When you purchase homeowners insurance, did you know that you are buying coverage not only to replace the cost of damage to your home, but also damage to personal property within your home? Homeowners insurance can also offer liability coverage to any injuries that occur at your property. Let’s explore homeowners insurance: what it covers, what it doesn’t cover, and whether it makes sense to tack an endorsement (add-on) to your policy.
What’s covered and what’s not?
No matter how well you plan, lots of things could happen to your home that are out of your control. The bright side is that many of these incidents, listed below, are generally covered on homeowner’s policy:
Unfortunately, not all perils are covered under homeowners insurance. Here are a few that aren’t typically covered, but the good news is you can get special insurance for some of these events if you’re in an area that’s exceptionally vulnerable.
- Power failure
- Nuclear damage
- Damages from poor maintenance
- General wear and tear
What do I need to know about personal property coverage?
First, when your valuables are damaged in an event that is covered on your policy, the typical contents coverage limit (for your personal property), is set at 70% of the value of the dwelling where the contents reside.
Second, most homeowners policies pay for the replacement cost of the item as opposed to actual cash value (which deducts depreciation).
Third, there are some items you may consider to be your personal property that aren’t covered under your homeowners policy in the eyes of your insurance company. These items may include:
- Money, gold, silver
- Items you use for a business purpose
- Motor vehicles and aircrafts
- Property of tenants in a space you are renting out
If you own personal property that many others don’t, like a valuable art collection, connect with a broker to discuss adding scheduled personal property protection to your homeowners policy to protect your valuable property.
Most of us purchase homeowner’s or renter’s insurance directly from an insurance company or through an agent/broker and don’t really think twice about it as long as it meets the minimum requirements of the lender or the landlord; but there are several coverages or endorsements that are important.
Personal Property Replacement Cost Coverage
It is common for a policy be endorsed with this coverage enhancement but if not, the standard policy only pays out Actual Cash Value for your personal property or the stuff that you own. Actual Cash Value payout takes into consideration the depreciated value of the item. If you’ve ever tried to sell a used sofa or kitchen appliance you know that you generally cannot get much for it. The replacement cost endorsement ensures that the policy pays out replacement cost which is the value to replace that used refrigerator or television with a brand-new one rather than its current value.
Coverage A or Dwelling Coverage
Generally, a replacement cost calculation is completed to determine the limit of coverage needed but unless it is a high-value home and a full inspection is ordered by the insurance company, it is still just an estimate. This is where the Extended Replacement Cost endorsement comes into play. Generally available in 25% or 50% limits, this endorsement states the carrier will pay over and above the listed Dwelling coverage to rebuild your home, if necessary. This is important not only because the limit listed is just an estimate, but if there is large scale damage from a wildfire or other natural disasters, the cost of construction increases due the demand. In addition, any time there is a construction project of this size, like building a home, there is a good chance of unforeseen costs. We always include this at 150% on our policies to offer the maximum protection available.
Water damage claims are one of the most common types of claims homeowners face and most types of water damage claims are covered under the standard policy, such as water damage from a broken pipe or appliance. Water backing up from a sewer or drain however is not covered under the standard policy and if some coverage is not added back in via a Water Backup endorsement, your claim would be denied. Flood coverage, on the other hand, is always excluded and in most cases, will only be required by the lender if you live in a designated flood zone. In which case, a separate policy would be required.
Personal Liability Coverage
Personal liability covers you and your family from lawsuits like slip and falls, dog bites, swimming pool accidents, etc. and we always recommend taking more than the minimum $100,000. Increasing the coverage to $300,000 or $500,0000 generally only increases the policy a few dollars a year. We also recommend adding Personal Injury liability. This extends the liability to not only cover actual bodily injury and property damage claims but also mental injury, specifically because of false arrest, wrongful eviction and slander and defamation. In the world we live, with everything being permanently documented online through social media. A nasty tweet or Facebook post from your teenager could result in costly personal injury lawsuit, with this endorsement included you are protecting yourself from the defense costs as well as any potential payout.
These are just a few of the ways your homeowner’s policy can be enhanced for a relatively small increase in cost. If you are doing your own shopping it is important you are comparing apples to apples because the list of endorsements shown on the quote, or not, could drastically change the coverage you have depending on the situation. As always, contacting your local insurance professional to ensure you are getting the coverage you need and the most from your homeowner’s policy is the safest bet.
Check out more of Mike’s articles on iGrad.com!
Actual cash value. Depreciation. Extended Replacement Cost. Are you well versed in the terminology of homeowners’ insurance? If not, read on!
Depreciation basically means that your home loses value over time because the home ages and some items and systems within the home become outdated. Much in the way that your brand new Apple Watch won’t seem so cool five years from now.
Actual Cash Value vs. Replacement Cost
A 38mm stainless steel Apple Watch with white sport band currently costs $549.00. After a few years of wear and tear and technology updates, the value of your watch will decrease. Let’s say it’s valued at $200.00 in 2017. In homeowners’ insurance terms, the actual cash value of your watch in 2017 is $200 but the replacement cost is still $549.00 – the cost to replace your watch when depreciation is not factored in.
A history of homeowners’ policies
When homeowners’ policies were first coming into existence, they were based on paying out the actual cash value. Today, they are written on a replacement cost basis, meaning that they do not deduct depreciation.
The problem with this method is that when a person’s home is totally destroyed, the amount of their policy isn’t enough to cover the replacement of the whole property.
So, Guaranteed Replacement Cost policies were developed, which guarantee that in the event that your home is totally destroyed, the home will be replaced to its condition on the day before the loss. But, the problem with this type of insurance is that it proved to be prohibitively expensive.
In comes extended replacement cost
Extended replacement cost is a happy medium. If a person loses their home, the policy will pay more than their policy limit (usually up to 120-125 percent) to cover the replacement cost of the home. That way the insurance premium isn’t ridiculously expensive and in the rare event that someone needs to replace their home, they get that extra boost in coverage. This can be especially helpful if there happens to be an unexpected spike in costs at the time the house is being replaced.
Are you thinking it’s time to make a change in your homeowner’s policy? Don’t hesitate to check in with our keen home insurance specialists at Fusco & Orsini.
Health insurance is a complicated topic and one that most find very personal. After all, no two individuals have the same health needs or consume health services the same way. Many of us want different things from our policies. Here is an overview of the health care marketplace and the many policy choices available, along with related tax implications.
Essential Health Benefits
All health insurance plans offered in both the employer-based market and the individual market must include “essential health benefits” such as:
- ambulance and emergency services
- maternity and newborn care
- mental health and substance abuse services
- prescription drug coverage
- rehabilitative services and devices (services and devices to help people with injuries, disabilities, or chronic conditions gain or recover mental and physical skills)
- lab services
- preventative and wellness services
- pediatric dental and vision services
Metal Tier Designations
Metal tier designations – bronze, silver, gold and platinum – for health care plans are based on the amount of coverage provided compared to how much the average person will pay in “out of pocket” expenses like deductibles and copays.
A bronze plan on average will cover 60% of an individual or family’s health claims, while silver covers 70%, gold 80% and platinum 90%. How the plans implement this is up to them as long as they can provide actuarial data like past claims history if requested.
So, a bronze plan is the lowest-cost plan but bronze policies have the highest deductibles. A platinum plan is the most expensive plan but it has no deductible and very low-copays for most services, prescriptions, etc. Silver and gold plans fall somewhere in between.
Types of Plans
Health plans are also divided by plan type: HMO, PPO, EPO, and more. The most common types of health plans are your HMO and PPOs, with the latter Preferred Provider Organization (PPO) offering the most flexibility while the Health Maintenance Organization (HMO) is more restrictive but more competitively priced.
A PPO offers a preferred list of providers known as “in-network.” These plans also provide limited “out-of-network” coverage for doctors who are not contracted with the plan. Generally, the out-of-network coverage is subject to a higher deducible and because there are no contracted prices for services between the provider and the carrier, the plan pays only 50% of Usual, Customary and Reasonable (UCR) treatment, which may equal 50% of the actual invoice.
An HMO on the other hand, is a closed-provider network and there is only coverage for those doctors and providers who are contracted with the carrier. HMOs also institute a referral requirement, this means you are required to select a PCP (Primary Care Physician) whom acts as a gatekeeper. He or she must refer you to specialists when needed and they are responsible for managing your care and use of the network. With a PPO, there is no such requirement and you can go see any specialist you choose.
Coverage area differs, too. An HMO generally only provides coverage within your home area, with only emergency care covered throughout the country. With a PPO, you can choose to obtain care from a specialist out of state. An EPO, (Exclusive Provider Organization) operates similarly to a PPO but without the out-of-network coverage that a PPO offers.
Health Savings Accounts
Lastly and certainly not least are the tax implications of health insurance. Health Savings Accounts or HSAs, were signed into law in 2003. These tax-advantaged savings accounts allow you to save money tax-free to pay for your qualified medical expenses. You are required to choose a high-deductible health plan (HDHP), though. These are designated by having HDHP, HSA, or the word “Savings” in the name of the health plan.
The idea behind HSAs is that as a consumer, if you take more control of your health expenditures by paying claims from your own savings rather than via health insurance, you are less likely to burden the system. However, opponents say HSAs may worsen healthcare results rather than improve them overall, because consumers may postpone the care they need that would normally be covered, or they may spend the money unnecessarily to avoid tax penalties. Withdrawals from an HSA for non-medical expenses are treated similarly to early withdrawals from retirement accounts.
Obamacare Tax Subsidies and Credits
Other tax implications lie in the more recent individual mandate and tax subsidies for Obamacare, or the Affordable Care Act. The individual mandate states you and your dependents must have health insurance or pay a penalty for each month that coverage is lacking.
There is a two-month exemption available, so if you are uninsured for no more than two consecutive months, you avoid the penalty for the entire year. The penalty is the higher of 2.5% of household income with a maximum penalty equal to the total yearly premium for the national average price of a bronze plan, or a per person fee of $695 per adult and $347.50 per child with a maximum penalty of $2,085.
In many cases, the penalty is less than the cost of obtaining coverage but you put yourself and your family at risk for catastrophic losses while still having to pay a penalty. Paying for a minimum level of coverage may make more sense when looking at total value provided.
For those at certain income levels who are not offered coverage through an employer, there are tax credits or subsidies available. These begin at 400% of the Federal Poverty Level (FPL), which is $97,000 for a family of four, with the credit increasing as you approach 138% of the FPL, which is $33,465 for a family of four. At income levels below this, there may be free or low-cost coverage provided through the Medicaid program.
Talk to An Expert
Health insurance is very complicated and there are many moving parts. In addition, laws vary from state to state. It is important now, as much as ever, to use your local insurance professionals, brokers, and agents to help successfully navigate the ever-changing health insurance landscape.
Originally published on iGrad.com. For more iGrad articles by Mike Fusco, click here.
I’m pretty confident that if you asked anyone who has ever owned a rental property you would get an overwhelming response that it’s not as lucrative or easy as they thought it would be. In fact, owning a rental property can be a major pain, and end up costing you a ton of money!
I certainly don’t mean to be a “Debbie Downer”, and I know that if it’s done right it can be lucrative, but from an insurance agent’s perspective, I don’t see a lot of people doing it right.
So you’re probably thinking, “Well Chris, you are an insurance agent. What do you know about real estate or rental properties? Why should I take advice from you?”
I’m not a real estate agent, and I don’t own a rental property. However, several of my friends/family/clients/co-workers own rentals, and because I insure a bunch of their properties, I’ve had a first hand account of the process, and I’ve learned what to do, and what not to do.
I was recently asked this question by one of our Fusco & Orsini Insurance Services clients, and thought I would share the answer here for our readers.
There are a lot of things that go into homeowners and auto insurance rates, one of them being credit. I’ve heard a lot of complaints from people who don’t like the fact that insurance companies use credit in their underwriting.
Some people have absolutely no idea that it’s used in the rate at all.
At the end of the day, there’s not much we can do about it though. Insurance companies have been using credit in their rates for decades, and that’s not likely to change.
By the way, insurance companies don’t pull your credit like a mortgage company or credit card company does. There is no negative impact on your credit as a result of an insurance company looking at it.
When I say “pull” what I mean is that the insurance company is doing what’s called a soft inquiry, which is not the same thing as having your credit pulled (hard inquiry).
When does credit play a role in insurance rates?
It’s important to understand that insurance companies don’t continuously check or monitor your credit. Usually, they only check it when you first get a quote and/or sign up with them in the very beginning.
This means that if your credit score increases (or decreases) your insurance company does not automatically know about it.
So, to my customers question of whether or not his increased credit score will lower his rates, the answer is not automatically.
What has to be done on our side as the agent is contact the carrier the insurance and ask them to do what’s commonly referred to as a “re-score”. This is when the insurance company can re-run the person’s credit (soft inquiry) to see if there is any positive bearing on the rate.
This isn’t something that the insurance company is going to let the agency do every single year, so it’s not worth even asking unless there has been a significant change in your credit score, and only you as the customer would know if that was the case.
If you’d like to get a better handle on your credit rating, it could be helpful to setup credit monitoring. We hope this was helpful! As always, leave us comment below if you have any questions.
Why do my auto insurance rates keep going up even though my car is getting older? At Fusco & Orsini Insurance Services, many of our clients ask this question so I would like to address it from a couple of angles.
First things first, even though it’s called car/auto insurance, it covers more than just your car. It should technically be called “auto-owners” insurance, similarly to how home insurance is actually called “home owners insurance”.
It’s important to understand that there are a lot of variables that go into insurance premiums, and with auto insurance, it’s no different.
The insurance company is much more concerned with you crashing into someone and causing them (or yourself) bodily harm, or death, than they are about your car. A car is a material possession which can be replaced.
A human life is not.
When is the last time you looked at your auto insurance policy?
If you look at it you’ll notice there are a lot of different coverages on your auto policy.
Loss of Income
Loss of use
These are all things that you are covered for on your auto policy. How many of them have to do with your car?
How many of them have a price next to them on your policy?
All of them.
Your car isn’t the only thing you’re being charged for on your policy
That’s because auto insurance covers far more important things than your car as mentioned above.
Let me re-phrase that: your car insurance rate isn’t just based on your car.
You’re not the only one…
It’s also important to understand that you are not the only person your insurance company insures. You are one fish in an ocean of other fish, sharks, and sea creatures, all who have different characteristics and risk profiles.
Insurance is all about spreading costs over a large number (risk pool) of people, which each person paying their fare share. That risk pool is constantly changing, and is impacted by a ton of different things, including the overall economic climate.
This means that you are sharing in the cost of millions of other people, many of whom may have poor loss history and/or credit.
That’s what insurance is though — sharing in the cost.
The next time your auto insurance rates go up, take a look at the big picture. Make sure you’re looking at ALL of the coverages, and corresponding rates.
Hope this helps! If you would like to know more about Car Insurance be sure to visit our page dedicated to it.