Insuring Your Home
Homeowners insurance helps pay to repair or rebuild your home and replace personal possessions lost due to theft, fire or other disasters such as storms. Although Florida law does not require homeowners insurance, some cities and counties require liability coverage if you own certain pets or a swimming pool. Liability coverage pays for nonautomobile-related injuries to other people, or damage to their property, for which you are legally responsible.
For mortgaged homes, the lending institution will require full insurance coverage on the structure, including flood (if located in a special zone), fire, liability, windstorm, etc. Some developments and subdivisions may also require insurance.
The following overview explains the basic types of coverage available and provides tips for homeowners and renters.
Hurricane / Windstorm Coverage
Most homeowners policies cover damage caused by windstorms, hurricanes and hail, but insurance companies may exclude this coverage in some high-risk areas. In Florida, many insurance companies will not underwrite hurricane coverage. The Citizens Property Insurance Corporation provides homeowners with insurance in high-risk situations (like a home on the beach) and to consumers who can't find coverage in the private market.
Flood Insurance
Typically, homeowners policies exclude flood damage (rising water). Depending on your home's location, however, you may qualify for flood insurance through the National Flood Insurance Program. You also may qualify for a discount if you include a special elevation report with your application. For more information, contact the National Flood Insurance Program at 1-888-FLOOD29 (1-888-356-6329).
The coverage involves a 30-day waiting period before the policy becomes effective, unless the policy is purchased at the same time you buy your home. Some insurance companies also offer flood insurance. Generally, you will get separate coverage for your home and personal property. Your insurance agent or company can assist you with application forms for flood coverage.
Basic Coverage Available
Property Coverage
Property coverage helps pay for damage by covered perils to your home, the contents of your home and other personal belongings owned by you or family members who live with you. In some cases, it helps pay for damage to other structures, such as tool sheds, detached garages, small boats, guest houses and their contents. Your insurance agent or company can point out the items covered in a given policy.
Your policy provides limited coverage for some personal property, such as antiques, firearms, jewelry, furs and electronics. You may need additional coverage as an endorsement, or addition to your insurance policy, to modify its original terms for an additional premium. You can insure your home and belongings for replacement cost or actual cash value.
Notes: Your homeowners insurance policy may also cover your dependent children's belongings while they attend college, whether they live on or off campus.
You may need a separate policy to protect personal possessions for your child who attends college and no longer qualifies as a dependent (on your household tax return).
Homeowners policies do not cover vehicles. Your agent or company can help you find coverage for items not included in you policy.
Additional Living Expense (ALE)
Homeowners policies provide additional living expense coverage that will pay some extra expenses if damage to your home prevents you from living there while it is being repaired. Most policies also will provide this coverage when a civil authority (law enforcement agency, emergency management service, etc.) prohibits the use of a residence due to direct damage to neighboring homes by a covered threat.
The items typically covered – above and beyond normal expenses – include extra costs for food, housing, telephone, transportation (to and from work or school), relocation and storage, utility installation and furniture rental for a temporary residence. Be sure to check your policy to find out what is specifically covered. This coverage applies only to differences in expenses. For example, it would apply to the cost of restaurant meals minus normal food expenses. It does not cover your mortgage, groceries and utilities or the monthly cost of a telephone in a rented space (since you normally pay for the telephone in your house).
Your policy may designate limited coverage for additional living expenses, but your policy does not oblige your company to pay this amount up front or in full if you suffer a total or partial loss. For this reason, you must keep receipts for additional living expenses and submit these to your company for reimbursement.
Additional living expense coverage does not apply to your dependent children while they are away at college. It applies only to the primary insured structure in the event of a loss.
Policies generally offer ALE coverage without any deductible. Flood insurance policies, however, don't provide this coverage. For more information, contact your insurance agent or company.
Replacement Cost Versus Actual Cash Value
When buying coverage, you may insure your property and belongings for actual cash value or replacement cost.
Replacement Cost: Replacement cost is the amount needed to replace or repair your damaged property with materials of similar kind and quality, without deducting for depreciation (the decrease in the value of your home or personal property due to normal wear and tear).
Actual Cash Value: Actual cash value is the amount needed to repair or replace damage to your home after depreciation. For example, your insurance company would deduct for the age and condition of a 17-year-old roof with a 20-year life expectancy.
Here is how the two types of coverage work in practice.
Let's say you bought a new television in 1994 for $700. In 2005, a lightning strike destroys the TV. A policy for actual cash value will only pay an amount that reflects the TV's current value – say $300.
A replacement cost policy would cover the entire cost of a new TV of the same type – say $900. Legislation passed in 2005 requires full payment without a depreciation hold-back for personal residential policies in some cases. Call the Consumer Helpline at 1-800-342-2762 for further information.
Your agent must offer you replacement cost coverage for your dwelling. If you reject this coverage, you must sign a statement on the application form indicating that you don't want it. Standard replacement cost depends upon the dwelling limit stated on your policy. Insurance companies design most homeowners policies to require the policyholder to insure the dwelling for at least 80 percent of its replacement cost.
And while it is rare, you can insure your home for less than 80 percent. If you do so, you will be charged a co-payment penalty, in addition to your deductible, when you file a claim. Some companies offer guaranteed replacement cost dwelling insurance – an option that costs only a few dollars more, and insures your home for an increased amount, even if it exceeds policy limits. Many companies will not offer guaranteed replacement benefits for older homes.
Ordinance or Law Exclusion
If a local building ordinance or law increases the cost of repairing or replacing your dwelling, the insurance company will not pay that extra amount, unless you had added ordinance or law coverage to your policy. In Florida, your agent must offer you ordinance or law coverage. If you do not wish to buy this coverage, you must sign a form stating that you reject it.
How Much Insurance to Buy
Do not rely on the purchase price of the home, the amount of the mortgage loan, or the amount set by the property tax appraiser or insurance agent. In order to be adequately covered, your home must be insured for the amount it will take to rebuild the home at current prices for building materials and labor costs, including the amount necessary to bring it into compliance with current building codes. Please contact your insurance agent, and consult a licensed contractor or certified property appraiser who will provide you with a detailed estimate. This is the only way to ensure that you have adequate coverage at the time of a loss.
If your home is underinsured at the time of a loss, there may be a penalty or reduction in the amount the insurance company will pay for the loss.
Please ask your agent about limits and exclusions.
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