• 

  News and Publications

  • Media Room
  • News: Federal
  • News: State
  • Publications
  • Subscriptions

• 

  Seminars and Services

  • Convention
  • Event Calendar
  • Services

• 

  Government Affairs

  • Advocacy
  • Compliance
  • Issue Resources
  • Legislative Reports
  • Public Policy
  • Political Action

• 

  About NAMIC

  • Membership
  • History
  • Member Directory
  • Employment
  • Affiliates
  • Contact

Read	E-mail Print

Homeowners Should Review Policies

Storms are reminder to review homeowners coverage

Widespread destruction caused by nature -- hurricanes, floods, tornadoes, etc. -- prompts many homeowners to wonder what their homeowners insurance covers and what it doesn't.

For that and other reasons, it's a good idea for policyholders to take time periodically to review their homeowners insurance policies to make certain they have enough coverage to pay for damage to their dwellings and other possessions.

Reviewing your policy annually will help ensure that you have enough coverage. To keep up with any increase in the value of your house, you may need to boost your insurance amount. Most companies offer inflation protection, which automatically increases policy limits annually.

The homeowners policy, which became popular in 1950, typically pays for losses caused by fire, hail, theft, vandalism, wind, and other perils to the dwelling and its contents. In addition, the policy covers anyone injured in accidents on the property.

Homeowners insurance doesn't pay for losses caused by floods or earthquakes. A person needs to buy separate coverages to insure against those risks.

Two major areas of coverage are the dwelling and contents. The amount the home is insured for -- the policy's face amount or monetary limit -- is usually the maximum amount your insurer is obliged to pay in case your home is destroyed. You should be aware of what your coverage limits are -- and that they're high enough.

In addition to coverage on the dwelling, homeowners insurance protects contents. Generally, contents coverage is equal to half the insurance on the home. Thus, if the house is insured for $80,000, there is an additional $40,000 coverage on furniture and other belongings.

Coverage for valuables like computers, jewelry, silverware, coin collections, and antiques, however, is limited. It's advisable to obtain extra insurance to fully protect valuables.

Because of increased ownership of home computers, insurance for that equipment has taken on increased importance in recent years. Nationwide Insurance's homeowners policies, which are typical for the industry, cover computer hardware and software losses. Nationwide, the country's sixth largest homeowners insurer, will pay up to $3,000 for computers and software covered under standard policies. Policyholders can buy up to $7,000 in additional coverage.

In addition to the policy limits, it's important to understand what types of loss-settlement provisions your policy offers. Most policies cover the dwelling, up to the policy limits, on a "replacement-cost" basis. That means that if you sustain a loss and you rebuild or replace your home, depreciation will not be a factor in your cost settlement.

Personal property or contents usually are covered on an "actual-cash-value" (ACV) basis, which takes into account depreciation. The now-destroyed television set you purchased 10 years ago for $800, for example, might result in a claims settlement of $75.

Other loss-settlement options are available. For example:

• If a policyholder prefers to cover contents on a replacement-cost basis rather than using the standard ACV coverage, an "endorsement" or provision for replacement-cost coverage can be added to standard policies at an extra cost.
• An option that can provide additional replacement cost coverage can be added to the dwelling coverage. The option, generally known as "capped replacement cost coverage," is like standard replacement-cost coverage in that it pays to replace the damaged home without taking depreciation into account. But the payment amount can exceed, with some caps, the policy limits.

Owners of older homes -- homes with plaster walls, hardwood floors, etc., -- can select a policy known as a "market-value" or repair-cost contract. That policy enables customers to insure their older homes for less than replacement cost because it calls for the use of contemporary building methods and materials, like drywall and sub-flooring, to repair those homes.

Under a replacement-cost policy, for example, an older home that cost an owner $80,000 might have to be insured for much more than that to replace damaged property or contents with new. Under the market-value contract, that home could be insured for an amount closer to the $80,000 purchase price because conventional repairs would be less costly.

Damaged property sometimes can be restored to pre-loss condition through partial replacement of parts, or by repair or cleaning. No depreciation is figured in the cost of repairing, partially replacing, or cleaning damaged items.

No matter what type of coverage you carry, the insurer will pay to restore covered property to the same general condition as before the loss.

Claims can be settled by phone if the loss is relatively small or after a claims representative evaluates the damage in a major loss. The claims representative generally explains the coverage that applies and reviews options that may be available to the policyholder. Nationwide Insurance is committed to contacting policyholders within 24 hours after a loss is reported.

Insurance company representatives are fully trained and regularly take courses to improve their skills. To assure customer satisfaction, they observe high standards of courtesy, promptness, and quality of reports, and adhere to company and industry standards. Those standards assure customers that adjusters are qualified to answer questions and will work to determine the fairest settlements.

Policyholders are encouraged to take the following steps:

• Keep a complete, up-to-date inventory of all household items. A videotape showing each room and its contents is helpful. Keep both items someplace other than your home.
• Keep purchase receipts for all home furnishings and appliances.
• Have all valuable items appraised.
• Regularly check your policy coverages and limits to be sure they're still appropriate.