HOMEOWNER INSURANCE 101 - "Class is in session ..."

Some background information...

Homeowners insurance is basically designed to bring your home and possessions back to the same condition they were in before a loss occurred. There are several different types of homeowners policies offered by a wide variety of insurance companies and not all coverages are the same or are available in all states. You should speak directly with an independent agent or Travelers representative about your specific coverage needs.

While reading through the information below, you should keep in mind a couple definitions: (a) Exclusions are situations where your policy does not provide coverage; and (b) Liability is something for which you are legally responsible.


Dwelling (referred to as Coverage A in the policy)
Imagine your house on moving day...empty, waiting to be filled. This is the part referred to as Coverage A: your physical home (rooms, fireplaces, tile floors, carpeting, etc.) and the structures attached to it, such as an attached garage.

The amount of coverage assigned to your dwelling should reflect the amount it would cost to completely repair or rebuild your home should it suffer a covered loss. Often this is determined by your home's purchase price plus inflation. However, if it's been a while since you last updated your policy coverage or if you are not sure that your dwelling is adequately covered, you can either check with your agent or Travelers representative.


Other structures (Coverage B)
Not all structures that exist on your property are actually attached to your house. Therefore, Coverage B offers insurance protection for other structures such as a detached garage, gazebo, or storage shed.


Personal property (Coverage C)
Your personal possessions such as furniture, clothing and appliances are covered. Certain types of possessions are excluded or have limited coverage. Please see personal property exclusions and limits of coverage for more specific information.


Loss of use (Coverage D)
The coverage is also called Additional Living Expense. Essentially, this pays for your housing and other living expenses (like meals and laundry) if a major loss makes your house uninhabitable and you have to move out temporarily while it's being repaired.


Covered perils

A homeowners insurance policy provides protection from the following perils:

• fire or lightning
• windstorm or hail
• explosion
• aircraft
• vehicles
• riot or civil commotion
• smoke
• theft
• vandalism/malicious mischief
• glass breakage
• volcanic eruption

Some policies also provide coverage for:

• falling objects
• weight of ice, snow or sleet
• freezing of plumbing
• accidental plumbing discharge
• rupture of steam or hot water heating system, air conditioning systems, or water heaters
  damage from artificially generated electricity

Exclusions

A homeowners policy does not provide coverage for the following perils:

• loss due to flood, or water that backs up through sewers
• loss to building by earthquake, aftershocks and mud slides
• loss by enforcement law or ordinance regulating construction, repair or demolition, or zoning
• loss due to power interruption when the interruption takes place off the residence property
• loss due to neglect of the insured to save and preserve property following a loss
  war and nuclear perils
• intentional loss

Limits of Liability

For basic homeowners policies, a specific minimum amount of coverage is required for each of the major property coverages, based on the primary amount of insurance selected.

Coverage A (Dwelling) = Primary limit
Coverage B (Other Structures) = 10% of Coverage A limit
Coverage C (Personal Property) = 50% of Coverage A limit
Coverage D (Loss of use) = 20% of Coverage A limit.

For example, if your home is insured for $100,000 under Coverage A:

Coverage B liability limit is $10,000
Coverage C is $50,000
Coverage D is $20,000

Deductibles

With a homeowners policy, a deductible applies to the property portion of the policy. A deductible is the amount you would have to pay out of your own pocket before the insurance coverage kicks in. Typical deductibles are $100, $250, $500 or higher and some policies have several deductibles. The higher the deductible you select, the lower your premium payment is.


Optional Coverages

There are a number of optional coverages (also called endorsements) which enhance your basic homeowners policy either by adding or removing certain coverages. Some of the more common add-on coverages include:

Broadened coverage for contents: provides "all-risk" protection for your possessions. This means that your personal property is covered in most situations, regardless of the cause of loss.
Contents replacement cost coverage: after a loss, you would be paid based on the replacement cost...with no deduction for depreciation...subject to your policy limits and deductible. Special limits apply to certain items such as jewelry, watches and furs.

Valuable Items Plus: provides higher limits and worldwide protection for special property such as jewelry, silverware, fine art, furs, cameras, firearms, musical instruments, and home computers for an extended variety of losses. Should you need even higher amounts of coverage than that offered by the Valuable Items Plus endorsement, a separate Valuable Items policy is also available.

Additional Coverage Endorsement (ACE): extends protection or increases limits on special types of property (for example: jewelry, firearms, or silverware). This coverage also increases personal liability coverage by $100,000 and includes coverage for personal injury.
Water back up of sewers or drains: you're covered for a specific dollar amount if water backs up through a sewer or drain, or overflows from a sump pump.

Personal Property Exclusions and Limits of Coverage

Certain classes of property are specifically excluded from coverage because of the nature of what they are or because they are generally covered by other types of policies:

• Animals, birds or fish
• motorized vehicles or aircraft, including equipment and accessories
• radios, CB radios, tape decks, etc., while in or on a motor vehicle
• articles separately described and specifically insured in any other insurance
• property of boarders (renters insurance is available and should be considered by boarders).
  aircraft or aircraft parts
• property in an apartment held for rental by the insured
• property rented to others off the residential premises

Certain classes of property have specialized limits of coverage:

• money or related property, coins and precious metals other than tableware
• securities, manuscripts, and other valuable property
• water craft, including trailers and equipment
• trailers
• grave markers
• loss by theft of jewelry, watches, furs and semi-precious stones
• loss by theft of firearms
• loss by theft of silverware, goldware or pewterware
• property on the residence premises used for business purposes
• property away from residence premises used for business purposes

Endorsements

There are several endorsements or separate policies that cover personal property items for higher limits of coverage. For example, Traveler's Home Business Protection provides expanded protection for home office equipment and additional protection for home-based businesses (in some states). A Valuable Items policy may be needed to protect your jewelry, furs or other treasured possessions.

Personal liability (Coverage E)
Provides coverage for bodily injury or property damage for which you are legally responsible. For example, let's say your dog bites someone, a guest falls down your front stairs, or your son throws a ball through your neighbor's window. You are legally responsible for these actions. Personal Liability helps to cover the associated costs of these related damages.

Most homeowner policies provide a minimum of $100,000 of liability protection. However, you can opt to increase this amount. Also Excess Liability Insurance 101 can help you determine whether the liability limits available on your homeowners policy are sufficient for your needs. Of course, an independent agent or Travelers representative is your greatest resource for this evaluation.


Medical payments (Coverage F)
Pays all reasonable and necessary medical expenses for a period of three years from the date of an accident to a person or persons injured while on your property. This coverage does not apply to the insured or regular residents of the insured's household.


Bodily Injury
Accidents do happen...and sometimes they happen to other people while at your home, or by a member of your household. This coverage helps to pay for the expenses created in the event that a physical injury to others is caused by you, residents of your household, or your pets.


Property Damage

If someone's property is accidentally damaged by you, members of your household, or your pets, your homeowners policy will help to repair or replace it.

Liability coverage exclusions
A homeowners policy does not provide coverage for:

• bodily injury or property damage which is expected or intended by the insured
• bodily injury or property damage arising out of business pursuits
• bodily injury or property damage arising out of rental of any part of the premises
• liability arising out of ownership, maintenance, use, loading or unloading of aircraft, motor vehicles or water craft
• liability arising out of war or insurrection

Additional exclusions to Coverage E only:

• liability assumed under contract or agreement
• property damage to property owned by, used by or in the care of the insured
• bodily injury which is covered under a Workers Compensation policy

Umbrella or Excess Liability Coverage
Umbrella or excess liability coverage provides liability coverage over and above what's covered by your auto, homeowners or other policy for personal liability and lawsuits. Such coverage can be purchased as an attachment to your policy or as a separate policy. Our Excess Liability Insurance 101 course provides much more information on this important protection. Or you can speak directly with an independent agent about your specific coverage needs.