Business Development Officer, T.D. McNeil Insurance Services, Fresno, California
Most insurance companies that offer homeowner’s policies use or adapt a standard policy that was developed by the Insurance Services Organization (ISO). Definitions are fairly consistent across different company policies. Companies have frequently adopted “easy read” policies and some of these appear to be slightly different; however, they are still based upon the same framework in most cases.
The mix of coverages offered by the various insurance companies is also comparable. The ISO format allows for a number of different “forms” and that can sometimes create confusion but most companies offer the standard HO-3 form. The most important thing is to determine the perils that the policy is pledged to insure against. Again, these are fairly standard but with the different forms there is also a slightly different list of perils. The basic peril is fire and the list of perils includes “everything except.” As a consumer you should note carefully the perils that the policy is going to cover.
Customers occasionally fail to make premium payments when they are required and the coverage lapses. Expired home insurance is the very worst kind. It will not provide any coverage in the event of loss which could be quite expensive. The majority of home policies are actually paid by an impound account established by the mortgage company but some are not and occasionally even a mortgage company fails to pay the premium at the correct time.
Incidentally, since the mortgage company requires that you carry home insurance and name them as mortgagee they also have the right to issue an insurance policy on the property with a company that you do not select and at a price you do not negotiate. This can be a rude and expensive revelation.
So, the best home insurance policy is the one that is in effect. The next criteria are that the best home insurance has adequate limits to handle a claim. Usually this is established at the time the policy is written with a third-party estimate of reconstruction costs. Most home policies have a provision that increases coverage with every renewal to keep pace with the rising cost of construction in your area. This should be checked every few years to make sure that everything is accurate.
The cost of a property loss could greater than anticipated. If there is a massive loss in an area, for example a fire takes out homes in a three block area, the limits of the policy might be exhausted before the home can be restored because there would be an unusual strain on the capacity of the building trades in the area to repair all the homes involved. There is intense competition for building materials and specialty contractors. If you think you might be in an area that could be affected in that way make sure you discuss this at length with your insurance agent.
The liability limit on your home policy requires close attention. A lawsuit for bodily injury or physical damage can end up costing a great deal more than the value of your home. You should select the maximum amount of liability coverage that the insurance company offers and then price umbrella coverage to increase that limit. It only takes one lawsuit to ruin your weekend.
Two huge risks are not covered by the standard home insurance policy. These risks are flood and earthquake. Both can be devastating. Consider the purchase of flood insurance through your agent and the National Flood program and Earthquake which is available as a separate policy or as optional coverage depending upon your insurance company.
There are four optional coverages that also require close attention. There are additional coverages available but your agent will probably be able to identify your need based upon your location. If your sewer backs up and destroys your hardwood floors, carpets, tile, walls and woodwork, you will be surprised that that damage is excluded by most home insurance policies. Coverage for this risk is available through your home insurance company.
Since most losses to the residence itself are partial losses repair and replacement can be hampered by a change in laws and ordinances concerning construction in your area. There is additional coverage available to pay for those increased expenses.
Home insurance policies do not cover all personal property in the same way. There are specific limits to coverage for jewelry, guns, collections and others. Review this coverage and obtain additional coverage if you have an exposure in these areas.
The coverage for the contents in a home is rarely set up as replacement coverage. That means that a loss is going to be adjusted by the price of used furniture, clothing and appliances. This is not satisfactory in most cases. There is optional coverage that will replace personal property based upon the actual price of replacement items.
Many people think that home insurance is just a simple matter, however, it can be quite complex, particularly when you have a loss.
Chief Executive Officer, Coastal Homeowners Insurance Solutions, Rocky Point, NY 11778
The most comprehensive home insurance policies are offered by the High Value/High Net Worth insurance companies. These companies include PURE Insurance, AIG's Private Client Group, ACE Insurance & Chubb Insurance. They will usually provide coverage on an all risk form as opposed to a named peril form. For example- a named peril form will list the things you are covered for; fire, wind, hail, theft, vandalism, etc. The High Value companies will say you are covered for Everything except- intentional acts, flood, wear & tear, nuclear, etc. The insurance companies listed above will usually require you insure your home for more than $1,000,000 and have excellent credit. Some will even require an umbrella or jewelry policy to consider.
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The mix of coverages offered by the various insurance companies is also comparable. The ISO format allows for a number of different “forms” and that can sometimes create confusion but most companies offer the standard HO-3 form. The most important thing is to determine the perils that the policy is pledged to insure against. Again, these are fairly standard but with the different forms there is also a slightly different list of perils. The basic peril is fire and the list of perils includes “everything except.” As a consumer you should note carefully the perils that the policy is going to cover.
Customers occasionally fail to make premium payments when they are required and the coverage lapses. Expired home insurance is the very worst kind. It will not provide any coverage in the event of loss which could be quite expensive. The majority of home policies are actually paid by an impound account established by the mortgage company but some are not and occasionally even a mortgage company fails to pay the premium at the correct time.
Incidentally, since the mortgage company requires that you carry home insurance and name them as mortgagee they also have the right to issue an insurance policy on the property with a company that you do not select and at a price you do not negotiate. This can be a rude and expensive revelation.
So, the best home insurance policy is the one that is in effect. The next criteria are that the best home insurance has adequate limits to handle a claim. Usually this is established at the time the policy is written with a third-party estimate of reconstruction costs. Most home policies have a provision that increases coverage with every renewal to keep pace with the rising cost of construction in your area. This should be checked every few years to make sure that everything is accurate.
The cost of a property loss could greater than anticipated. If there is a massive loss in an area, for example a fire takes out homes in a three block area, the limits of the policy might be exhausted before the home can be restored because there would be an unusual strain on the capacity of the building trades in the area to repair all the homes involved. There is intense competition for building materials and specialty contractors. If you think you might be in an area that could be affected in that way make sure you discuss this at length with your insurance agent.
The liability limit on your home policy requires close attention. A lawsuit for bodily injury or physical damage can end up costing a great deal more than the value of your home. You should select the maximum amount of liability coverage that the insurance company offers and then price umbrella coverage to increase that limit. It only takes one lawsuit to ruin your weekend.
Two huge risks are not covered by the standard home insurance policy. These risks are flood and earthquake. Both can be devastating. Consider the purchase of flood insurance through your agent and the National Flood program and Earthquake which is available as a separate policy or as optional coverage depending upon your insurance company.
There are four optional coverages that also require close attention. There are additional coverages available but your agent will probably be able to identify your need based upon your location. If your sewer backs up and destroys your hardwood floors, carpets, tile, walls and woodwork, you will be surprised that that damage is excluded by most home insurance policies. Coverage for this risk is available through your home insurance company.
Since most losses to the residence itself are partial losses repair and replacement can be hampered by a change in laws and ordinances concerning construction in your area. There is additional coverage available to pay for those increased expenses.
Home insurance policies do not cover all personal property in the same way. There are specific limits to coverage for jewelry, guns, collections and others. Review this coverage and obtain additional coverage if you have an exposure in these areas.
The coverage for the contents in a home is rarely set up as replacement coverage. That means that a loss is going to be adjusted by the price of used furniture, clothing and appliances. This is not satisfactory in most cases. There is optional coverage that will replace personal property based upon the actual price of replacement items.
Many people think that home insurance is just a simple matter, however, it can be quite complex, particularly when you have a loss.