DID YOU KNOW?

Taking a video inventory...

of your home and its assets will help you rebound from a major catastrophe. Make a video of your home and the major items in it, and provide a voiceover narrative of what things cost.

FAQ: Personal

Q: Do I really need insurance for my home?

For most people, their home is their single most valuable possession and largest investment. Homeowners insurance protects your investment as well as you, your family and your household possessions.

If you were to suddenly lose your home due to fire or a tornado, or have the contents damaged or stolen, you probably could not afford to replace everything all at once. If somebody sued you for an injury or damage caused by you or your property, the cost of defending against that lawsuit could be very expensive regardless of the outcome.

All of these situations are covered by the homeowners package policy. And while it may be unpleasant to think about fire, theft, and other uncertainties of life, let's face it, that's reality.

Yet another reason you need to carry homeowners insurance is that mortgage lenders require it. No mortgage company will lend the large amounts of money needed to finance homes at today's prices without requiring an insurance policy to protect that investment.

Q: What kinds of perils am I protected against?

Remember that policies vary but homeowners insurance usually covers damage to both structures and personal property caused by:

  • Fire or lightning
  • Windstorm or hail
  • Explosions
  • Riot or civil commotion
  • Aircraft
  • Vehicles
  • Smoke
  • Theft or vandalism (sometimes called malicious mischief)
  • Falling objects
  • Weight of ice, snow or sleet
  • Freezing of a plumbing, heating, air conditioning or other such household system

In fact, your coverage is most likely even more comprehensive than the above list. Many homeowners policies cover damage by "just about everything," unless the coverage is specifically excluded. In these cases, it is even more important to understand what is not covered.

Q: What about floods, earthquakes and other catastrophes?

Most catastrophes are covered; for example, tornadoes fall under the windstorm peril listed in the previous question and so are most likely included. Flood and earthquake damage, however, are not covered by a standard policy. (Earthquake insurance can be purchased.)

Be careful not to be lulled into a false sense of geographic security. Flood and earthquake activity is more widespread than many people realize. For example, almost 90 percent of the U.S. population lives in seismically active areas. Since 1900, earthquakes have caused damage in all 50 states. And if your home is located in a flood-prone area, you are 26 times more likely to suffer a flood loss than a loss from fire.

You may want to check with your Henry O. Baker agent about special catastrophic policies for normally excluded conditions like floods and earthquakes. Of course, the cost of such extra coverage may reflect the high risk involved. If you live along a shoreline, for example, expect to pay a higher premium for flood coverage than someone living on a mountaintop would pay.

Q: Who decides how much my property is worth?

State laws may dictate how losses are to be figured, which means the same insurance company may use one method in one state and a different method in another. The common methods are:

Actual Cash Value - The replacement cost of the item minus depreciation. For example, a new television set may cost $500. If your 7-year-old TV set gets damaged in a fire, it might have depreciated 50 percent. Therefore, you would be paid $250 for that set after your deductible.

Replacement Coverage - The cost of replacing an item without deducting for depreciation. So today's cost for a TV set with features similar to the 7-year-old one damaged by fire would determine the amount of compensation. If it still costs $500 today, that would be the replacement coverage.

Replacement value should not be confused with market value. The market value is what your house, for example, would actually sell for and is generally more than the replacement cost. This is because replacement value does not include the land, which almost always does not need to be replaced.

Check your policy. If you prefer replacement coverage and do not already have it, this coverage can be added to your policy. Typically, the difference in premiums is 10 to 15 percent to upgrade from actual cash value coverage to replacement coverage. However, it is well worth it to protect your investment in your possessions. Your Henry O. Baker agent can tell you about the costs involved.

Q: How much will I be paid for damage to my personal property?

Remember that homeowners insurance is designed to cover general personal possessions, not valuable collections like antiques, jewelry or original art. Insurance companies deliberately limit their coverage of expensive possessions so that household premiums are more affordable to everyone. After all, if they had to cover museum-level art collectors under standard homeowners policies, we would all end up paying higher premiums to cover those expensive items.

Your policy lists the specific monetary limits for personal property under what is called "Special Limits." You may wish to talk to your Henry O. Baker agent about additional coverage for specific items.

Q: I rent out my basement. Are my tenants covered by my homeowners policy?

No. Your property and the structure (the basement) are covered by your policy as is your personal liability. However, the tenants' possessions and liability are not covered by your policy. Therefore, they may wish to purchase their own renters insurance. Whether you are a lessor or a renter, you should check with your Henry O. Baker agent to make sure you have the coverage that is right for you.

Q: Help! I've lost everything! Where do I start?

If most of us suddenly found ourselves without anything due to some calamity, we would be hard pressed to know all that we had lost. When was the last time you counted the number of shoes you own or CDs, not to mention furniture, dishes, drapes, or audio and video equipment? The list goes on and on. How much is it all worth and where would you start if you had to replace it?

Now is the time to make a list of major household items and possessions. The handy inventory form at the back of this guide will make your job easier. Just remember that, where possible, it is wise to list the serial number, date and cost of purchase, and even include the receipt if you can.

Another easy way to inventory your home is to use a video camera or take pictures of your home and its contents. As you take the video, you can also talk about the items and their date and cost of purchase.

Whichever method you choose, have a copy made and ask a friend or family member to hold on to it. Or store your copy in a safe deposit box. That way if the worst happens and your home is destroyed, the inventory list will be safe at another location.

Q: Is there anything I can do to lower my premiums?

Because your premium is based partly on the level of risk the insurance company must take, there are things you can do to lower your premium. Installing deadbolt locks (to discourage theft), fire extinguishers, smoke alarms, and burglar and fire alarms that alert your local police and fire stations can often save you up to 15 percent on your premium. Check with your Henry O. Baker agent before purchasing any of these items to see if your insurance carrier has specific requirements to qualify for the discount.

Many insurers also offer discounts if you insure both your home and automobile with the same company. Another way to save may be to increase the deductible on your homeowners policy. If your deductible is $100, it means that you agree to pay this amount first, and your insurance company will pay for damages that exceed this deductible. By increasing your deductible from $100 to $250, or even $500, this decreases the insurance company's risk, which may mean a savings in your premium.

Also, it pays to shop around for insurance coverage just like anything else. Of course, you may want to keep in mind that the extent of coverage also determines the premium cost so the cheapest policy is not necessarily the best. Your Henry O. Baker agent can help you evaluate the different policies and companies so you can make the choice this is right for you.

Q: Who keeps an eye on the insurance companies?

Insurance is a heavily regulated industry. Every state has a government department that regulates and monitors every insurer operating within the state's borders. In addition to approving rates, your state's insurance department is involved in all insurance matters on behalf of private citizens and businesses. It also issues operating licenses to insurers and agents, based on their ability to meet the state's requirements for conduct and knowledge about insurance issues.

Your insurance company and agent work closely with your insurance department to make sure you are getting the best and fairest possible service within the state's guidelines. If you ever have difficulty settling a claim, work with your Henry O. Baker agent to resolve the difficulty. However, you can also contact your state's insurance department if you wish to know more about your options and rights as an insurance consumer.

Q: What do I do when my property is damaged or stolen?

Contact your Henry O. Baker agent as soon as possible. If there is damage to your home or possessions, make "emergency" repairs to protect yourself and your property from further damage, then call your Henry O. Baker agent. For example, if some of the windows in your home have been blown out by wind, you may board them up to prevent additional damage. In fact, your policy covers the cost of these emergency measures.

However, before setting about to make permanent repairs, call your Henry O. Baker agent. The insurance company has the right to inspect the property in its damaged condition. They may want to send a claims adjuster or instruct you to get an estimate from an independent contractor.

If you have property stolen, notify the police immediately and call your Henry O. Baker agent.

Q: I am a renter, not a homeowner. Do I need insurance?

The same rule of thumb applies to renters as to homeowners. If catastrophe struck tomorrow, could you afford to replace everything you own? Or if you were sued, would you have enough money to pay legal fees and possibly settle the suit? If not, chances are you would benefit from the protection that renters insurance brings.

Renters insurance offers the same general personal property coverage and liability protection as a homeowners policy. Thus, your camera is insured while you are on vacation, and you are covered if your grandfather clock crashes into the apartment lobby's wall and leaves a gaping hole. In fact, most policies are surprisingly extensive and may include additional living expenses (also called loss-of-use coverage) if you are forced by fire or other damage to live elsewhere.

Q: Isn't my apartment covered under my landlord's policy?

No, the landlord's insurance covers damage to the building and the landlord's property, not your personal property or liability.

Q: How are prices determined for renters insurance?

Renters insurance is surprisingly inexpensive. That's because you are not insuring a building. Like all property/casualty policies, the value of your property to be insured and other risk factors are weighed by the insurance company to determine your premium. Your Henry O. Baker agent can help you find the best combination of coverage and cost that you determine are right for you.

Q: I live in an apartment with three roommates. Do we each need a policy?

Check with your Henry O. Baker agent. Usually, it is best if all roommates are on the same policy although it is possible for each to purchase his or her own coverage. If you do need to "go it alone," you alone receive the security of renters coverage.

Q: I own a condo. How is my policy different?

Condo owners insurance covers the same general areas outlined throughout this guide for homeowners in the important areas of personal property and liability. In addition, condo owners insurance provides coverage for some situations specific to condominium unit owners.

Usually, the condominium association buys insurance to cover the property (building and structures) and liability coverage for the general association. If you own a condominium unit, you may be responsible for covering from the "walls in" on your unit, that is, for your personal property and the interior of your unit (whatever area is excluded from the condo association's policy) as well as for your personal liability.

Sometimes, condo owners are assessed by their condo association for losses "outside the walls" that were not completely covered by the association's policy. For example, if the clubhouse is destroyed and the condo association did not have it insured, you could be assessed for a "share" amount needed to replace it. If you wish, check with your Henry O. Baker agent about adding such "loss assessment coverage" to your condo owners policy.

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