Understanding your homeowner’s insurance

August 2017: Chances are your mortgage payment is your single most expensive budget item, and your home is your most valuable investment. Homeowner’s insurance is your protection against the uncertainties of day-to-day living that could endanger that asset.
firemanHomeowners insurance is a “package” policy that covers your house, other structures on the property and your personal possessions—and liability.
If your house is damaged by a fire, hurricane or other insured peril and leaves you without a place to stay, your policy provides living expenses as well as reimburses you for the damaged property.
There are several types of homeowner’s insurance policies available, and Integrity Insurance can explain the options available and help you choose the coverage that best suits your needs.
Do I really need insurance for my home?
The simple answer is yes. If you were to suddenly lose your home due to fire or a tornado or other catastrophe, or have the contents damaged or stolen, you – like most of us – may not afford to rebuild the house and replace lost furnishings all at once. Then, if somebody sues you for an injury or damage caused by you or a family member, the cost of defending that suit could run into thousands of dollars just for legal fees—regardless of the outcome of the suit.
And, of course, you are required by your lender to carry homeowners insurance if your home is mortgaged.
While it may be unpleasant to think about incurring catastrophic losses, such things do often happen – as many residents who lost their homes in the August 2016 flood can attest.
That brings up a very, very important issue that some people learned the hard way in 2016. Homeowner’s insurance does NOT cover flooding from rising water. The two ways to obtain flood insurance is through the federally-administered National Flood Insurance Program (NFIP) which is under the Federal Emergency Management Agency (FEMA), or through the private market. Although all flood insurance is provided by NFIP, you cannot purchase flood insurance directly from either of the providers; you must purchase it through a licensed insurance agent.
Integrity Insurance sells flood insurance and, in addition to guiding your homeowner’s choice will be happy to discuss flood insurance coverage with you as well.
What does a homeowner’s policy cover?
The perils that homeowners are protected against may vary somewhat from one company to another, one state to another, and according to the type of homeowner’s policy you choose, but all homeowner’s policies, except renter’s, have two basic components: property insurance (to cover your structures and possessions) and personal liability. Renter’s insurance can be obtained for personal possessions.
housewreckPolicies may cover your buildings and belongings for damage from 16 common categories of events, depending on which type policy you have: fire or lightning; hail or windstorms (includes hurricanes and tornadoes); explosions; riot or commotion; damage caused by vehicles; damage caused by aircraft smoke; theft; volcanic eruptions; falling objects; weight of ice, snow or sleet; accidental discharge or overflow of water or steam from within a plumbing, heating, air conditioning, or automatic fire-protective sprinkler system, or from a household appliance; sudden and accidental tearing apart, cracking, burning, or bulging of a steam or hot water heating system, an air conditioning or automatic fire-protective system; freezing of a plumbing, heating, air conditioning or automatic, fire-protective sprinkler system, or of a household appliance; sudden and accidental damage from artificially generated electrical current.
Flood and earthquake damage, although not covered by a standard policy, can be purchased separately. Be careful not to be lulled into a false sense of geographic security for these two perils. Flood and earthquake activity is more widespread than many people realize. For example, almost 90 percent of the U.S. population lives in seismically active areas. Since 1900, earthquakes have occurred in 39 states and caused damage in all 50. And if your home is located in a flood-prone area, you are 26 times more likely to suffer a flood loss than a loss from fire.
Are there any other exclusions I should know about?
If you neglect to take care of your property (for instance, a leaky roof), you may not be covered. Obviously, if you intentionally damage your property, there is no coverage. There may be other exclusions spelled out in your policy such as “earth movement,” general power failure and damage caused by acts of war. Other exclusions may apply depending on which type of homeowner’s insurance you purchase.
kitchenOne other exclusion that can be costly is the ordinance (local law) exclusion. Building codes established by governmental bodies that drive up the cost of rebuilding or repairing after a loss occurs may not be covered by your insurance policy. Thus, if you discover when replacing damaged property that current law demands higher grade or more expensive materials than the original ones being replaced, the new materials may not be covered for the full price.
Even if you live in a fairly new or renovated home, laws and building codes are constantly being updated. Coverage to include ordinance requirements can be added to your homeowners policy with an endorsement—an addition that costs extra but could save you money in the long run.
One-size homeowner’s policy does not fit all
Some people do not realize that there is more than one type of homeowner’s insurance policy. In fact, there are eight types:
HO-1: Limited coverage policy – This is a “bare bones” policy no longer available in most states.
HO-2: Basic policy – Only the perils specifically listed are covered – no others. A basic policy provides protection against the most 16 common specifically-named disasters such as fire, lightning, hail, hurricanes, tornadoes etc.
HO-3: The most popular policy -This “special” policy protects your home from all perils except those specifically excluded.
HO4: Renter – Created specifically for those who rent the residence they live in, this policy protects your possessions against specific named disasters.
HO-5: Comprehensive – This policy is comprehensive, indeed, in that it often covers more perils than other types of policies. Just like a HO-3 form, a HO-5 is an open-peril policy form that can financially safeguard you against all perils unless your policy specifically excludes them in writing.
H0-6: Condo/Co-op – A policy for those who own a condo or co-op, it provides coverage for your belongings and the structural parts of the building that you own. It protects you against specific named disasters as in the HO-2.
HO-7: Mobile home – This policy is designed specifically for mobile or manufactured homes, which don’t fall under regular homeowners insurance coverage.
HO-8: Older home – Designed for older homes that have a replacement cost which exceeds the actual cash value of the home. For that reason, the HO-8 policy form is frequently used to insure registered landmarks and architecturally significant structures. The payout of the actual cash value would be much smaller than that of the replacement cost. Full replacement cost policies may not be available for some older homes.
Who decides what type policy to buy when the home is mortgaged?
You do—it is your home and your insurance policy. However, as a means of protecting their investment, the mortgage company requires that the house be covered for an amount sufficient to pay off the mortgage, and it collects a set amount from you each month, puts it in escrow and then pays your insurance and taxes when they fall due. As the homeowner, you may still select your insurance agent and choose the insurance policy you feel offers the best coverage at the best rates. In fact, if you allow the mortgage company to choose the insurer, you might well end up paying more for your homeowners insurance.
What determines how much is paid out for a claim?
The value of the real property— your home, garage, shed and other structures—is generally based on the value of the house itself. Thus, if the house were insured for $125,000, the shed, detached garage and other auxiliary structures would be covered for 10 percent, or $12,500.
daughterAdditional property protection features may include living expenses should your home not be habitable for a period of time. Your personal property is also covered. Personal property includes the contents of your home and personal belongings used, owned, worn or carried by you or members of your household—basically, everything and the kitchen sink! This coverage is also based on the house coverage, and there are limits on the losses that can be claimed.
Higher limits and broader coverage can be purchased for both real and personal property, and “riders” can be added for specific valuable items such as jewelry, art, firearms, antiques, etc.
Be aware that some policies pay losses for the house and contents based on “actual cash value” (the replacement cost of the item minus depreciation based on the age of the item), while others pay “replacement coverage” (the cost of replacing an item at the time of the loss without deducting for depreciation). Some companies which standardly use actual cash value basis offer the option of choosing replacement coverage, which may be worth the higher premium.
Replacement value of the house itself should not be confused with “market value.” The market value is what your house would likely sell for and is generally more than the replacement cost. This is because replacement value does not include the value of the land. Demand for local housing and a desirable location also may increase the sales value of a home but is not factored into the replacement value for insurance purposes.
Once the value of damaged property is determined and the amount of coverage is taken into account, the deductible is applied, and the net payout is figured.
What is a smart deductible to have?
The standard deductible (the share of the loss that the homeowner is responsible for) is generally $1,000, but homeowners can save money by choosing a higher deductible – but they must be prepared financially to absorb more of the cost when a loss occurs.
Deductibles may be a percentage of the loss or a flat rate, and there also maybe different deductible amounts for different types of losses, such as wind, hail or hurricane, so always pay close attention to the details when choosing a deductible.


Details: Integrity Insurance, 225.686.1217, 20185 Iowa St., Livingston, or 29887 South Montpelier Ave., Albany, 225.567.5700; Email: integrityagency@bellsouth.net; website: www.integrityinsurancela.com; and Facebook: Integrity Insurance. Hours: Mon-Thurs 7:30 am-5 pm, Friday 8 am-noon.

Many homeowners resolve that they will not file a claim for a loss that is less than $1,000, or even $2,000 or more, so as to not have frequent claims that could affect their claims record and possible cause their premiums to go up. Just remember that if you decide on a loss threshold higher than $500, you should raise your deductible to that threshold, because there’s no point in paying a higher premium for a low deductible if you’re not going to claim smaller losses anyway.
Waiting periods for  coverage to begin
The time between signing a home insurance contract and the policy going into effect differs from one company to another. Typically, a home insurance policy will have a 30 to 90 day waiting period before a claim can be filed. Insurance companies set up their policies this way to prevent people from committing fraud by purchasing coverage after the event has happened, or waiting until a severe storm is imminent before they purchase coverage. Each company is able to set the waiting period individually, but this period will be specified in your policy.
insuranceLocal, independent service for all your insurance needs
Agents at Integrity Insurance, Inc. in Livingston and at Integrity Insurance’s Albany Branch, LLC, urge policy holders and those in need of policies to come in and talk about personal insurance needs. They truly want you to understand your coverages – to know that what one thinks is covered in a policy, is actually covered in that policy – before anything happens to make it necessary to file a claim.
“Our agents work hard to convey coverage options and find the best deal on the most appropriate coverage possible for each individual,” says owner Sarah Louise Quezada. “Bring us your current insurance policies for any type coverage – homeowners, flood, auto, boat, personal or commercial and more – and let us review them with you, explain the details within the policies and compare them to other companies and policies as you wish.”
Whether looking for new policies or more fully understanding current policies, go visit one of the Integrity Insurance offices where agents will be happy to spend time with you.
Editor’s note: Information for this article was provided by Integrity Insurance, FEMA, floodsmart.gov, and the Trusted Choice Consumer’s Guide to Homeowners Insurance.