Homeowner Insurance Claims

First comes the evacuation, a mad scramble for insurance documents, financial statements, family heirlooms. As you drive away, smoke shrouds the windows, flames lick the rooftop. Your home is reduced to ashes.

After the fire trucks and reporters have gone, you're left with a charred concrete and lingering emotional trauma. You must deal with door-to-door solicitors and fend off shady contractors and other scam artists who prey on disaster victims. And if part of the house is left standing, you'll need to secure the property to fend off looters.

And then comes the Big Question: What do I do now?

What's the first step?

After securing your family's safety, contact your agent or your insurance company as soon as possible.

What documents should I be prepared to provide?

It's helpful to have copies of your insurance policy and "declarations" page, which details your specific coverage limits.  A comprehensive inventory of your home's contents, including photographs or video records will smooth the process.

What if my insurance documents were destroyed in the fire?

Your insurance company should have all of your policy information on file, so you will still be covered. But it makes sense to always keep your home's inventory in a readily accessible safe, secure location such as a fire proof safe or a safety deposit box at your financial institution, because that will be difficult, if not impossible to reconstruct in the aftermath of disaster.

If I'm burned out of my home, what documentation do I need to be reimbursed for expenses?

Fire victims should keep receipts for all hotel rooms, food and staples bought to maintain their regular standard of living. Coverage for additional living expenses is standard with homeowner's policies at most insurers. You may want to make sure you have it when you do your annual coverage checkup.

What if I'm a renter?

Renters insurance typically covers the customer's personal belongings and emergency living expenses, so the same advice applies: Keep an up-to-date home inventory, and save receipts if you are forced to leave. Landlords, conversely, will generally be covered for lost rent.

Home Insurance Basics

When shopping for home insurance, there’s much more to consider than how much your coverage will cost.

You need to buy the right type of policy.  You need the proper level of protection, plus special provisions for valuables such as jewelry, your computer equipment and other possessions.  You might also need additional coverage for such things as earthquakes or flooding. 

Lending institutions usually require mortgage customers to purchase homeowners insurance.  Don’t rely on the coverage levels mandated by your bank or mortgage company.  Those levels are designed to protect the house itself, but not necessarily your possessions.  That’s why it’s important to check with your agent or insurance company, to make sure you have adequate coverage.  Always keep an up-to-date home inventory.

There are several basic types of home insurance policies: 

HO-1

• Basic homeowners policy

• Covers your house and possessions against 11 different perils.

HO-2

• Broad homeowners policy

• Covers house and contents against 17 perils, with premiums running about 5 percent to 10 percent more than an HO-1 policy.

HO-3

• Special homeowners policy

• Covers all perils except those specifically excluded by the policy. Costs 10 percent to 15 percent more than an HO-1 policy.

HO-4

• Renters Policy

• Covers 17 named perils and includes liability coverage. It does not insure the dwelling itself.

HO-5

• Extensive homeowners policy

• Covers damage from practically everything except earthquakes, wars and floods.

HO-6

• For owners of co-ops or condominiums

• Provides personal property coverage, liability coverage and specific coverage of improvements to the owner’s unit. Insurance provided by the owner’s association normally covers most of the actual structure.

HO-8

• Policy for older homes

• Covers the same perils as HO-1 but pays only for repair costs or actual cash value, since replacement cost could make the policy costly.

HO-A

• Covers your home and possessions against named perils only, for actual cash value.

HO-B

• Covers the dwelling for all perils unless excluded against all risks and contents against named perils. The house is covered for replacement cost up to policy limits, while contents are covered for actual cash value unless you buy additional replacement cost coverage.

HO-C

• Covers house and contents against all risks not specifically excluded by the policy. Again, the house is insured for replacement cost up to policy limits, while contents are covered for actual cash value unless you buy additional coverage.

There are variations on these policies as well. For example, landlords can buy coverage that insures only their buildings and not your personal property (which is what a renters policy would cover). You can get special policies to cover mobile homes (a.k.a. manufactured housing).

Starting an application

When you apply for homeowners insurance, you’ll provide a great deal of information.  The insurance company will ask you about your current occupation and employment history, marital status, previous addresses, date of birth and Social Security number. The insurer will check your criminal, credit, and insurance history to see if you are a "good risk." The insurance company also will look at your "loss history" to see what kinds of home insurance claims you've made in the past.

Then, you’ll have to decide what type of homeowners policy you want, the deductible, and how you’ll pay for the coverage. Your agent or insurance company will determine how much it would cost to replace your home and many of the items inside.  For more expensive property, such as jewelry and computer equipment, you might need special coverage in addition to the basic policy.  You will need to maintain written documentation as well as photograph's of these items to prove ownership.

Analyzing your home

Many factors go into determining the premiums for a homeowners policy.  The age of your home, the materials used to build it, where it’s located, the square footage, and the number of rooms all play a role. 

 How do you heat your home?  What’s the overall condition of the house?  How many people live in your home?  How close is your home to the nearest fire station and fire hydrant?  The answers to these questions also help determine how much you’ll pay for your homeowners policy.

Ways to save

If your home is equipped with an alarm system, smoke detectors and deadbolt locks, you could save money.  Those items help make your home safer and more secure.  If you have an in-ground pool or a trampoline, you might pay higher premiums. You can also expect to pay more if you are located in a higher risk area, such as a coastline. Your insurance company will also want to know if you plan to use the home for any business purposes, of if you plan to rent all or part of the house, both of which can increase liability.

Armed with all this information, insurance companies can determine how much to charge you for insurance, sometimes in a matter of minutes.

Your policy dollar limits are important

If you insure your house for $100,000, that's the most you will get if it is destroyed, even if it would cost more to replace it. The Declarations Page on the front of your policy shows how much coverage you have. Talk with your agent or company representative if you have any questions about your insurance limits

Replacement cost coverage for your personal property

“Before buying homeowner’s insurance, you need to understand the difference between ‘replacement cost’ and ‘actual cash value,’”    Most homeowner policies contain replacement cost coverage on the home and actual cash value coverage on personal property.

Homeowners policies automatically cover household contents - furniture, clothes, appliances, etc. - up to 40 percent of the amount your house is insured for. This means if you insure your house for $100,000, its contents are insured for up to $40,000.  You can get more coverage by paying a higher premium. This automatic coverage pays only the actual cash value of damaged, stolen, or destroyed household goods. Actual cash value is an items replacement cost, minus depreciation.  You will need to provide an inventory of your home's contents

Replacement cost policies give you more protection than actual cash value coverage. For example, what happens if a burglar steals your six-year-old television set. With actual cash value coverage, you get only what you would expect to pay for a six-year-old television set. With replacement cost coverage, the insurance company pays to replace your TV with a new set similar to the stolen one.

Insurance companies generally want proof you replaced an item before paying your claim in full.  An insurer might offer to replace the items instead of paying cash, but the choice is yours.

Take inventory

Many people learn after a fire or storm they didn't have enough personal property coverage. Taking inventory will help you decide how much insurance you need. It also will simplify claims.

Your inventory should list each item, its value, and serial number. Photograph or videotape each room, including closets, open drawers, storage buildings, and your garage. Keep receipts for major items in a fireproof place.

What other protections does my policy provide?

Homeowners policies regularly provide other types of coverage, including off-premises theft protection and unauthorized use of your credit cards. Make sure you understand which provisions are included in the standard coverage you elect to purchase and which might require supplemental premiums.

Supplemental coverage

Homeowners policies cover specific risks.  Depending on what you own and where you live, you might need to supplement your policy with special coverage.

Flood insurance

Homeowners policies do not cover flood damage. The National Flood Insurance Program (NFIP) offers flood coverage in many areas. Local insurance agents sell NFIP flood policies and can tell you about the program in your area.

If a mortgage lender determines a home is in a special flood hazard area, the borrower might be required to purchase flood insurance.

Earthquake insurance

If you are concerned about earthquakes, you can get coverage with a separate policy.

Extra coverage (Endorsements)

You might want more coverage for certain items than your policy provides. For an extra premium, you might be able to buy endorsements that expand or increase the coverage on these items. Some of the most common endorsements cover jewelry, fine arts, camera equipment, coin or stamp collections, computer equipment, and radio and television satellite dishes and antennas.

Personal umbrella liability insurance

If you want more liability coverage than a homeowners policy provides, you can buy a separate umbrella policy. Because policies vary, make sure the agent or company fully explains the coverage.

Higher deductibles, lower premiums

Deductibles allow you to cut the cost of your insurance, by assuming some of the risk.  If you have a $250 deductible on your homeowners policy, you agree to pay $250 to cover any losses, before the insurance company pays the rest of your claim.  By increasing that deductible to $1,000, you might save 20 to 30 percent on your premiums.  You must decide whether lower deductibles or lowering your premium is right for you.