Although there are many types of insurance available, our main focus in this section is on homeowner, renter, and flood insurance programs, including coverage for owners of condominiums and manufactured housing. We’ll also touch briefly on related policies such as automobile, boat and watercraft coverage, home rental and dwelling insurance, law and ordinance coverage, and supplemental insurance you might want to consider.
Homeowners insurance protects your home and its contents from accidents and disasters. It is known as a “package policy” because it usually provides two or more types of protection. For instance, it covers physical damage to your home and also protects you from liability or legal responsibility for damage or injuries that you or your family members and pets may cause to others.
Most homeowners policies also cover some living expenses you would incur if you are unable to occupy the property for a period of time. Your policy probably also includes some limited medical-payments coverage.
Let’s examine the most common types of coverage that are included in your policy:
- Home and Property Damage
- Personal Liability
- Additional Living Expenses
- Medical Payments
Home and Property Damage
This portion of your insurance pays to replace or rebuild your home and any other structures on your property — such as a detached garage. It also provides the funds to replace your personal property — such as furniture and clothing.
The amount of insurance you carry on your home and personal property should be based on a sound assessment of your needs in the event of a loss. You should have enough coverage to rebuild your home and replace all of your possessions at today’s costs.
In some cases your lender or condo association may require a minimum amount of coverage tied to mortgage amounts or other guidelines. Remember that standard personal property payout benefits may also be limited to between 50% and 70% of the dwelling coverage amounts.
Make a commitment to review the value of your home and possessions on an annual basis and make any necessary adjustments to benefit limits. You can also purchase additional types of coverage that pick up where standard policies end.
Liability coverage protects you against lawsuits for damages caused by you, your family members, and/or your pets. It pays for the cost of defending you in court as well as the cost of any settlement action or finding of liability.
Most standard policies include coverage of approximately $100,000 for personal liability. Higher amounts are available, and today most experts recommend coverage amounts of between $300,000 and $500,000.
Additional Living Expenses (ALE)
If you cannot occupy your home after a disaster, you will want to make sure your policy includes benefits that provide payments for additional living expenses.
These include hotel rooms, meals and related living expenses while your home is being rebuilt or repaired and can’t be occupied. The standard homeowner policy sets limits at about 20% of the maximum coverage.
This coverage pays for the medical expenses of persons accidentally injured at your home, regardless of who is at fault for the injury. Benefits are capped at the medical payment limits in the policy and do not apply to your injuries or those of anyone living with you or to activities involving a home-based business.
Your homeowners insurance policy covers your condominium much like it does for a single-family homeowner. The condominium association should have what’s known as a “master policy” on the condominium project, which typically covers the structure. The master policy protects the commonly owned elements of the building, such as the roof and outer walls. You probably pay for a portion of the master policy in your monthly homeowners association dues.
Caution: Don’t Get Forced Off the Road with a “Force-Placed” Policy
Though homeowners insurance covers many types of perils, it does not cover flood damage or damage due to poor maintenance or deliberate destructive acts. In fact, if you let your homeowners insurance policy expire while your home is financed, your lender will likely put what’s known as a “forceplaced” policy on the property. Force-placed insurance is often more than twice the cost of traditional policies and provides little benefit to you as the property owner.
Caution: Avoid Being “Boxed In” Don’t wait until the last minute to buy your policy, especially during hurricane season (June 1 through November 30). Insurance companies do not accept new applications, or requests to increase coverage, once a tropical storm or hurricane reaches a certain distance from landfall. Insurance companies generally refer to this situation as the storm being “in the box.”
As a condo owner, the homeowners policy you purchase typically only covers the contents of the unit and the portions of the building that belong to you as an individual condo association member.
Condo associations can also require unit owners to insure items such as front doors and screened porches. In addition, unit owners should continue to insure interior additions or upgrades which are not the same kind or quality as the original building items.
Your condo association may still choose to cover some items, so make sure you are thoroughly familiar with its by laws and insurance policy and know what the association is responsible for covering.
Renters insurance protects your possessions when you rent a house or apartment. Your landlord’s insurance policy usually won’t cover your possessions. For example, if your rented home is destroyed by a fire, your landlord will be covered for the structural damage. But if you don’t have renters insurance, you will not receive any money for your lost possessions. Renters policies can be a relatively inexpensive way to help cover the loss of your personal belongings.
Renters insurance typically covers the same “perils” as homeowners insurance policies fire, theft, etc.) and also limits your personal liability for injuries to others. In some cases, renter policies also cover additional living expenses if you cannot live in the property temporarily, although this benefit usually has a set maximum amount.
There are two standard renters insurance policies: The Broad Form is the most common and covers personal belongings from damage due to:
- Theft Water-related damage from property utilities
The Comprehensive Form provides coverage for all of these events plus additional selected options such as windstorm damage. Since Comprehensive covers more perils, it usually is more expensive than the Broad Form.
Homeowners Insurance for Mobile and Manufactured Homes
If you own a mobile or manufactured home, the steps for getting insurance are pretty much the same as for owners of other types of homes. Usually you get a standard homeowners insurance policy, though some companies may offer a special manufactured or mobile home policy. You can still qualify for mobile home insurance even if you don’t live in the mobile home all year round. If you’re renting a mobile home, you can purchase renters insurance to cover personal belongings just like any other renter.
Am I covered if I move my home?
The main difference between your mobile or manufactured home and other homes is the fact that yours is built to be moved. Your regular homeowner’s policy will not cover the move from one site to another, and in fact the policy will probably tell you that you have to call your insurance agent if you plan to relocate your home. The company will sell you a different policy for about a month’s time, which covers any damage due to the move, the property being stranded, and so on. You may find that you get charged a higher deductible during the move, so be sure to read the policy carefully before trying to make a claim.
Are there any other differences?
Companies that insure mobile homes are most concerned about wind and storm damage. This is because mobile homes tend to be lighter and easier for the wind to push around. In order to get insurance you may have to use industry-approved “tie downs” that anchor your unit to the ground.
Another difference is that the company may offer little or limited coverage for outbuildings, like sheds. For example, they might limit coverage of all outbuildings to $2,000.
You may be required to carry flood insurance on your home if it is in a federally designated Flood Zone. These zones are mainly located in coastal areas that are prone to flooding from oceans, lakes and/or rivers.
Even if your home is not in a Flood Zone, if you think flooding is possible you may be able to voluntarily purchase flood coverage. All standard homeowners and renters policies exclude coverage from floods. Basic coverage is only available through FEMA’s National Flood Insurance Program (NFIP). The National Flood Insurance Program is managed by FEMA, though the insurance policies are sold by approved insurance companies.
You can only purchase flood insurance if your community participates in FEMA’s NFIT. For a complete state-by-state list of communities that are participating, check out the links at FEMA’s website, www.floodsmart.gov.
If flood insurance is available in your community, it can be purchased through your local insurance company along with your homeowners or renters policy as long as it offers the NFIP coverage.
Caution: Mobile Home Insurance vs. Special Vehicle Insurance Mobile home insurance is not the same as motor home, recreational vehicle (RV), or travel trailer insurance.
Caution: You should be aware that there are NFIP limits on coverage. Standard dwelling coverage is limited to a maximum of $250,000 for homes and $500,000 for businesses. Annual premiums can vary from $350 to $2,100, depending on the amount of coverage you need and the Flood Zone your home is in.
Alert: The amount of money that flood insurance pays out for personal property is based on actual cash value rather than full replacement costs. This can severely impact you if you must replace everything.
Automobile insurance is required by law in all states. Each state sets the minimum types and amounts of coverage that you must have. Mandatory policies usually include:
- Personal Injury Protection — Covers auto accident related injuries for you and your family members or others riding in the car. Some policies will also insure your child if he or she suffers an injury while riding a school bus under this type of coverage.
- Property Damage Liability — Covers certain damage that you or anyone covered cause to another person’s property with an automobile whether moving or parked. It only covers damage for which you or anyone insured under your policy is legally liable.
- Bodily Injury Liability — This coverage pays for death or serious and permanent injury to others when you are legally liable for an accident involving your automobile or while driving someone else’s car (in some cases). Your insurance company will pay for injuries up to the limits of your policy and provide legal representation if you get sued.
- Collision — This coverage pays, regardless of who causes the accident, for repair or replacement of your vehicle if it collides with another vehicle, flips over, or crashes into an object. It does not cover injuries to people or damage to property other than your covered automobile.
- Comprehensive — This coverage pays for losses from incidents other than a collision, such as fire, theft, windstorm, vandalism, or flood. It also covers damages caused by falling objects or from hitting an animal.
- Uninsured and/or Underinsured Motorist —This coverage pays for bodily injuries to you, your family members, and any other person occupying your covered automobile, should they be caused by the negligence of an uninsured or underinsured motorist.
Boat and Watercraft Insurance
Small boats, including canoes and small sail and power boats (under 25 horsepower), are most likely covered under your homeowners or renters policy. Basic coverage is usually limited to the lesser of $1,000 or 10 percent of the home’s property value.
Maximum limits include the boat, motor, and trailer combined. Liability coverage is typically not included, but it can be included in your homeowners policy. Check with your insurance agent to find out what coverage is in place or available for your boat.
Larger or faster boats and personal watercraft (wave runners and jet skis) need a separate boat insurance policy. Premiums are based on several factors, including the type of craft, size and cost to replace. Boat insurance policies also provide expanded liability protection.
- Damage to the hull, machinery, and certain equipment
- Bodily injuries caused to others
- Property liability
- Medical payments for the owner and passengers
Liability policies are available for $15,000 to $300,000 in coverage. Deductibles generally range from $250 to $1,000. Policies also can include towing coverage, insurance for the boat trailer and any special equipment that may be on board, such as fishing gear.
Home Rental or Dwelling Insurance If you rent your home to others, insurance companies offer landlord coverage to suit your situation. You usually need a commercial dwelling policy to cover a home you do not live in. If you rent a room or a portion of your home, ask your agent what coverage you may need.
Ordinance or Law Coverage
It’s possible that a local building code or law passed after you purchased your insurance policy could increase the cost of repairing or replacing your home if it’s damaged. The insurance company will not pay that extra amount, unless you add ordinance or law coverage to your policy. Your agent must offer you ordinance or law coverage. If you do not wish to buy this coverage, you must sign a form stating that you reject it. Some companies automatically include this coverage.
Review the following wise tips to consumers on supplemental types of insurance coverage:
Inflation Guard — Inflation or room additions can increase the replacement cost of your home and its contents, while the actual cash value of your home may decrease over time. An inflation guard endorsement gradually increases your coverage limit annually to keep your insurance coverage up-to-date with current prices and inflation.
Windstorm Coverage — Most homeowner policies do cover damage caused by windstorms, hurricanes and hail, but insurance companies may exclude this coverage in some high-risk areas — such as homes on or near the beach.
Hurricane Deductibles — Most coastal insurance policies include special hurricane deductibles that take effect when the National Weather Service has issued a hurricane warning. These deductibles depend on the value of the insured property and apply only to hurricane claims. You may owe extra out-of-pocket costs for damage that occurs: any time a hurricane watch or warning is issued, up to 72 hours after such a watch or warning ends, and any time when hurricane conditions exist throughout the state.
Even though you may face damage from more than one storm during a season, you typically only have to make one deductible payment per year.