Top Ten Homeowners Insurance FAQs

Homeowners insurance may seem pretty straightforward, but you will still have several decisions to make when buying your policy, and you need to make sure that you understand your coverage so there are no surprises if you have to file a claim.

For some quick answers, here are the Top Ten Homeowners Insurance FAQs that we have compiled over the years.

1)      What are the benefits of choosing a higher deductible?

One of the best ways to keep your homeowners insurance premium down is to choose a higher deductible. Of course, this means you will have to pay a little more out of your own pocket if you have to file a claim, but over the long run the savings you achieve may be well worth it.

2)      Does my home insurance policy provide any coverage for identity theft?

Identity theft has become a bigger threat in recent years, and it is important for everyone to take steps to make sure that their identity is safe. Some homeowners policies do include an optional identity theft feature that will help compensate for some losses and expenses related to recovering your identity.

3)      What is a scheduled personal property rider, or floater?

Scheduled personal property riders, or floaters, can be added to your homeowners insurance policy if you need additional coverage for high-value items like jewelry, furs, electronics, antiques and so on. These items are added to a “schedule” on your policy along with specified coverage limits to ensure that you have sufficient coverage should they be destroyed, lost, stolen or otherwise damaged by a covered peril.

4)      Does my homeowners insurance cover my in-home business?

Typically, no. Most home insurance policies specifically exclude coverage for business equipment and liability beyond a certain limit (e.g., $2,500 for business equipment). To cover your business equipment and records as well as protect yourself from increased liability exposures, you need to add an in-home business endorsement onto your homeowners policy, or purchase separate coverage such as an in-home business policy, a business owners policy, or a personal umbrella (excess liability) policy.

5)      What is the difference between replacement cost coverage and actual cash value coverage?

Your home insurance policy will calculate the value of your property based on its actual cash value or its replacement cost value. Actual cash value coverage pays to replace your home or possessions minus a deduction for depreciation, up to the policy limit. You will receive reimbursement based upon what your items are worth today, not what you paid for them. Replacement cost coverage will reimburse you for the actual cost of replacing your property with no deduction for depreciation, up to the specified policy limits. This type of policy allows you to rebuild your home, make repairs, or replace destroyed or damaged items using similar materials at today’s costs.

We highly recommend a replacement cost policy. Using an accurate replacement cost figure ensures that you are neither under- not over-insured, and would allow you to rebuild your home sufficiently should the worst happen.

6)      Does my homeowners insurance cover flooding?

No. Flood insurance must be purchased separately. We can help you purchase flood insurance from the National Flood Insurance Program (NFIP), the federal government’s flood insurance program.

7)      Does my policy cover sewer or drain backup?

A sewer or drain backup or sump pump overflow is not covered by homeowners insurance or flood insurance. You can, however, an add endorsement to your homeowners policy for coverage for sewer backup or sump pump overflow. This is highly recommended if your home is susceptible to either.

8)      When do I need earthquake coverage?

Earthquake coverage is available and we recommend that homeowners in Massachusetts purchase this coverage. Massachusetts does have a history of earthquakes, and losses due to earthquakes are not covered by your standard homeowners insurance policy. Earthquake coverage can be added as an endorsement to your main home insurance policy.

9)      What other types of perils are excluded from my homeowners coverage?

It is important to understand what your home insurance policy does not cover. Most homeowners insurance policies exclude coverage for earthquakes, power failure, war, acts of terrorism, nuclear hazard, government action, faulty zoning, bad repair or workmanship, defective maintenance and flooding.

Regarding water damage, in general water damage that is caused by water that comes “from above” (e.g., rainwater or a burst pipe) is usually covered. Water damage “from below” (e.g., sewer backup or flooding) is not. As mentioned above, there are remedies for the excluded types of water damage, from flood insurance to special endorsements.

10)   Are there any discounts available to help keep the cost of my home insurance down?

Insurance companies base the rates they charge you on the risks they assume you face. You can take several steps to help reduce your premiums, from maximizing discounts that your carrier offers to adding safety and security features to your home. The most common homeowners insurance discounts include:

  • Multi-policy discount
  • Home improvement discount
  • Security discount
  • Senior citizen or retiree discount
  • Good credit discount
  • New home discount
  • Roof certification discount
  • No mortgage discount
  • Accredited builder discount
  • Construction materials discount

Do have additional questions about your homeowners coverage? Tell us about them below.

 

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