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Can You Answer These 7 Home Insurance Questions?
Many home owners find out important details about their home insurance only when they file a claim (and sometimes the news is not what they want to hear).
Here are some key questions everyone should be able to answer about their home insurance.*
1. Are you insured for replacement cost or cash value?
Replacement cost is usually the best option for both your home and your possessions because it is the amount you would pay for a new item at toda y's costs.
Cash value is replacement cost minus depreciation, meaning that you pay the difference between cash value and the cost of the new replacement item.
There's an excellent overview of these insurance coverage details on the non-profit FLASH® website.
2. Does your policy cover flooding?
No, standard home insurance does not cover flooding. This exclusion typically extends to events such as mudslides, water seeping into basements due to poor drainage, and blocked sewer lines. Flood insurance is available through the federal government, but is in the process of changing drastically, with expanded flood zones and much higher rates. For example, some homeowners who were paying less than $1,000 a year could soon pay eight to twenty times that amount for flood insurance. (Stay tuned for legislation to counter or delay this.)
3. Does your policy cover water damage?
Yes, as long as it is not due to a flooding event. For example, if wind tears off part of your roof and rain damages the interior, this would typically be covered. If wind and rain create a storm surge that floods your home, however, you would not be covered.
4. Could your insurer drop you for having a trampoline?
Yes, depending on the insurer. Trampoline accidents often involve spinal cord injuries that require extremely expensive treatment. Some insurance companies prohibit trampolines entirely, whereas others may simply ask for safety netting to be installed. Either way, if you have a trampoline it's worth finding out if you are covered, otherwise you risk paying out of pocket for potentially huge medical expenses.
5. Does your property harbor an "attractive nuisance"?
No, we're not talking about Miley Cyrus. :) Think swimming pool, swing set, fountain, farm equipment, abandoned vehicles - basically, anything created or maintained by you that a child or minor could wander into and harm themselves with. While that is not the complete legal definition of an attractive nuisance, it gives you the general idea. Home owners are expected to take precautions to prevent children from harming themselves on their property.
6. Are you covered if your dog bites someone?
Maybe not, depending on your insurer and the breed of dog. Dog  bites account for one-third of all liability claims and resulted in nearly $490 million in payments in 2012, according to the Insurance Information Institute. This is why some companies no longer issue policies if the home owner has a breed of dog deemed dangerous based on bite and fatality statistics. There doesn't appear to be one standard compilation of breeds used by all companies, but you can see a list of the usual suspects in this Forbes article (scroll a page or two down to see the list).
7. If your neighbor's tree damages your home, who covers it?
Typically your policy covers it, not theirs. Your neighbor's policy might kick in if you can prove that the tree was likely to fall and you had asked them to remove it before it damaged anything, but that would be an exception. Note: When a tree (yours or theirs) falls on your property without damaging or resting upon an insured structure, the event is usually not covered at all.
Bonus Question: Do standard policies cover earthquakes?
No, most policies exclude loss from earthquake damage. Earthquake insurance can be purchased separately. * Information is based on typical coverage provided by the most commonly issued policies: HO3 for single family homes and HO6 for condominium units. You can see the list of all HO policy options here.
Money-Saving Insurance Tips
- Get an umbrella policy for additional liability protection. Lawsuits are expensive, and several million dollars worth of coverage typically costs a few hundred dollars per year. 
- Keep a home inventory. Try the free Know Your Stuff tool from the Insurance Information Institute. - Don't claim too often. More than one claim in a 3 or 5-year period could get you dropped, so think twice before making small claims. - Be careful about inquiries. If you call your agent or company to find out if something is covered, make sure they know you are making an inquiry only, otherwise your question could count as a claim.
- Prevent damage before it happens. Clean out gutters, trim nearby dead branches, insulate exterior faucets during cold weather, and direct water drainage away from your home. * We recommend the best products and services that we know of, but please use your best judgment when evaluating them for yourself. We'd love to hear your opinion on any that you use.
- U.S. home prices rose 12.8 percent year-to-year in August, according to a recent S&P/Case-Shiller report. They rose 12.0 percent year-to-year in September according to CoreLogic, a data and analytics company. - The national average 30-year fixed mortgage rate is back down in the low 4-percent range. - The Pending Home Sales Index dropped 1.2 percent year-to-year in September, according to the National Association of REALTORS® (NAR). Note: Housing statistics based on closed sales typically reflect market conditions of two or three months ago. To find out what's going on right now in our local market, please call us directly.
Are you planning to buy or sell a home, or do you know someone who is? Please call or email us - We're never too busy to help you and the people you care about with real estate. (*What the lawyers make us say: The information in this newsletter is deemed reliable but not guaranteed. Please always consult a qualified expert before making decisions based on this content. Nothing in this article is meant to be taken as expert legal, financial, or medical advice.) | 
