Home Insurance Policy Declaration Questions

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muddlehead
Posts: 189
Joined: Mon Sep 22, 2008 2:03 pm

Home Insurance Policy Declaration Questions

Post by muddlehead » Thu Sep 18, 2014 11:44 am

My childhood home of many, many years ago burned to the ground recently. Got me to think about my own home insurance. Pulled out my statement. Questions arise which I think would be better answered by this board than a AAA rep. Looking for easy explanations to the seven numbers in Section I and Section II. Hoping they are the same categories in everyone's home insurance. I'm in Northern California. Insurance is AAA. Premium cost per year $732. No earthquake or flood. Section I : A/ dwelling $405,000 B/ other structures $41,200 C/ personal property $308,000 D/ loss of use $162,000 Section II : E/ personal liability each occurrence $1,000,000 F/ medical payments to others each person $1000 each accident $25,000. Thanks in advance. Hope this discussion will help a lot of us...

passivestream
Posts: 41
Joined: Thu Jul 10, 2008 6:42 am

Re: Home Insurance Policy Declaration Questions

Post by passivestream » Thu Sep 18, 2014 12:55 pm

Coverage A - Dwelling - The cost to rebuild your home from top to bottom.
Coverage B - Other Structures - This is an automatic percentage of Coverage A , provides coverage for sheds, Arbors, Patios, Docks at a Lake House and sometimes pools.
Coverage C - Contents - Everything inside that isn't permanently attached to the house - clothes, dishes, electronics, etc.
Coverage D - Loss of use - Can be used to rent a house/hotel if your home is destroyed.
Coverage E - Liability - Protection from law suits , someone falls off your deck, You hit someone with a golf ball, etc... etc..
Coverage F Medical payments - These are good faith payments to cover medical bills without someone suing you. Exa: A friend trips in your back yard, you could file a claim under here to pay his medical bills. Typically you aren't penalized for filing Med Pay claims.


hope this helps. I am a licensed insurance agent, but please consult your policy for exclusions, clarifications, etc.

Tarball
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Joined: Wed Sep 17, 2014 4:39 pm

Re: Home Insurance Policy Declaration Questions

Post by Tarball » Thu Sep 18, 2014 2:13 pm

Passivestream pretty much nailed it.

A couple of things I would add is that there are special limits a lot of people forget about or don't pay attention too. Under Coverage C - Contents you will usually find sub limits for example.
Sub-limit for Jewelry $5000, Money $1000, Firearms $5000, Business Property $5000...etc..

Depending on the category of item it might be a Theft only limit or it could be a limit for any type of covered loss. I've seen plenty of burglary claims where people turn in a $15,000 dollar jewelry claim only to find out they only have $1000 to $5000 sub limit. So be sure and talk to your agent about what categories of property you own and they can help you insure it correctly, or cover the risk with a good quality safe.

Depending on the building codes where you live you will want to make sure Ordinance & Law coverage as well.

If you live in a community that has a homeowners association or Creeds, Covenants and Restrictions then it's a very good idea to have Loss Assessment coverage included too. These coverages are usually listed on the declarations pages as well if you have them.

Alan S.
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Location: Prescott, AZ

Re: Home Insurance Policy Declaration Questions

Post by Alan S. » Thu Sep 18, 2014 2:25 pm

Note that the Coverage B, C, and D limits are much more than the average person could ever claim because they do not have exposures that even approach those limits. But you cannot request a credit to reduce any of these limits, except perhaps if you have a carrier that will allow you to reduce C if you are allowed to substitute actual cash value on your personal property for replacement cost coverage.

The coverage B limit can be applied to any detached structure, but was originally meant primarily to cover the garage back when many garages were not connected to the dwelling. Now many people do not have any outbuildings and therefore do not need Cov B. Many contemporary developments have lot sizes that don't have room for detached buildings much bigger than the dog house.

muddlehead
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Joined: Mon Sep 22, 2008 2:03 pm

Re: Home Insurance Policy Declaration Questions

Post by muddlehead » Fri Sep 19, 2014 3:51 pm

Thanks. Anything in these numbers stick out as items I should change? Home worth ~900k, 3000 sq ft, zero expensive personal property.

john94549
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Re: Home Insurance Policy Declaration Questions

Post by john94549 » Fri Sep 19, 2014 4:18 pm

I'd get a professional appraisal and see what the appraiser comes up with for a "per square foot" replacement cost. Our insurance company balked (at first) when I wanted our dwelling coverage increased to the appraisal replacement value. However, our lender required it, and the insurance company finally relented.

The carrier's "guidelines" for replacement costs in our area were dramatically lower than the appraiser's. Stated another way, you may be under-insured.

Alan S.
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Location: Prescott, AZ

Re: Home Insurance Policy Declaration Questions

Post by Alan S. » Fri Sep 19, 2014 4:37 pm

Or you can also be over insured at $300 per sq foot.
With respect to the physical damage sections (Cov A thru D), the limits all spin off the Cov A (Dwelling) amount.

The 900k for the dwelling should reflect the current replacement cost of the dwelling, but should not include any land value because the land is not covered and does not need to be. Check your coverage to see if your policy includes guaranteed replacement cost (GRC). GRC provides you will a higher limit in the event the house cannot be replaced for the 900k. The higher limit is often around 20% or so. With a GRC of 20%, your policy would provide you with up to 1,080,000 of coverage if needed. The insurance company will want your policy limit at 900k if that is what they think the actual replacement cost is, but if you can convince them to write the policy for 750k with a GRC of 20%, you will still be covered for the 900k you need but your premium and the other limits will be based on the 750k shown on the policy. This approach will reduce your premium by around 15%.

Regarding the 900k ($300 per sq ft) you indicate your house is worth, how was that arrived at? $300 per sq ft would apply to custom construction with all kinds of features, in other words everything is first class. Again, the value of the land should not be included in this figure, nor should any detached structures on the property such as garages or outbuildings. Also, how much of of your sq footage is actual living area? Attached garages, covered decks etc replace at a far lower cost than heated and cooled living areas.

In summary, be sure you are not over insured because overinsurance is a total waste of money. You will only collect the amount it takes to replace with the same quality as before the loss.

You need higher limits if you are located in an area subject to total loss along with other homes in the area. Total losses can only be caused by fire and in extreme locations major hurricane. So here you are looking a brush or forest fire prone areas. Total catastrophe fire losses means that the area will have a shortage of labor to rebuild and material costs will also rise due to demand. If you are in an area of that nature, you would need a higher limit than otherwise due to higher costs to replace.

Finally, to reduce premium further, select the highest available deductible that you can handle. 1% of the Cov A amount would be 9,000. and I certainly would not go lower than 5,000. This would produce a nice credit and also eliminate the reporting of more smaller losses which could just drive up future premiums.

pshonore
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Re: Home Insurance Policy Declaration Questions

Post by pshonore » Fri Sep 19, 2014 7:45 pm

OP has stated his dwelling coverage is $405K. There seems to be a big disconnect if the home is worth 900K. $732 sounds quite reasonable for 405K of coverage although we do not know his deductible.

Big Snack
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Re: Home Insurance Policy Declaration Questions

Post by Big Snack » Sat Sep 20, 2014 5:52 am

Coverage B/Other Structure coverage can also include fencing, pools, tennis courts, retaining walls and hardscape. If a driveway or sidewalk is damaged and needs to be repaired/replaced it usually covered under Coverage B, so just about everyone needs some Coverage B even if they don't have a "structure" like a shed or detached garage.

August
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Re: Home Insurance Policy Declaration Questions

Post by August » Sat Sep 20, 2014 10:20 am

Also keep in mind that in addition to policy limits, there may be certain perils or events that are or aren't considered covered losses and there may be loss settlement provisions such as replacement cost vs actual cost value that will play a role in your settlement should you have a loss. In addition, certain coverages may have lower limits than the policy limits (for example mold coverage is sometimes limited). I only bring this up since as an adjuster it is very rare that I handle a loss that reaches the coverage limit, but it is very common for a coverage limitation to come into play.

I'm sorry to hear about your family home. This type of loss is tragic and has an emotional as well as a financial toll.

muddlehead
Posts: 189
Joined: Mon Sep 22, 2008 2:03 pm

Re: Home Insurance Policy Declaration Questions

Post by muddlehead » Sat Sep 20, 2014 11:30 am

Thanks. This is one complicated 7 part document. Looks like my deductible is $1000 in the 2 places it's listed in the Basic Policy Premium Section. Section II we're good. Leaves Section I. 4 parts. A thru D. D- Loss of Use- Why is it so high? $162k for renting as my house is rebuilt. C- Personal Property- nothing expensive in this house. But, apparently I can't reduce the $303,800. B-other structures. No pool, deck, expensive fencing. Garage attached. 2 car. Living space here 2908 sf. Garage ~ 400 sf. A- Leaves A- Dwelling- I've got some homework to do.

pshonore
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Joined: Sun Jun 28, 2009 2:21 pm

Re: Home Insurance Policy Declaration Questions

Post by pshonore » Sat Sep 20, 2014 11:53 am

You'd be surprised how Personal Property adds up. Imagine moving into a house and having nothing to furnish it with because all your possessions were lost a tornado. Everything from toasters to toys to all your clothing, rugs, etc. The 200 pair of shoes the typical wife owns :happy , Computers, TVs, appliance, tools, lawn equipmt, snowblowers, mowers, etc. Of course if you're not a pack rat and haven't lived there for long time, it may not be as much.

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