What is homeowners insurance?
Homeowners insurance provides financial protection against disasters. A standard policy insures the home itself and the things you keep in it.

Homeowners insurance is a package policy. This means that it covers both damage to your property and your liability or legal responsibility for any injuries and property damage you or members of your family cause to other people.

Damage caused by most disasters is covered but there are exceptions. The most significant are damage caused by floods, windstorms and poor maintenance. You must buy two separate policies for flood and windstorm coverage. Maintenance-related problems are the homeowners' responsibility.

What is in a standard homeowners insurance policy?
A standard homeowners insurance policy includes four essential types of coverage. They include:
1. Coverage for the structure of your home.
2. Coverage for your personal belongings.
3. Liability protection.
4. Additional living expenses in the event you are temporarily unable to live in your home because of a fire or other insured disaster.

1. The structure of your house
This part of your policy pays to repair or rebuild your home if it is damaged or destroyed by fire, hurricane, hail, lightning or other disaster listed in your policy. It will not pay for damage caused by a flood or routine wear and tear. When purchasing coverage for the structure of your home, it is important to buy enough to rebuild your home.

Most standard policies also cover structures that are detached from your home such as a garage, tool shed or gazebo. Generally, these structures are covered for about 10% of the amount of insurance you have on the structure of your home. If you need more coverage, talk to your insurance agent about purchasing more insurance.
   
2. Your personal belongings
Your furniture, clothes, sports equipment and other personal items are covered if they are stolen or destroyed by fire, hurricane or other insured disaster. Most companies provide coverage for 50% to 70% of the amount of insurance you have on the structure of your home. So if you have $100,000 worth of insurance on the structure of your home, you would have between $50,000 to $70,000 worth of coverage for your belongings. The best way to determine if this is enough coverage is to conduct a home inventory.

This part of your policy could include off-premises coverage. This means that your belongings are covered anywhere in the world, unless you have decided against off-premises coverage. Some companies limit the amount to 10% of the amount of insurance you have for your possessions.

Expensive items like jewelry, furs and silverware are covered, but there are usually dollar limits if they are stolen. Generally, you are covered for between $1,000 to $2,000 for all of your jewelry and furs. To insure these items to their full value, purchase a special personal property endorsement or floater and insure the item for its appraised value. Coverage includes “accidental disappearance,” meaning coverage if you simply lose that item. And there is no deductible.

Trees, plants and shrubs are also covered under standard homeowners insurance. Generally you are covered for 5% of the insurance on the house—up to about $500 per item for perils covered under your policy.

Most companies limit the amount to be paid out on certain types of items. These include such things as firearms, jewelry, antiques and electronics. Make an inventory list and review with your agent to find out whether any of your items have limited amounts of coverage. You may want to buy higher limits for these items, for an additional premium.

3. Liability protection
Liability covers you against lawsuits for bodily injury or property damage that you or family members cause to other people. So, if your son or daughter accidentally ruins your neighbor’s expensive rug, you are covered. However, if they destroy your rug, you are not covered.

The liability portion of your policy pays for both the cost of defending you in court and any court awards—up to the limit of your policy. You are also covered not just in your home, but anywhere in the world.

Liability limits generally start at about $100,000. However, experts recommend that you purchase at least $300,000 worth of protection. Some people feel more comfortable with even more coverage. You can purchase an umbrella or excess liability policy which provides broader coverage, including claims against you for libel and slander, as well as higher liability limits. Generally, umbrella policies cost between $600 to $1,000 for $1 million of additional liability protection.

4. Additional living expenses
This pays the additional costs of living away from home if you can't live there due to damage from a fire, storm or other insured disaster. It covers hotel bills, restaurant meals and other living expenses incurred while your home is being rebuilt. Coverage for additional living expenses differs from company to company. Many policies provide coverage for about 20% of the insurance on your house. Some companies sell a policy that provides an unlimited amount of loss-of-use coverage, but for a limited amount of time.  If you rent out part of your house, this coverage also reimburses you for the rent that you would have collected from your tenant if your home had not been destroyed.   

Policies generally offer ALE coverage without any deductible. Flood insurance policies, however, don't provide this coverage. For more information, contact your insurance agent or company.

Personal Liability and Medical Payments
This coverage protects you against a claim or lawsuit resulting from (non-auto) 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 exclusions and discuss them with your agent.

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.

Sales Representatives vs. Insurance Agents
An independent insurance agent will be able to give you details on what a policy covers, and make recommendations on what is best for you, based on your lifestyle. This differs from a telephone sales representative who is often working from a script, and is only able to quote prices, not make recommendations. When talking to an independent agent, it's important to discuss:

• The extent of your assets and net worth
• Your views about asset protection and insurance
• Your expectations if you have a claim

What is an umbrella liability policy?
If you are ever sued, your standard homeowners or auto policy will provide you with some liability coverage, paying for judgments against you and your attorney's fees, up to a limit set in the policy. However, in our litigious society, you may want to have an extra layer of liability protection. That's what a personal umbrella liability policy provides.

An umbrella policy kicks in when you reach the limit on the underlying liability coverage in a homeowners, renters, condo or auto policy. It will also cover you for things such as libel and slander.

Because the personal umbrella policy goes into effect after the underlying coverage is exhausted, there are certain limits that usually must be met in order to purchase this coverage. Most insurers will want you to have $250,000 or more of liability insurance on your auto policy and $300,000 of liability insurance on your homeowners policy before selling you an umbrella liability policy for $1 million of additional coverage.

source:  http://www.iii.org

Some of the above information was provided by the Florida Department of Insurance

If you would like information about other types of personal insurance, please call our agency.  We will be glad to answer any questions you may have.