| Homeowners insurance can be one of the
most difficult products to place in Florida. East Bay Insurance has always offered
this important insurance product to our clients. After each major storm the industry
is thrown a new wrinkle to handle. East Bay is always ready to understand the
market/process and our clients benefit from that knowledge. Below has been reprinted
from www.fldfs.com consumer guides. The more you understand as a consumer the
better prepared you are to make the right choice.
Homeowners insurance helps pay to repair or rebuild your home and replace personal
possessions lost due to theft, fire or other disasters such as storms. Although
Florida law does not require homeowners insurance, some cities and counties require
liability coverage if you own certain pets or a swimming pool. Liability coverage
pays for non-automobile-related injuries to other people, or damage to their property,
for which you are legally responsible. For mortgaged homes, the lending institution
will require full insurance coverage on the structure, including flood (if located
in a special zone), fire, liability, windstorm, etc. Some developments and subdivisions
may also require insurance.
The following overview explains the basic types of coverage available and provides
tips for homeowners and renters.
Basic Coverage Available
Depending on which company you choose, you may obtain one of several basic
packages of homeowners insurance in Florida to protect your home and belongings.
Each package protects against a specified number of perils, or events that cause
damage to property, such as fire, windstorm or theft.
Covered perils apply to four categories:
- Structure (the dwelling itself)
- Other structures (like sheds and fences)
- Personal property (the contents of the structures)
- Loss of use (also called Additional Living Expense or ALE)
The first three are defined as “property.”
Property
Property coverage helps pay for damage by covered perils to your home, the
contents of your home and other personal belongings owned by you or family members
who live with you. In some cases, it helps pay for damage to other structures,
such as tool sheds, detached garages, small boats, guest houses and their contents.
Your insurance agent or company can point out the items covered in a given policy.
Your policy provides limited coverage for some personal property, such as antiques,
jewelry, furs and electronics. You may need additional coverage as an endorsement,
or addition to your insurance policy, to modify its original terms for an additional
premium. You can insure your home and belongings for replacement cost or actual
cash value (see page 7).
Note: Homeowners policies do not cover vehicles. Your agent or company can
help you find coverage for cars and large boats.
Additional Living Expense (ALE)
Homeowners packages provide additional living expense coverage that will pay some
extra expenses if damage to your home prevents you from living there while it
is being repaired. Most policies also will provide this coverage when a civil
authority (law enforcement agency, emergency management service, etc.) prohibits
the use of a residence due to direct damage to neighboring homes by a covered
threat.
The items typically covered – above and beyond normal expenses –
include extra costs for food, housing, telephone, transportation (to and from
work or school), relocation and storage, utility installation and furniture rental
for a temporary residence. Be sure to check your policy to find out what is specifically
covered.
This coverage applies only to differences in expenses. For example, it would
apply to the cost of restaurant meals minus normal food expenses. It does not
cover your mortgage, groceries and utilities or the monthly cost of a telephone
in a rented space (since you normally pay for the telephone in your house).
Your policy may designate a limit of coverage for additional living expenses,
but your policy does not obligate your company to pay this amount up front or
in full if you suffer a total or partial loss. For this reason, you must keep
receipts for additional living expenses and submit these to your company for reimbursement.
Additional living expense coverage does not apply to your dependent children
while they are away at college. It applies only to the primary insured structure
in the event of a loss.
Policies generally offer ALE coverage without any deductible. Flood insurance
policies, however, don’t provide this coverage.
Two additional types of coverage are known as personal liability and medical
payments.
Personal Liability
This coverage protects you against a claim or lawsuit resulting from (nonauto)
bodily injury or property damage to others. For example, if a neighbor slips and
falls in your house and sues you, and a jury finds you legally liable, this coverage
would pay that claim plus legal fees up to the policy limits. This coverage applies
to you and all family members who live with you. It does not cover intentional
damage or harm caused by you or family members who live with you. Check your policy
for any exclusions and discuss them with your agent.
Medical Payments
Regardless of fault, this coverage pays for medical expenses, up to the medical
payment limits, of persons accidentally injured at your home. It does not apply
to your injuries or those of anyone living with you or to activities involving
an at-home business.
Replacement Cost Versus Actual Cash Value
When buying coverage, you may insure your property and belongings for actual
cash value or replacement cost.
Replacement Cost
Replacement cost is the amount needed to replace or repair your damaged property
with materials of similar kind and quality, without deducting for depreciation
(the decrease in the value of your home or personal property due to normal wear
and tear).
Actual Cash Value
Actual cash value is the amount needed to repair or replace damage to your
home after depreciation. For example, your insurance company would deduct for
the age and condition of a 17-year-old roof with a 20-year life expectancy.
Here is how the two types of coverage work in practice.
Let’s say you bought a new television in 1994 for $700. In 2005, a lightning
strike destroys the TV.
A policy for actual cash value will only pay an amount that reflects the TV’s
current value – say $300.
A replacement cost policy would cover the entire cost of a new TV of the same
type – say $900. However, you initially will receive only the actual cash
value for your set ($300). When you buy a new television and present the receipt,
you will receive the balance ($600).
For this reason, it is important to keep all receipts! Replacement cost coverage
is triggered only when you replace the item that was damaged or lost. Your insurer
will require proof of purchase for full reimbursement.
Inflation Guard
Inflation or room additions can increase the replacement cost of your home
and its contents, while the actual cash value of your home may decrease over time.
An inflation guard endorsement gradually increases your dwelling’s coverage
limit annually to keep your insurance coverage up-to-date with current prices
and inflation. It also may keep the policy value in line with increases in local
building costs per square foot. If your policy lacks this endorsement, you are
responsible for periodically updating your coverage with your insurance agent
or company.
No matter how you insure your home, you should keep track of its replacement
cost evaluation. Check with your agent or company once a year to make sure your
policy provides adequate coverage.
How Much Insurance to Buy
When you buy a home, you need enough insurance to protect the structure and
your personal possessions in the event of a loss. Some insurance policies are
written with a limit that is equal to at least 80 percent of the value of the
home. This means that if your home is damaged, you will have to pay for the damages
up to the deductible. If you insure at less than 80 percent, you will have to
pay a co-insurance penalty as well, which means that you will be responsible for
more of the cost of the damages.
Regardless of what percentage you choose, this should not reflect the cost
of the land on which your home is built. Unfortunately, some banks and other lending
institutions want you to buy insurance for the entire amount of the mortgage,
including the cost of land.
For example, if you buy a $50,000 lot and build a $100,000 home, your mortgage
would total $150,000, but you need insurance only for the $100,000 home. Your
insurance company would pay $100,000 if a covered peril such as an accidental
fire destroyed your home, but it would not pay for the lot. Remember: You need
to buy enough insurance to protect your insurable interest, or the amount needed
to replace your house.
You should contact the Department of Financial Services Consumer Helpline toll-free
at
1-800-342-2762 if your bank tries to make you insure the entire mortgage amount
if it includes the lot.
Source:
Department of Financial Services http://www.fldfs.com
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