Important Homeowners and Umbrella Insurance Facts

New home construction

Homeowner’s & Umbrella Ins.

Property and Casualty insurance protects the things we own, such as our cars, homes, and businesses. It also protects areas with gaps in coverage such as professional and personal liability. This article will explore many of the major issues about homeowners and umbrella insurance. It will touch on some other insurance you should be aware of and provide tips to save you money so that you can intelligently review your insurance coverage.

Property and Casualty insurance can vary greatly between companies who provide it and from state to state. This information is offered as a general overview to help you become more educated about your choices. Seek the advice from a trusted professional insurance agent.

Important Insurance Tips

  • Coverage limits: Discuss with your agent the recommended insurance amounts for all the various categories pertinent to your situation.
  • Price Comparisons: Shop around. This is a simple suggestion, but it can save you several hundred dollars per year. Since prices vary, get at least three quotes: from the Internet, from independent insurance agents, and from captive insurance agents. The captive agents can sell products only from their respective companies.
  • Documents. Keep the documents from your previous insurance companies in case you are sued after you switch your coverage.
  • Group your insurances. Buy your homeowners, auto, business and umbrella insurance from the same insurer, if possible. Many insurers give multi-policy discounts.
  • Maintain good credit. This is important because it may help cut your insurance costs. Some insurers are increasingly using credit information (although not without controversy) to underwrite insurance policies.
  • Don’t let price be the only factor. If comparing quotes, pay attention to coverage amounts. Many prefer to use a local agent whom they can talk to in person, someone they trust to give insurance advice. Ask friends for recommendations, and contact your state insurance department to find out whether it provides information on consumer complaints. Choose an agent or representative who listens and takes the time to answer your questions
  • Use Well Rated Insurance Companies: Choose companies that are financially stable. They should be able to tell you their rating from companies like A.M., Best, and Standard & Poor’s.
  • Read your policy. At least review the main declaration page, which describes your personal coverage. Read or at least scan your insurance policy, for you may be surprised what is and isn’t covered. This makes you more aware of things to be careful about and how to file a claim. You might discover that you are insured for things you didn’t realize were covered. This is good to know if something happens.
  • Review your coverage regularly and always read any updates that you receive in the mail. Sometimes your coverage is only slightly modified. e.g., when laws change. At other times you might be facing a more significant change.

Home Insurance. Your single biggest asset is most likely your home and its contents. If you suffer a loss to your home, it substantially affects your net worth. To protect this asset, ensure that you have homeowners, condominium or renters insurance. Your homeowner’s policy also covers you for certain types of liability and may extend coverage to your belongings away from home.

Common Homeowner’s Insurance Coverage:

  • Dwelling Protection covers your actual house for a variety of different losses, such as fire, wind, hail, and vandalism.
  • Other Structure Protection is important too, since it extends coverage to other improvements to your property separate from your home, e.g., detached garage, fence, or shed.
  • Personal Property Protection protects the stuff in your home, for some of the same risks mentioned for dwelling protection, but it also protects against theft.
  • Loss of use pays for your housing expenses if you are unable to occupy your house while it is being repaired, e.g., following a fire.
  • Bodily Injury Liability and medical payments covers injuries sustained by anyone who is injured on your property; it also covers some lawsuits of guests, which can help save you from the financial responsibility of paying an attorney to defend you or from paying medical bills if you are found at fault.

Coverage and Cost Reduction Tips

  • Risk prone areas. Do you live in an area that is prone to floods, hurricanes or earthquakes? If so, consider that most policies do not cover damage from floods or earthquakes. Contact your insurance agent for riders to cover these risks.
  • Important riders. Ask your insurance agent about important riders that you should consider, such as ones for basements, sewage backup or sump pump failure.
  • Replacement Cost. Make sure your policy covers “replacement cost” on contents and structure, to insure that your contents and building are replaced or fixed at today’s inflated costs, and not at a depreciated value.
  • Inflation protection on the structure. Inflation may cause the cost of repair to be greater than an amount normally covered. Ask your agent for information.
  • Renters Insurance. If you are a renter, be sure to acquire insurance for your possessions and for liability.
  • Condominium Insurance. If you own a condominium, the condo association should provide coverage for the structure; however, ask your agent for loss assessment and coverage for improvements that you make.
  • Be a good insurance risk. Try to keep your claims low by placing fire extinguishers in strategic locations in your home. Install sprinkler, smoke, fire and theft alarm systems if feasible. Keep your home and land maintained and free of debris. From time to time your homeowner’s policy company may send people inspect your home. One of the things they look for is the condition of your home to make sure you have maintained the property. Good upkeep contributes to fewer losses on average.
  • Personal Property Description. Create (and keep current) a written or video inventory of your home’s contents, so that if you have a loss you can provide this information to your insurance company. An easy way to do this is to shoot a video of the entire contents of your home and to save the file on the cloud, e.g., in Drop Box.
  • Engrave your larger possessions, or use theft ID or tracking technology.
  • Limits on certain types of property. Your policy may limit the coverage for such things as guns, sporting equipment, cameras, computers, items used for business, jewelry, antiques, stamps, coins, and other collectibles. Consider increasing your limits on these categories, or buy ‘riders’ for specific items. Keep appraisals, insurance policies, home contents inventory, photos, and records in a secondary location, such as in a bank safe deposit box.
  • Discounts for fire and security systems may apply to your policy.

Business Insurance. Being self-employed can be risky enough, and without proper insurance protection, your risks increase. Having your business threatened by a casualty loss could threaten your ability to earn a profit and to stay in business. We live in a very litigious society, and when you own a business you face an increased risk of legal action. Business insurance is a very specialized area of insurance, and many small businesses and professionals have gaps in coverage. Consult with a good business insurance agent regarding your needs. Coverage can vary greatly depending on your type of business or profession.

Personal Umbrella Liability Insurance. Umbrella insurance is probably one of the least understood property and casualty insurance policies, so most people don’t obtain it.

Umbrella insurance is actually very simple. It is designed to provide added liability protection above and beyond the limits on other insurance policies such as auto and homeowners. Umbrella insurance provides coverage when certain limits of those policies are exhausted.

Automobile and homeowners’ policies should contain liability coverage. Liability insurance pays expenses for such things as an injured person’s medical bills and lost wages. It may also cover the cost of a legal defense. Medical expenses and legal fees can easily exceed the liability limits on other insurance policies.

A personal liability umbrella insurance policy provides that extra layer of liability coverage, usually for a low premium. Consider purchasing at least $1 million of coverage (usually for around $10 a month). Discuss the appropriate amount of coverage and costs with your auto and homeowners’ insurance agent.

Umbrella liability policies may also provide coverage in other areas, such as personal injury (including libel and slander), defamation of character, and protection for volunteers to a nonprofit.

Summary. Property and casualty insurance is not exciting, but it is vital in our society. It is a necessary budgetary expense, and it is important to your overall financial condition.