When you insure your home, you are really insuring two distinct things:

(1) the structure of your home
(2) your personal belongings

The Structure of Your Home

Three Ways to Insure the Structure of Your Home:

1. REPLACEMENT COST
Insurance that pays the policyholder the cost of replacing the damaged property without deduction for depreciation, but limited to a maximum dollar amount.

2. EXTENDED REPLACEMENT COST
An extended replacement cost policy, one that covers costs up to a certain percentage over the limit, may be purchased instead of a guaranteed replacement cost policy. This gives you protection against such things as a sudden increase in construction costs due to a shortage of building materials.

3. ACTUAL CASH VALUE
Insurance under which the policyholder receives an amount equal to the replacement value of damaged property minus an allowance for depreciation. Unless a homeowners policy specifies that property is covered for its replacement value, the coverage is for actual cash value.

If you have an older home...

Insurance companies differ greatly in how they insure older homes. Some companies will insure older homes for the full replacement cost as long as the dwelling is in good condition.

Other companies offer a modified replacement cost policy. Features typical to an older home like plaster walls and wooden floors would be replaced or repaired using the standard building materials and construction techniques in use today.

You should insure your home for the total amount it would cost to rebuild your home if it were destroyed. If you don't have sufficient insurance, your insurance company may only pay a portion of the cost of replacing or repairing damaged items. Here are a couple of tips to help make sure you have enough insurance:

1. For a quick estimate of the amount to rebuild your home - multiply the local building costs per square foot by the total square footage of your house. To find out the building rates in your area, consult your local builders association.

2. Factors that will determine the cost to rebuild your home:

a. local construction costs
b. the square footage of the structure
c. the type of exterior wall construction -- frame, masonry (brick or stone) or veneer
d. the style of the house (ranch, colonial)
e. the number of bathrooms and other rooms
f. the type of roof
g. attached garages, fireplaces, exterior trim and other special features like arched windows.

3. Check the value of your insurance policy against rising local building costs each year. Ask your insurance agent or company representative about adding an "INFLATION GUARD CLAUSE" to your policy. This automatically adjusts the dwelling limit when you renew your policy to reflect current construction costs in your area.

4. Check the latest BUILDING CODES in your community. Building codes require structures to be constructed to minimum standards. If your home is severely damaged, you might have to rebuild it to comply with the new standards requiring a change in design or building materials. These changes could cost more. Generally, homeowners insurance policies (even a guaranteed replacement cost policy) won't pay for this extra expense. However, some companies offer an endorsement that pays a specified amount toward these costs. (An endorsement is a form attached to an insurance policy that changes what the policy covers.)

5. Do not insure your home for the market value. The cost of rebuilding your house may be higher (or lower) than the price you paid for it or the price you could sell it for today.

6. Some banks require you to buy homeowners insurance to cover the amount of your mortgage. Make sure it's also enough to cover the cost of rebuilding.

7. Increase the limit of your policy if you make improvements or additions to your house.

Two Ways to Insure Your Personal Belongings:

1. REPLACEMENT COST COVERAGE
Insurance that pays the dollar amount needed to replace damaged personal property with items of like kind or quality without deduction for depreciation.

2. ACTUAL CASH VALUE
Insurance under which the policyholder receives an amount equal to the replacement value of damaged property minus depreciation. Unless a homeowners policy specifies that property is covered for its replacement value, the coverage is for actual cash value.

Here are a few other things to keep in mind when your are insuring your stuff:

1. Check the limits on personal items, such as jewelry, silverware, furs and computer equipment. If the limits are too low, consider buying a special personal property "endorsement" or "floater." An endorsement is an addition to your policy. A floater is a form of insurance that allows you to insure valuable items separately.

2. Make an inventory of everything you own in your home and in other buildings on the property, except your car which must be insured separately. Write down the major items you own along with all available information:

a. serial number
b. make and/or model number
c. purchase prices
d. present value
e. date of purchase

Don't forget to include indoor and outdoor furniture, appliances, stereos, computers and other electronic equipment, hobby materials and recreational equipment, china, linens, silverware and kitchen equipment, jewelry and clothing.

3. Take either still or video pictures of these items. Attach receipts to the inventory when available. Store the inventory and visual records away from your home - perhaps in a safe deposit box.

4. Add major purchases to the inventory and visual record soon after the purchase.

DO YOU NEED FLOOD INSURANCE?

Flooding is not covered by a standard homeowners insurance policy. To determine if you need flood insurance, ask your insurance professional, mortgage company or neighbors about the flood
history in your area. If there is a potential for flooding, you should consider purchasing a policy that covers the structure and your personal belongings.

Flood insurance can be purchased from an insurance agent or company under contract with the Federal Insurance Administration (FIA), part of the Federal Emergency Management Agency (FEMA). Flood insurance is only available where the local government has adopted adequate flood plain management regulations under the National Flood Insurance Program (NFIP).

Source: Insurance Information Institute

The traditional homeowners program offers protection for your home's structures, your personal property, as well as liability safeguards in case you are sued.

If you own a Condo, your Association probably has a Master Policy that insures all of the property and common areas collectively owned by the unit owners. Since this includes the actual structure of your unit, you would not need to pay for this type of coverage. However, the Master Policy does not cover your personal property or your legal responsibility. That's where condo insurance is needed.

If you rent, your landlord probably has insured your building, but not your personal possessions within your apartment. Renters insurance would protect you in the event of a loss.

The following chart will help you understand the differences between the three main homeowners coverages:
 


Protection for Your:

	Homeowners	Condo Owners	Renters
Dwelling & Attached Structures	x	—	—
Other Structures	x	*	—
Personal Property	x	x	x
Expenses during Loss of Use	x	x	x
Personal Liability	x	x	x
Medical Payments	x	x	x
Bodily Injury to Others	x	x	x
Additions & Alterations	**	x	x
Loss Assessment	x	x	—
Credit card & check forgery	x	x	x

* coverage available if structure is solely owned and not part of common property.
** available for other residences (such as rented homes).


Coverage A: Dwelling
This is the part that refers to your physical home (rooms, fireplaces, tile floors, carpeting, etc.) and the structures attached to it, such as an attached garage. The amount of coverage here should reflect the amount it would cost to completely repair or rebuild your home if it suffered a covered loss. This is often determined by your home's purchase price plus inflation. 
 
Coverage B: Other Structures
Coverage B offers insurance protection for all the structures that exist on your property that are not attached to your house, like a detached garage, gazebo, or storage shed.
  
Coverage C: Personal Property
Your personal possessions such as furniture, clothing and appliances are covered. Certain types of possessions are excluded or have limited coverage. Please see personal property exclusions and limits of coverage for more specific information.
  
Coverage D: Loss of Use
This part of the coverage is also called Additional Living Expense. This pays for your housing and other living expenses (like meals and laundry) if a major loss makes your house uninhabitable and you have to move out temporarily while it's being repaired.
 
Coverage E: Personal Liability
Personal liability provides coverage for bodily injury or property damage for which you are legally responsible. For example, let's say your dog bites someone, a guest falls down your front stairs, or your son throws a ball through your neighbor's window. You are legally responsible for these actions. Personal Liability helps to cover the associated costs of these related damages. Most homeowner policies provide a minimum of $100,000 of liability protection. However, you can choose to increase this amount. 
  
Coverage F: Medical Payments
Pays all reasonable and necessary medical expenses for a period of three years from the date of an accident to a person or persons injured while on your property. This coverage does not apply to the insured or regular residents of the insured's household.




Limits of Liability
For basic homeowners policies, a specific minimum amount of coverage is required for each of the major property coverages, based on the primary amount of insurance selected.

• Coverage A (Dwelling) = Primary limit
• Coverage B (Other Structures) = 10% of Coverage A limit
• Coverage C (Personal Property) = 50% of Coverage A limit
• Coverage D (Loss of use) = 20% of Coverage A limit.

For example, if your home is insured for $100,000 under Coverage A:

• Coverage B liability limit is $10,000
• Coverage C is $50,000
• Coverage D is $20,000.
  

Personal property exclusions and limits of coverage
Certain classes of property are specifically excluded from coverage because of the nature of what they are or because they are generally covered by other types of policies:

• Animals, birds or fish
• motorized vehicles or aircraft, including equipment and accessories
• radios, CB radios, tape decks, etc., while in or on a motor vehicle
• articles separately described and specifically insured in any other insurance
• property of boarders (renters insurance is available and should be considered by boarders).
• aircraft or aircraft parts
• property in an apartment held for rental by the insured
• property rented to others off the residential premises.
  

Certain classes of property have specialized limits of coverage:

• money or related property, coins and precious metals other than tableware
• securities, manuscripts, and other valuable property
• water craft, including trailers and equipment
• trailers
• grave markers
• loss by theft of jewelry, watches, furs and semi-precious stones
• loss by theft of firearms
• loss by theft of silverware, goldware or pewterware
• property on the residence premises used for business purposes
• property away from residence premises used for business purposes.
  

Exclusions
A homeowners policy does not provide coverage for the following perils:

• loss due to flood, or water that backs up through sewers
• loss to building by earthquake, aftershocks and mud slides
• loss by enforcement law or ordinance regulating construction, repair or demolition, or zoning
• loss due to power interruption when the interruption takes place off the residence property
• loss due to neglect of the insured to save and preserve property following a loss
• war and nuclear perils
• intentional loss.
   

Liability Coverage Exclusions
A homeowners policy does not provide coverage for:

• bodily injury or property damage which is expected or intended by the insured
• bodily injury or property damage arising out of business pursuits
• bodily injury or property damage arising out of rental of any part of the premises
• liability arising out of ownership, maintenance, use, loading or unloading of aircraft, motor vehicles or water craft
• liability arising out of war or insurrection.
  

 Additional exclusions to Coverage E only:

• liability assumed under contract or agreement
• property damage to property owned by, used by or in the care of the insured
• bodily injury which is covered under a Workers Compensation policy.
  

Covered perils
A homeowners insurance policy provides protection from the following perils:

• fire or lightning
• windstorm or hail
• explosion
• aircraft
• vehicles
• riot or civil commotion
• smoke
• theft
• vandalism/malicious mischief
• glass breakage
• volcanic eruption.
  

Some policies also provide coverage for:

• falling objects
• weight of ice, snow or sleet
• freezing of plumbing
• accidental plumbing discharge
• rupture of steam or hot water heating system, air conditioning systems, or water heaters
• damage from artificially generated electricity.
  

Property damage
If someone's property is accidentally damaged by you, members of your household, or your pets, your homeowners policy will help to repair or replace it.
 
Bodily injury
Accidents sometimes happen to other people while at your home, or by a member of your household. This coverage helps to pay for the expenses created in the event that a physical injury to others is caused by you, residents of your household, or your pets.

  
There are a number of ways in which you can save money on homeowners insurance. Discounts from your insurance company are available for a wide variety of reasons, ranging from the type of building material used to build your home to how close you live to a fire station. These discounts will vary by state and insurance company.
 
Here are 12 ways you can save money on your homeowners policy, according to the Insurance Information Institute (III).
 
1. Shop around
Check with many different insurance companies to get rate quotes. Check the Internet for deals. Ask you friends and family for recommendations. 
 
2. Raise your deductible
The deductible is the amount of money you have to pay towards a loss before your insurance kicks in. Typically, according to the III, deductibles start at $250.
Increase your deductible to:
$500 and save up to 12 percent on your premiums
$1,000 and save up to 24 percent
$2,500 and save up to 30 percent
$5,000 and save up to 37 percent.
Just make sure you can afford to pay the higher deductible out of pocket if something should happen.
 
3. Buy your home and auto policies from the same company
Many companies will give a multi-line discount if you buy both homeowners and auto coverage from them.
 
4. Consider insurance when buying a home
If you're looking at buying a home, think about the cost of insuring the home. A newer home's electrical, heating, and plumbing systems and overall structure are likely to be in better condition than those of an older home. This can lead to a discount on your premiums. Also consider where you live. If you live on the East Coast, you'll want the house to be able to stand up to wind damage, while on the West Coast, you need to keep earthquakes in mind.
 
5. Insure your home, not the land
While your home and its contents are at risk from fire, theft, windstorms, and other perils, the land your home sits on is not. Don't include the value of the land in deciding how much homeowners insurance you need to buy.
 
6. Improve security and safety
Items such as dead-bolt locks, burglar alarms, and smoke detectors can usually bring discounts of five percent each, depending on the company. Your insurance company may also offer a significant discount of 15 or 20 percent if you install a sophisticated home-security system. If you're thinking about buying such a system, check with your insurer to see which systems they recommend and which you'll get a discount from.
 
7. Stop smoking
Smoking accidents account for more than 23,000 residential fires every year. Some insurers offer to reduce premiums if no one in the home smokes.
 
8. Senior discounts
Insurance companies have found that retired people stay at home more and spot fires sooner than working people. Older people also have more time for maintaining their homes. If you're at least 55 years old and retired, you might qualify for as much as a 10 percent discount.
 
9. Group coverage
Alumni and business associations often work out insurance deals with an insurance company, which includes a discount for association members. Ask your association's director about any such deals.
 
10. Stay with an insurer
If you've kept your coverage with a company for several years, you may receive special consideration. Several insurers will reduce their premiums by 5 percent after staying with them for three to five years; and some companies will discount you as much as 10 percent after six years.
 
11. Check your policy annually
You want your policy to reflect the value of your home and belongings. If you review your policy every year, you will be able to make the necessary adjustments. If, for example, you just sold a valuable painting, you won't to need the same amount of coverage. But if you added a garage, you'll need to increase your coverage.
 
12. Look for private insurance first
If you live in a high-risk area - one that is especially vulnerable to coastal storms, fires, or crime and think you'll be forced to buy homeowners coverage from your state's high-risk insurance pool, check first with an insurance agent or company representative. You may find that you can still buy insurance at a lower price in the private insurance market than from the insurer of last resort.
 

There are a number of optional coverages (also called endorsements) which enhance your basic homeowners policy either by adding or removing certain coverages. Some of the more common add-on coverages include: 

• Broadened coverage for contents: provides "all-risk" protection for your possessions. This means that your personal property is covered in most situations, regardless of the cause of loss.
• Contents replacement cost coverage: after a loss, you would be paid based on the replacement cost...with no deduction for depreciation...subject to your policy limits and deductible. Special limits apply to certain items such as jewelry, watches and furs.
• Valuable Items Plus: provides higher limits and worldwide protection for special property such as jewelry, silverware, fine art, furs, cameras, firearms, musical instruments, and home computers for an extended variety of losses. Should you need even higher amounts of coverage than that offered by the Valuable Items Plus endorsement, a separate Valuable Items policy is also available.
• Additional Coverage Endorsement (ACE): extends protection or increases limits on special types of property (for example: jewelry, firearms, or silverware). This coverage also increases personal liability coverage by $100,000 and includes coverage for personal injury.
• Water back up of sewers or drains: you're covered for a specific dollar amount if water backs up through a sewer or drain, or overflows from a sump pump.