What to ask your insurance agent about homeowner’s policies
Posted: Friday, February 4, 2011 11:37 am
Nashville – Without looking, what is the value of the contents of your home covered by insurance? Is a flood covered? If someone is hurt while visiting you, will your insurance pay medical expenses?
Whether you’re a renter or an owner, the Tennessee Department of Commerce and Insurance (TDCI) Insurance Division suggests you review all your insurance policies annually.
It is a chance to brush up on what is covered, and to evaluate whether the coverage is still adequate (or too much) for your needs. Here, the National Association of Insurance Commissioners (NAIC), of which TDCI is a member, provides tips for consumers.
When reviewing your policy, find the answers to these three questions:
1. What type of coverage do I have?
Homeowners or Renter’s? – A homeowners insurance policy covers the structure, belongings and legal obligations, if someone is injured at your home. A renter’s policy does not insure the structure, but otherwise provides similar coverage.
To review a list of coverage terms that are in typical policies, go to www.InsureUonline.org, select the appropriate life situation on the right, then click on the “Home” tab found among the choices in the upper middle of the page.
Replacement Values – Check the type of replacement value provided in the policy. Actual cash value (ACV) is the amount it would take to repair damage to a home or to replace its contents after allowing for depreciation.
Replacement cost is the amount it would take to rebuild or replace a home and its contents with similar quality materials or goods, without deducting for depreciation.
Visit http://www.naic.org/Releases/2008_docs/disaster_survey.htm to learn more about how the difference between replacement cost and ACV could affect a claims payout.
Liability Limits – Liability insurance protects you from legal obligations arising from accidents involving visiting non-residents. With a few exceptions, such as auto or boating accidents, all-purpose liability coverage follows wherever you go.
An umbrella policy can extend the liability limits of a homeowners or renter’s policy, if the policy limit is insufficient.
Medical payments – Homeowners and renter’s polices typically include limited medical expense payments for injuries occurring on your premises to visiting non-residents.
It may also cover medical expenses of an individual injured by you, a member of your family or a family pet while away from the home.
2. How much coverage do I need?
Make a home inventory – A home inventory is the best way to determine the appropriate level of coverage needed for contents. It is also a useful tool to have in case of a loss.
When doing the home inventory, make sure to include as much detail as possible about the items. Visit http://www.naic.org/index_disaster_section.htm for a home inventory worksheet and tips to get started.
Do not over-insure – Homeowners do not need to insure the value of the land a home sits on, but coverage should include any outdoor structures on the property. For both homeowners and renters, have an accurate list of belongings and be sure liability limits are at a proper level.
3. What are my deductibles and discounts?
Save money on homeowners or renter’s insurance – Deductibles and discounts are generally the easiest places to save money on this type of policy. Most companies offer discounts for people who have more than one type of insurance policy with them, and for people who have had few claims or are long-term customers.
When it comes to the deductible – which is the amount you have to pay if there is a loss – usually the higher it is, the lower the premium. It’s normal to consider raising a deductible to save on premium, but remember, the bill will be that much more following a claim.
After reviewing the policy, call your agent or insurance company and ask these five questions:
1. Is the coverage on my home and its contents adequate? Is it too much?
The home inventory will help this. If you have any special items like art, jewelry, memorabilia or collections (such as stamps or coins), mention that, too. These items may require special coverage.
And, running a small business at home will affect the premium, so mention that.
2. Is my premium as low as I can expect it to be? Are there additional discounts available?
Can (or should) I raise my deductible? What about mitigating against damage from local threats?
Mitigation – or taking steps to reduce a potential loss before it happens – can help limit your home’s exposure to certain local risks (such as wildfire or hurricane). Ask if there are risk mitigation programs and discounts available.
3. Are there any losses – such as through floods or earthquakes – I need to worry about that are not covered in my current policy?
Neither floods nor earthquakes are covered by a standard homeowners or renter’s policy. There are optional insurance policies for both types of disasters. Ask about available options or visit www.floodsmart.gov for details on flood insurance.
4. Would my long-term financial health benefit from an umbrella policy?
An umbrella policy provides excess liability limits and possibly other additional coverage terms above a homeowners or renter’s policy.
For example, an umbrella policy can extend the liability to $1 million or more above the $250,000 limit of liability that might be in a basic homeowners policy.
As your asset portfolio grows, your insurance company or agent may suggest an umbrella policy for better protection.
5. Has anything changed in my coverage in the past year?
Insurers may change policy terms at renewal, but they must notify you first. Read all notices and information sent from the insurance company. When talking with the agent, ask if there are any anticipated changes when the policy renews.
Get educated about your insurance choices. For more information about homeowners or renter’s insurance and the basic coverage terms in a policy, go to www.InsureUonline.org and choose the life stage that best fits your life situation.
Or download the NAIC Consumer’s Guide to Home Insurance at http://www.naic.org/documents/consumer_guide_home.pdf.
For specific questions about coverage or about an insurance company or agent, contact the consumer representatives at the TDCI Insurance Division: Consumer Insurance Services may be contacted at 615-741-2218, 800-342-4029 or CIS.firstname.lastname@example.org.
The Department of Commerce and Insurance works to protect consumers while ensuring fair competition for industries and professionals who do business in Tennessee.
Visit www.tn.gov/commerce/ for more.