Homeowners Insurance 101
Homeowners insurance comes in different varieties – it could be a policy covering: a dwelling you own and reside in yourself; a condominium unit you own; or the contents of a house or apartment which you rent from someone else. It is a “package” policy in that it provides both property and liability coverage, with some coverages automatically included and many different optional coverages available. It can be very broad or very limited; it also has exclusions (usually when something is uninsurable or when it can be covered by another policy). A Homeowners policy typically provides protection against such things as fire, theft, water damage and wind damage (and many others!). A deductible would apply to all property losses; a deductible is the amount that you are responsible for before your policy would respond. There can also be a separate wind deductible; “named storm” deductible; OR “hurricane” deductible applying to damages caused by these specific perils.
An HO-3 policy is what most people have on their home, whether a primary or a secondary (seasonal) residence. This policy covers the following items:
A. Dwelling – usually at a limit equal to the 100% replacement cost for the building
B. Other Structures – structures not attached to the main building, such as sheds or garages, but also including fences, swimming pools, etc.; usually the limit is 10% of the dwelling limit
C. Personal Property – contents of your home while there or anywhere in the world; sometimes the limit is equal to 50% of the dwelling limit but usually it is increased to 70% when coverage is broadened to apply on a “replacement cost” basis. Certain types of property, such as jewelry, silver, furs, watercraft, business, etc. have special sub-limits within the overall policy limit. These can usually be increased by endorsement.
D. Loss of Use – increased living expenses which are caused by an insured loss that has made your home not fit to live in; usually the limit is either 20% or 30% of the dwelling limit
E. Personal Liability – protection against lawsuits due to bodily injury or property damage to others caused by your negligence; available limits usually are from $100,000 to $500,000.
F. Medical Payments to others – costs for medical expenses due to bodily injury to others either on your property or caused by you or an animal you own; this coverage is not dependent upon liability being proven but is available as a “good-will” gesture in hopes of averting a lawsuit; available limits usually are from $1,000 to $10,000 per person.
An HO-4 policy is also known as “Tenants” insurance and provides coverages C, D, E & F as outlined above when you occupy a building, apartment or rooms owned by someone else.
An HO-6 policy is Condominium Unit-owners insurance and provides coverages C, D, E & F as outlined above and should also have a Coverage A (dwelling limit) to cover damages to whatever part of the unit itself you are responsible for under the terms of the condominium bylaws and/or which might be less than the Condo Association’s Master policy deductible. It should be endorsed to cover certain Loss Assessments made against you by the condo association which exceed the $1,000 limit in most policies.
All Homeowners policies exclude damages caused by FLOOD. A separate policy is needed. Also excluded are damages caused by EARTHQUAKES; this coverage can be added by endorsement. You might also want to endorse your policy to get more than the standard 10% limit provided in most policies to cover repairs after a loss which are required due to an Ordinance or Law (especially important with the new building code changes in Mass.). This is a general description of the most basic coverages, and does not include all the available endorsements which might be used to tailor a policy to your specific needs. It also does not include all the exclusions and limitations which are in the policies, either. When comparing policies, it is very important to look at “apples to apples” quotes to be sure you are not losing valuable protection.