45240 Hwy 78 Lincoln AL, 35096
                                       Office: (205) 763-0950  Fax: (205) 763-0949

Home Owners

FAQ: Homeowners Insurance

What is homeowners insurance and who should buy this type of coverage?

Homeowners insurance is one of the most popular forms of personal lines insurance. The typical homeowners policy has two main sections: Section I covers the property of the insured and Section II provides personal liability coverage to the insured. Almost anyone who owns or leases property has a need for this type of insurance. And most often, homeowners insurance is required by the lender as part of the requirements in obtaining a mortgage.

What is the difference between "actual cash value" and "replacement cost"?

Covered losses under a homeowners policy can be paid on either an actual cash value basis or on a replacement cost basis. When "actual cash value" is used, the policy owner is entitled to the depreciated value of the damaged property. Under the "replacement cost" coverage, the policy owner is reimbursed an amount necessary to replace the article with one of similar type and quality at current prices.  The choice of which policy best suits your needs or desires is up to you when purchasing a homeowners policy, although if you currently have an actual cash value policy we can upgrade your protection to replacement cost for additional premium.

What factors should I consider when purchasing homeowners insurance?

There are a number of factors you should consider when purchasing any product or service, and insurance is no different.

Here is a short list of things you should consider when you purchase homeowners insurance.

  1. First and foremost, purchase the amount and type of insurance that you need. Remember that if your policy limit is less than 80% of the replacement cost of your home, any loss payment from your insurance company will be subject to a coinsurance penalty. Also, determine the amount of personal property insurance and personal liability coverage that you need.
  2. Second, determine which, if any, additional endorsements you want to add to your policy. For example, do you want the personal property replacement cost endorsement, the earthquake endorsement, etc..?

What are some practical things I can do to lower the cost of my homeowners insurance?

There are a number of things you can do to lower the cost of your homeowners insurance.

One way to lower the cost of your homeowners insurance is to look for any discounts that you may qualify for. For example, many insurers will offer a discount when you place both your automobile and homeowners insurance with the them. Other times, insurers offer discounts if there are deadbolt exterior locks on all your doors, or if your home has a security system. Be sure to ask us about any discounts you may qualify for.

Another easy way to lower the cost of your homeowners insurance is to raise your deductible. Increasing your deductible from $250 to $500 will lower your premium, sometimes by as much as five or ten percent. However, be careful to make sure that you have the financial resources necessary to handle the larger deductible.

What are the policy limits (i.e., coverage limits) in the standard homeowners policy?

[Note: this answer is based on the Insurance Services Office's HO-3 policy.]

Coverages A and B provide protection to the dwelling and other structures on the premises on an all risks basis up to the policy limits. The policy limit for Coverage A is set by the policyowner at the time the insurance is purchased. The policy limit for Coverage B is usually equal to 10% of the policy limit on Coverage A. Coverage C covers losses to the insured's personal property on a named perils basis. The policy limit on Coverage C is equal to 50% of the policy limit on Coverage A. Coverage D covers the additional expenses that the policyowner may incur when the residence cannot be used because of an insured loss. The policy limit for Coverage D is equal to 20% of the policy limit on Coverage A. The coverage limit on Coverage E — Personal Liability — is determined by the policyowner at the time the policy is issued. The coverage limit on Coverage F — Medical Payments to Others — is usually set at $1000 per injured person.

Where and when is my personal property covered?

Coverage C, which provides named perils coverage, applies to all your personal property (except property that is specifically excluded) anywhere in the world. For example, suppose that while traveling, you purchased a dresser and you want to ship it home. Your homeowners policy would provide coverage for the named perils while the dresser is in transit — even though the dresser has never been in your home before.

Do I need earthquake coverage? How can I get it?

Direct damages due to earthquakes are not covered under the standard homeowners insurance policy. However, unless you consider yourself living in an area that is prone to earthquakes, you may not want this coverage. If you do live in a part of the country with high earthquake activity you may want to consider adding an earthquake endorsement to your homeowners insurance policy. This endorsement will cover damages due to earthquakes, landslides, volcanic eruptions and other earth movements.

Will my homeowners policy cover me for losses that occur outside of my home?

There is only one way to find out the answer to this question, and that is to check your policy. Homeowners policies regularly provide protection for off-premise destruction or theft, which covers your possessions while they are outside your home. For example, if your luggage were stolen while you're on vacation, a homeowner's policy containing off-premise protection would cover the loss. This type of protection can also protect your kids' stereo equipment and other possessions when they go off to college - if they live in a dormitory. Once a child moves to an off-campus apartment, he or she will typically need to purchase a separate renters insurance policy to cover their personal property.

If your homeowners policy does not contain off-premise protection as part of your standard coverage, you may be able to purchase this coverage for an additional charge.

You should check the liability portion of your policy to determine your level of coverage for accidents that occur outside your home. Homeowners policies typically cover accidents that occur on your property - if the mailman slips on your sidewalk, or if a neighbor is injured in your backyard. Many policies will even cover you for accidents that occur away from your property. For example, if you run a shopping cart over someone's foot at the grocery store, many policies will cover the medical bills. But once again, the only way to know whether you're covered is to carefully read your homeowners insurance policy.

How much of the exterior of my property is covered by homeowners insurance--fencing, driveway, etc.?

Many people don't realize it, but homeowners insurance covers a lot more than just your house. A standard homeowners insurance policy provides broad protection for personal property and other structures located in and around your home.

Several different types of coverage are included in every standard homeowners insurance policy (HO-1, HO-2, and HO-3--the three standard policy types available for most homes). Coverage A is strictly for the physical structure of your home, including additions permanently attached to the structure (such as an attached garage). Coverage B insures other structures on the premises, including detached garages, fences, swimming pools, driveways, and sidewalks. The limit on this coverage is typically 10 percent of the Coverage A amount. Coverage C insures your personal property, including all of your household possessions and other items such as awnings, outdoor antennas, and carpeting. The limit on Coverage C protection is typically 50 percent of the Coverage A amount. Additionally, all standard homeowners policies include various "additional coverages" for items such as debris removal, trees, and shrubs. Each of these coverages has its own dollar limit.

While homeowners insurance coverage is very broad, there are certain items which are not covered. For example, motorized vehicles (e.g., cars, motorcycles, go carts, golf carts, and snowmobiles) are not covered by your homeowners insurance. Animals, birds, and fish are not protected under homeowners insurance, either.

Keep in mind, too, that your homeowners insurance policy only covers the above-listed property if it is damaged or destroyed by an insured peril. Personal property is only protected against the perils listed in your policy, while your dwelling may be insured against named perils (HO-1 and HO-2) or open perils (HO-3).

My neighbor's tree fell across my fence. Will their insurance cover the damage?

In most cases, your insurance will be the one to cover the damage. Although the tree fell from your neighbor's property, the damage affected your property. Your homeowners insurance covers damage to your property, so you should make a claim under your policy. Your policy probably also provides coverage to remove the debris from your property (typically up to $500).

There are a few exceptions to this general rule, however. For example, say you notice that your neighbor's tree has a large, dead branch hanging precariously over your property. You notify your neighbor in writing of this hazard and ask him to address the problem, but he chooses to ignore it. Two weeks later, the branch comes crashing down and destroys your fence. In this case, you may have some recourse against your neighbor's insurer, because your neighbor had notice of a potential hazard and did nothing to improve the situation. Make sure you keep records of all correspondence and actions regarding the situation, so that you have something to back up your story if you have to contact your neighbor's insurer.

Complications may also arise depending on what actually caused the tree to fall. If the tree fell in a windstorm, or if it was struck by lightning, there is little question that the damage will be covered. However, certain perils such as floods and earthquakes are not covered under standard homeowners policies. If the tree fell as a result of such an event, the damage may not be covered at all. To find out for sure, you'll have to contact your insurer.

Please Note: The information contained in this Web site is provided solely as a source of general  information and resource.  It is a not a statement of contract and coverage may not apply in all areas or circumstances.  For a complete description of coverages, always read the insurance policy, including all endorsements.

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