Five Frequently asked insurance questions regarding home insurance:
Home insurance is more than just homes. It includes renters, condo, landlord, and mobile home insurance. Home Insurance covers your property, belongings, liability meaning injury to others or damage to the property of others you may cause. With this in mind here are the most often asked questions regarding home insurance.
1. What is renter’s insurance and why do I need it?
Renter insurance is an insurance policy that suits the needs of individuals and families who do not own the property they live in. A renter insurance policy is similar to a homeowner insurance policy except the building coverage is removed. There is coverage for personal property and personal liability. The cost of the renter insurance policy is small compared to the amount of insurance coverage you receive. Many insurance companies offer a multi-policy discount on your auto insurance with a renter insurance policy.
2. How is condo insurance different from home insurance?
Condo insurance has significant differences from a traditional homeowner’s policy. When you purchase a condo, you are purchasing the space inside of the building. The majority of the structure is not yours; it belongs to the homeowner’s association or the builder. Therefore, the insurance you purchase does not need to cover the entire building. It only covers your unit.
When you own a condo, you will most likely be part of a condo association. If there are problems with the building or public space, you can be assessed as part of association to fix damages. This coverage on your condo policy is for loss assessment.
3. How does escrow work with my homeowner’s insurance payments?
When you purchase a home, the lender will often set up an escrow account. An escrow account helps ensure that expenses such as your homeowner's insurance premiums and real estate taxes are paid on time. Your mortgage lender will deposit the escrow amount in the account each month and then pay your insurance bill, real estate taxes, and, if necessary, your private mortgage insurance bill when they are due. Other monthly expenses, such as a Homeowners Association fee, may also be included in the escrow account.
4. What is not covered in my homeowner’s insurance policy?
The standard homeowner's insurance policy, also known as an HO-3, covers your home for multiple perils, but there are some important exclusions.
· In most states, earthquakes, sinkholes, and other earth movements are not covered by your standard policy.
· Flood insurance must be purchased as a separate policy and is available only through the government-run National Flood Insurance Program. (NFIP) Other excluded types of water damage include overflows or backups from your pump, sewer system or drains. Coverage may be available, however, by adding a separate endorsement.
· Maintenance issues are excluded. Taking proper care of your home can keep you from having to pay for costly repairs your homeowner’s insurance won't cover. Many things that aren't covered under your standard policy typically result from neglect and a failure to properly maintain the property. Termites and insect damage, bird or rodent damage, rust, rot, mold, and general wear and tear are not covered. Damage caused by smog or smoke from industrial or agricultural operations is also not covered.
· If something is poorly made or has a hidden defect, this is generally excluded and won't be covered. The same applies to any mechanical breakdown.
· If your home should suffer a power outage, things like food spoilage are not covered under a standard policy.
· Standard homeowners’ insurance policies typically do not include coverage for valuable jewelry, artwork, other collectibles, identity theft protection, or damage caused by an earthquake or a flood.
5. How does actual cash value (ACV) affect a homeowners insurance claim?
Actual Cash Value (ACV) is a way insurance companies assess the value of property loss at the time of a claim. The most important thing to remember is that in the event of a loss, if your policy contains an ACV, depreciation of the property will be taken out of your payment.
For example, if you have kitchen cabinets that are 10 years old, but have a 20-year life, and they cost you $10,000 to replace, you will get a check for $5,000.
In most cases, actual cash value policies cost less than replacement cost policies, but the in cases of a loss the depreciation penalty will be more severe.