Home Insurance protects an insured from financial loss caused by disasters. A homeowner’s policy usually combines the following six coverages in one single policy: dwelling, other structures, personal property, personal liability, loss of use, medical payments to others. Flood damage due to rising water, however, is not covered by the home insurance. The insured must purchase a separate policy for flood insurance, which is provided by the National Flood Insurance Program through several participating insurance companies.
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How to Save Money on Home Insurance – there are many ways to reduce home insurance premium:
- Review policy for not over-insuring replacement cost on dwelling and personal property
- Raise the wind deductible or all-other-perils deductible or both
- Ask for discounts/credits you qualify for such as home/auto discount, local or monitored burglar/fire alarm, smoke alarm, fire sprinkler system, senior citizen, no claims for a number of years
- Shop around by calling an independent insurance agent, who represents several home carriers, to compare prices
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Dwelling pays for damage or destruction to the dwelling on the “residence premises” listed on the declarations page and also to the structures attached to the dwelling. Residence premises includes one-, two-, three-, or four-family dwelling. The land at the residence premises is specially excluded from property coverage since land is not susceptible to most of the perils that cause damage to the building and other property, and the value of the land should not be included when determining the amount of insurance to purchase.
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Other Structures applies to other structures on the residence premises that are not attached to the dwelling and are separated from the dwelling “by clear space”. Examples of other structures include storage sheds, detached garages, fences, and swimming pools. The standard limit for Other Structures is 10% of the Dwelling limit.
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Personal Property pays for theft, damage, or destruction of the policyholder’s personal property which includes items that the policyholder owns or uses. The standard limit for Personal Property is 50% of the Dwelling limit and can be increased for an additional premium. It is a good idea to do an inventory of everything in your home by keeping receipts, taking pictures or video taping since this can be used as proof to replace damaged or stolen items covered by the policy.
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Loss of Use pays for additional living expenses (temporary housing, food, and other essential expenses) if the residence premises where the insured resides are damaged so badly that they are “not fit to live in” during repairs. Most policies pay 10% to 20% of the amount of the dwelling coverage.
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Personal Liability protects an insured against financial loss if he/she is sued and found legally responsible for someone else’s bodily injury or property damage. The liability limit automatically provides $25,000 in coverage but can be purchased up to $1 million for an extra premium.
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Medical Payments to Others provides coverage for necessary medical expenses incurred by others (not an insured) within three years of an injury.
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Deductible is the amount an insured must pay out of his/her own pocket before the insurance company will pay on a claim
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Renters Insurance (Tenant Insurance) provides residential property coverage for people who rent homes or apartments.
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Flood Insurance, sold separately from home insurance, is specific insurance against property damage caused by floods (rising water). The National Flood Insurance Program (NFIP) provides flood insurance through more than 85 participating insurance companies. Typically there is a 30 day waiting period before the policy becomes effective. Flood insurance is required when you buy a house in a designated high-risk flood zone and finance the house through a federally-regulated mortgage loan. Flood insurance covers up to $250,000 of dwelling and up to $100,000 of contents for residential, and up to $500,000 of building and up to $500,000 of contents for business.
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Texas FAIR (Fair Access to Insurance Requirements) Plan is the state-run program that provides basic property insurance coverage on buildings, dwellings, and their contents for property owners who are unable to obtain coverage in the standard insurance market.
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Texas Windstorm Insurance Association is the state-regulated insurance pool that provides property insurance, both personal and commercial, in coastal areas exposed to the risk of heavy windstorm losses.
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Note: Information provided at this Learning Center is extracted from various text books written by the American Institute for Chartered Property Casualty Underwriters (AICPCU) and from the Texas Department of Insurance (TDI).