no coverage for these types of events.

• To increase your current coverage. Guaranteed replacement cost

coverage pays

18
to completely rebuild your home, while a personal property replacement
cost
endorsement pays to replace your personal property. An inflation guard
endorsement raises your dwelling coverage limit annually in line with
inflation.
Personal umbrella liability insurance increases your liability coverage above
the
level available in a homeowners policy. A scheduled personal property
endorsement (or “personal article floater”) covers jewelry, furs, stamps,
coins,
guns, computers, antiques and other items whose value might be greater
than
the normal limits in your homeowners policy. An ordinance or law
endorsement
pays for the extra expense to rebuild your home in compliance with building
codes and other ordinances or laws that didn’t exist when your home was
originally built.

Business Use of Your Home

While homeowners insurance isn’t designed to cover most business uses

of your home,
some policies might cover some business uses, at least partially. For
example:

19
• Computers and laptops. If you use your home computer or laptop for
business
purposes, it’s often covered, but you should check your policy limits. Your
laptop might be covered, even if it’s lost, damaged or stolen when it’s away
from
your home.

• Daycare coverage. Most homeowners policies provide a limited amount

of
liability coverage if you care for a friend’s children and aren’t paid. But if
you’re
paid to provide daycare in your home, you must buy more insurance to
cover
your related liability.

Other Types of Home-Related Insurance

You might hear about other types of insurance, especially when you buy
your home.
Lenders usually require private mortgage insurance (PMI) if your down
payment is less
than 20% of the home’s purchase price. PMI protects the lender if you
default on your

20
mortgage. The PMI premium is often included in your monthly mortgage
payment.

Title insurance protects you and the lender against any monetary loss due
to errors in
the title. You usually pay for title insurance as a one-time fee when you buy
a home.

A home warranty covers the mechanical breakdown of individual parts of

a home, such
as the electrical and plumbing systems. A warranty doesn’t cover the
home’s structure,
may or may not cover appliances, ends at a specific point in time (for
example, one
year) and has exclusions and limitations that you should review. Home
warranties
might not be regulated as insurance in your state.

How Insurers Determine Your Premium

Many factors affect the premium you pay, including which insurance
company you
choose. Different insurance companies charge different premiums for
similar coverage.

21
Decisions you make about how much insurance coverage to buy also affect
your
premium. Some of the other things that are likely to affect your premium
are:
= The characteristics of your home
• The cost to rebuild your home. This is not the same as the purchase price
(which includes the cost of the land). Your insurance agent might help you
estimate replacement cost using information about your home and its
contents.
• Whether your home is made of brick or wood. The premium usually is
lower
for homes that are primarily brick or masonry than for wood frame homes.
• The distance from your home to a water source or fire department and the
quality of your community’s fire protection services.
• The age and condition of your home. The premium often is higher for
older
homes and homes in poor condition than for newer homes and homes in
good condition.
• The claims history of your home and of homes in your area.
= Your choices and characteristics
• The coverages you choose, including optional endorsements.
• The deductible you choose.
• Insuring your home and autos with the same insurance company.
• The length of time you’ve been with your current insurance company.
• Your credit history. To access your credit report, the insurance agent
might

22
ask you for your Social Security number. In many states, insurers use your
credit history as a factor to decide whether to sell you insurance and what
price to charge you.
• Your history of filing claims for water damage, fire, theft or liability on
homes
you’ve owned.
= Other characteristics
• Having protection devices in your home, such as smoke detectors, a
burglar
alarm, a sprinkler system, deadbolts on doors or security devices for
windows. Many insurers offer a discount if you have any of these.
• Having a wood furnace or wood stove.
• Having a swimming pool, trampoline or playscape that could cause
injuries.
• The types of pets you have. Some insurers won’t insure you if you own
certain
breeds of dogs.
• Operating a business from your home.

Smart Shopping

Different insurance companies charge different rates for the same

coverage. Also, not
all insurance companies provide the same level of claims service.
Therefore, it makes
sense to shop around for the best insurance company for your needs.

23
Insurance companies use one of three methods to sell their products.

• Independent agents represent several companies and can give you

several
quotes.

• Exclusive agents only sell the products of one insurance company.

• Direct market sales are over the Internet or by mail or telephone.

You can find insurance companies and agents through the phone book, on
the Internet
and television and by asking friends and neighbors. You should also check
with your
state insurance department to see if it publishes premium comparison
guides for
homeowners insurance.
Customer service is important to most consumers, particularly when they
have a claim.
You can get a sense of how well an insurer serves its customers from a
complaint index.
Many state insurance departments post complaint index information on
their Web
sites. A complaint index measures how many complaints your state
insurance
department receives relative to the size of the company.

24
It’s illegal for unlicensed insurers or agents to sell insurance. Business
cards aren’t
proof that an agent is licensed. If you do business with an unlicensed agent
or company,
it might not pay your claims or refund your premiums if you cancel your
policy. If an
unlicensed agent or company contacts you, check with your state
insurance
department immediately, so it can investigate. Your actions may protect
someone else
from being victimized.
You also want to buy insurance from a company that’s financially sound.
You can check
the financial health of an insurance company by using ratings from
independent ratings
agencies such as Standard and Poor’s, A.M. Best and Moody’s.

Getting Premium Quotes

Getting premium quotes is a good way to compare different companies’

prices. But, first
you should decide what coverages and policy limits you need. It’s important
that you
know how much it would cost to rebuild your home. An insurance agent or
a contractor
might be able to help you estimate the cost to rebuild your home.

25
When you get quotes, it’s crucial that you ask for the same coverages and
limits and
give the same information to each agent or company. To give you an
accurate quote, the
insurance agent or company will usually ask for a description of your house
(such as
where it’s located, its square footage, when it was built and the type of
construction).
He or she also might ask about items that increase your insurance needs,
such as
owning pets and expensive possessions. An agent might visit your home to
take a photo
or ask you for other information (such as the distance from the nearest fire
department
and the general condition of your home). Be sure to get rate quotes and
key information
in writing.
Make sure you ask the insurance agent if you qualify for any discounts.
Some insurers
offer a discount if you also buy your auto insurance from them or if you
disaster-proof
your home (for example, add storm shutters), update the home’s electrical
or plumbing
systems, get a new roof or add home security devices (for example, a
burglar alarm).

26
Also, be sure to find out how much your premium will change if you choose
different
deductibles.
While you’re getting quotes, you should also ask the agent some of these
questions:
• Are the agent and the insurance company licensed by my state insurance
department? For how long? (Your state insurance department can confirm
the
answers to these questions.)
• How can I find out the claims history of the home before I buy it? The
claims
history of the home might affect your premium.
• If I submit a claim, how will it affect my premium when I renew the policy?
• How will my credit history affect my premium?
• What does the policy cover? What doesn’t it cover? What are the limits to
the
coverages?
• How much coverage do I need for my personal property?
• How much liability coverage should I buy?
• Should I buy flood insurance or earthquake coverage? Your homeowners
insurance policy doesn’t cover either.
• What types of water damage are not covered? Is mold damage covered?
If you’re thinking of buying a home, you can ask an agent to estimate the
cost of
insurance.

27
Your Responsibilities

A homeowners insurance policy is a legal contract. It’s written so that your

rights and
responsibilities, and those of the insurance company, are clearly stated.
You should
read your policy and be sure you understand it. If you have questions about
your
insurance policy, contact your insurance agent or company.
When you buy homeowners insurance, you will receive a policy—not a
photocopy. If you
don’t receive a policy within 30 days, contact the insurance company, not
the agent. If
you need a company’s toll-free number, contact your state insurance
department.
Keep your policy in a safe place and know the name of your insurer. If you
still have
questions, contact your state insurance department.
Other helpful tips:
• Pay the premium on time. Most insurers don’t offer a grace period for
paying the
premium; the due date is the due date.
• Keep a file of all paperwork you completed online or received in the mail
and

28
signed—as well as any other documents related to your insurance,
including the
policy, correspondence, copies of advertisements, premium payment
receipts,
notes of conversations and any claims submitted.
• Make a household inventory.
- Go through each room; write down and take pictures or videos of
everything
in the room.
- Inventory everything, including valuable items such as antiques,
electronics,
jewelry, collectibles and guns.
- Store your home inventory in a secure place at another location, such as
your
workplace, a safe deposit box, a relative’s house or online.
- Annually review and update your home inventory, including your
pictures/videos. Also update your inventory when you buy new items.
- Keep receipts with your home inventory for all repairs and new items you
buy, for proof if you file a claim.
• Maintain your home.
- A homeowners policy isn’t a maintenance contract; it insures against
damage
from perils such as fire, wind and hail. It doesn’t pay to repair items that
simply wear out, like rotted porch railings. You’re responsible for the
upkeep
of your home, such as repairing your roof when it begins to leak or cleaning

29
your chimney flue so it doesn’t catch fire.

Filing a Claim

Read your policy—it’s your guide to the types of losses that may or may not
be covered.
How often you file a claim and the types of claims you file often affect your
premium and
whether your insurer will renew your policy. If the cost to repair the damage
is not much
more than your deductible, you might want to pay for the repairs without
filing a claim.
To file a claim, contact your insurance agent or company as soon as
possible. Ask about
forms or documents you’ll need to support your claim. You’re also required
to protect
your home from further damage. For example, you might need to board it
up or clean
up water from a backed-up drain.
The insurance company will assign a claims adjuster to assess the
damages and
determine the payment. These adjusters may be employees of the
company or
independent contractors. You should cooperate with the adjuster’s
investigation of

30
your claim. The adjuster will probably want to meet with you at your house
to inspect
the damage. Jot down notes and keep track of the dates of any
conversations you have
with your insurance agent or adjuster.
If there are disagreements between you, the insurer and the claims
adjuster, first try to
resolve them with your insurer. Don’t feel rushed or pushed to agree with
something
you aren’t comfortable with. It might help to have your contractor meet with
you and
the insurance adjuster.
If you and the insurer still disagree about the value of the claim, check your
policy for
an appraisal clause. Another option is to hire an attorney or a public
adjuster.
If you have trouble with or questions about your claim, you also may
contact your state
insurance department for help. Your state insurance department has
consumer
services personnel who can help you work with your insurer to resolve
disagreements.

Losing Your Insurance

There’s a big difference between an insurance company cancelling your
policy and not

31
renewing it.

Cancellation means either you or your insurance company stop the

coverage before
the policy’s normal expiration date (which is usually 12 months after the
policy starts).
You can always cancel your policy for any reason. When you’re a new
policyholder,
there’s a limited period of time (typically 60 days) in which your insurance
company
can cancel your policy for any reason. After that, it can only cancel you if
you don’t pay
your premium, if you’ve lied on your application or if your risk has changed
substantially.
If your insurance company cancels your policy, it must give you notice. The
number of
days varies by state. If you or the insurer cancels your policy, the company
may refund
a portion of your premium.

Non-renewal means the company refuses to renew your policy after it

expires.

32
Insurance companies generally have the right to not renew your policy. If
your company
chooses not to renew your policy, it must give you notice; the number of
days (typically
30 days before the renewal date) varies by state. You may ask the insurer
for the reason.
You also may choose not to renew your policy.

What to Do if You Can’t Find Insurance

Contact your state insurance department to see if your state has a FAIR
Plan, wind pool,
or other residual market mechanism information or market assistance
program
available. See below for information on contacting your insurance
department.

 Home Insurance for First Time Buyers

33
For first time homebuyers, purchasing home insurance is an essential part
of buying a home. First time home buyers should be aware that many
lenders require home insurance before closing. Protecting a home gives
buyers peace of mind knowing they are protected.
As a first-time home buyer, you have to be able to understand all points of
a home insurance plan. When considering what type of home insurance to
buy, it is important to consider the following types of home insurance
coverage: - Personal Property: This type of insurance covers items within
the
home. Coverage depends on the limits of your coverage. It is essential to
know the details of your personal coverage. For instance, are you insured
for
the original price of an item or the current price?
- Casualty: This type of insurance covers natural disasters fro such events
as fire, hail, and wind. It is important to review the policy to make sure you
are covered. If you live in a flood risk area, you will have to purchase flood
insurance.
- Liability: This protects you from lawsuits resulting from injuries to guests.
The cost for this liability coverage is usually based on the limits of your
coverage.
- Additional Coverage: You may want to purchase extra coverage if you
have very expensive items. There are other types of coverage for such
situations as loss assessment, collapse, some repairs, damage to trees as
the result of wind or ice, some building additions, loss of food due to power

34
outage, and much more. It is important to inquire about the availability of
additional coverage.
- Exclusions: Home insurance policies always have a list of exclusions that
includes war, neglect, earth movement, intentional loss such as arson and
more. It is important to be aware of what your insurance does not cover.
Steps to help a first time buyer save money on home insurance include: 1.
Shop Around: Don't take the first home insurance policy that is offered.
Compare the details and price with other lenders. You may be able to get a
better deal or additional coverage. Make sure you ask a lot of questions to
get a sense of the lender's attitude. You do not want a lender to give you a
difficult time if you have to make a claim.
2. Deductibles: A deductible is the amount you have to pay toward a loss
before your insurance company will pay. Check to see whether it would
benefit to have either a high or low deductible.
3. Age of Home: Many insurers will lower costs if the house is brand new.
4. Home Security: Find out if there is a discount if you install safety
equipment such as smoke alarms, fire extinguishers, burglar alarms, dead
bolt
lock, etc.
5. Don't Change Insurers: Many insurers will reduce costs if you stay with
them for a certain period of time. Being a loyal client may also result in
special discounts.
6. Review Your Policy Annually: Because most home insurance policies
are renewed each year, you should take the time each year to compare
your

35
policy limits to the value of your possessions. You want to make sure that
your policy covers any major purchases. You also want your policy to
reflect
any changes such as renovations, having a baby, or getting married.
A home insurance policy protects both the homeowner and lender's
investment. Without home insurance, you are at great risk of losing
everything as
the result of events such as fire, burglary, if someone suffers a serious
injury while in your home, and many other sudden disasters. By securing
home

insurance at the time the sale closes, you and your family will be able to
relax and enjoy making memories in your new home.

36
 Homeowners Insurance

A home is usually a person’s most expensive

possession. Protecting it — and what’s in it — is
extremely important. Whether you own your home or
rent a place to live, you’ll need to purchase insurance.
Coverage for your home and personal belongings
should be selected with care.
Types of policies
The two most common types are HO-2 and HO-3.
The Broad Form (HO-2) covers damage to the
dwelling and possessions from specific perils such as
explosion, fire, lightning, windstorm, hail, riot, civil
commotions, theft, vandalism, falling objects, smoke,
and damage from a vehicle or aircraft.
A Special Form (HO-3) covers damage to personal
property from the same perils as the Broad Form.
The structure is covered against all perils, except a
specific few. There is also a policy to meet the
specific needs of condominium owners — HO-6.
Do renters need insurance?
Yes. Renters should not overlook the need for
insurance. If a renter’s building is destroyed, the
landlord or property owner’s policy will cover the

37
structure only. To recover for the loss of personal
belongings, the renter must have his/her own policy.
There is a policy tailored to fit the needs of renters.
The renters policy, or HO-4, covers damage to
possessions which result from certain causes. It is
similar to the policy purchased by the owner of a
house. The primary difference is that the renters
policy does not include coverage on the building.

 What other coverages are provided?

A homeowners or renters policy provides more than

just financial protection for the property and/or
contents. The policy also includes liability coverage.
This coverage applies to you as well as any family
members living in the household.
This portion of the policy provides coverage for legal
liabilities if someone is injured on the premises. It
also includes the cost of defending you in the event of

Coverage is also provided for: 1) medical expenses

resulting from minor injuries to others occurring on

the property, and 2) damage that you or a family
member might cause accidentally to another person’s
property.

38
 Do homeowners policies provide coverage for
personal property?

A homeowners insurance policy does cover personal

belongings as well as the home itself. Coverage for
personal property located on the premises is usually
50% of the insurance on the dwelling.
However, both homeowners and renters policies
usually provide limited amounts of coverage for
certain types of personal property. Those items,
which are susceptible to loss include cash,
securities, jewelry, firearms, and stamp and coin
collections. Coverage for cash has a $200 limit, while
coverage for other valuables varies between $1,000
and $2,500. For an additional premium, the
consumer can purchase an endorsement that
describes and insures each item for a certain dollar
value.
Homeowners and renters insurance policies may
cover contents on an actual cash value basis. That
means the insurance company will pay the
replacement cost, less depreciation.
However, a policy can be purchased to cover
contents on a replacement cost basis. If personal
property is destroyed, the insurance company will pay

39
if you repair or replace it — without deducting for

 What is the difference between a replacement

cost policy and a repair cost policy?

A replacement cost policy is the most common type

of dwelling insurance. It pays for replacing, rebuilding
or repairing the dwelling to its original condition with
materials of like kind and quality. Another option
offered by some insurance companies is the repair
cost policy. This type of policy pays to replace, repair
or rebuild damaged dwellings to a similar condition,
using contemporary materials.

Factors That Determine The Cost

Of Home Insurance Premiums
For most people, their home is their most valuable
asset. It represents not only a major investment of
money, but also an accumulation of a lifetime’s worth
of possessions and memories. For a fairly modest
amount of money, homeowners can protect both
their home’s structure and its contents in case of
damage from a variety of causes.
How much an individual pays to insure his or her
home depends on a number of factors that reflect the
risk of damage to the home and the cost of the

40
insurance company to repair or rebuild the home.
Michigan's Essential Insurance Act provides that
rates shall not be excessive, inadequate or unfairly
discriminatory. It further limits the factors an
insurance company can use to determine the price of
a homeowners policy. Following are just some of the
classifications used.
Amount and type of insurance coverage.
Homeowners can usually select from good-value,
basic policies that will reimburse for the depreciated
value of the home up to a deluxe policy that will
guarantee to rebuild the home and replace its
contents no matter what the cost. Coverage can
also be added that is not a part of the regular
insurance policy, such as coverage for a home
business. The more coverages that are selected,
the more expensive the policy will be.
Safety and security. Installation of dead-bolt locks,
smoke detectors and fire extinguishers are loss
prevention and loss reduction items which can help
decrease the cost of a homeowners policy. The
availability of law enforcement or crime prevention
services also play a part in determining the
homeowners policy premium.
Location of the home. Where a home is located has
a significant impact on the cost to insure it, for

41
several different reasons. Insurance companies will
determine if the home is at risk for hail, tornado or
other unusual damage; if the home is located within a
reasonable distance from a fire service; if the home

is located in an area of the country with high costs of

construction; and if there is unusually high or low

incidence of theft and arson where the home is
located.
Type of home. A home’s size, type of construction,
building material components and number of units are
just some of the important factors which determine a
home's insurance costs because they affect what it
would cost the insurance company should they have
to rebuild the home.
Michigan Basic Property
Insurance Association
Michigan Basic Property Insurance Association was
established on October 29,1968, along with 27 other
state FAIR Plans (Fair Access to Insurance
Requirements). The FAIR Plans were a result of the
Federal Omnibus Housing Bill, passed on August 1,
1968.
The Omnibus Bill passed by the federal government
provided for riot reinsurance if insurance companies
would join together in statewide pools to offer basic

42
property insurance to those who were ineligible in the
voluntary market. The bill gave the responsibility of
the formation of FAIR Plans and their operations to
individual states.
Michigan Basic’s purpose is to provide fair access to
property insurance at standard rates regardless of
property location.
Flood Insurance
In 1968 Congress created the National Flood Insurance
Program (NFIP) in response to the rising cost of
taxpayer-funded disaster relief for flood victims and
the increasing amount of damage caused by floods.
The NFIP makes federally-backed flood insurance
available in communities that agree to adopt and
enforce floodplain management ordinances to reduce
future flood damage.
Currently, about 797 Michigan communities participate
in the federal program, and over 27,600 policies are in
force with coverage of nearly $4 billion. Under the
NFIP, a flood is defined in part as a general and
temporary condition of partial or complete inundation
of normally dry land areas from overflow of inland or
tidal waters, or from the unusual and rapid
accumulation of runoff of surface waters from any
source.

43
It is important to note that this flood definition covers
general street flooding that enters a home, and notjust from a river. In the
standard flood insurance
policy, direct physical losses by flood are covered.
Also covered are losses resulting from erosion
caused by waves or currents of water exceeding
anticipated cyclical levels or erosion accompanied by
a severe storm, flash flood, abnormal tidal surge, or
the like. Basement flooding is a covered hazard
under the NFIP policy. However, homeowners should
be aware that personal property is not covered in a
basement location. Losses from water seepage,
sewer backup, or hydrostatic pressure are covered
only when they occur in conjunction with a general
condition of flooding.
To purchase flood insurance under the program,
residents must live in one of the participating
communities. Coverage can be obtained through
most licensed property/casualty insurance agents. If
you would like more information about the NFIP,
please contact the Michigan Department of
Environmental Quality, Land and Water Management
Division, P.O. Box 30458, Lansing, MI 48909, by email
to thomasl@[Link]

44
 BIBLOGRAPHY

1. ^ Nance CP. (2003). Modern Real Estate Practice in Texas p. 39.

2. ^ Murphy K. (2010). Shifting Soil Threatens Homes’ Foundations.
New York Times.
3. ^ Ellison J. Are home foundation repairs covered by insurance?.
Webcite archive.
4. ^ Hunt, Jr. FJ. (1962). Homeowners - The First Decade. Proceedings
of the Casualty Actuary Society.
^
5. ^ Wiening, Eric; George Rejda, Constance Luthardt, Cheryl
Ferguson (2002). Personal Insurance (1st edition ed.). Malvern,
Pennsylvania: American Institute for Chartered Property Casualty
Underwriters/Insurance Institute of America. ISBN 0-89463-108-X.
a b
6. ^ NAIC Staff. 1998 Home Insurance Average Premium. Research
Quarterly 7(2):17. Free full-text.

45
7. ^ [Link]
App_mode=Display_Statute&Search_String=&URL=Ch0718/Sec111.
HTM
8. ^ Willis G. (2006). Getting homeowners insurance 5 Tips Home
Edition: What to do if you have no coverage.
9. ^ [Link]
a=featured_pr&id=104537
10. ^ Rebecca Mowbray. (March 22, 2009). Contents coverage reforms
urged. The Times-Picayune.
11. ^ The Academy of Producer Insurance Studies. (2000). The
Insurance Essentials Handbook, pp 77-91. The National Alliance for
Insurance Education & Research.
12. • If you can’t find insurance, consumer rights information,
premium comparisons
13. or complaint handling information, visit your state insurance
department’s Web
14. site. The department will have some information posted on the
Web site, plus
15. contact information if you have other questions. To find the
Web site address of
16. your state department, visit the National Association of
Insurance
17. Commissioners (NAIC) Web site at
[Link]/state_web_map.htm and select
18. your state on the map.

46
19. • Visit the NAIC Web sites for consumers:
[Link] or [Link].
20. • Visit the National Flood Insurance Program Web site:
[Link].
21. • Access your free annual credit report through
[Link] or
22. call 877-322-8228.

47