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Please Analyze My Homeowner’s Policy

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About a year ago I signed up for a homeowner’s insurance policy with Travelers because Geico, my auto insurance company, didn’t offer homeowner’s insurance. If you call Geico, they’ll refer you to Travelers because they have some kind of partnership. Well, a year ago I did just that: I called Geico, was referred to Travelers, received a quote, and signed the policy. The price of the policy, $56.75 per month, was in line with what my friends, who owned homes in the area, were paying so I didn’t comparison shop. Now, a year later, without the business of actually closing on the home, I’ve decided I need to revisit my policy to ensure that its complete and correct for my needs.

My home’s appraisal value at the time of the purchase was $299,999.00 and the policy is for replacement cost. Replacement cost differs from actual cash value in that in the event of something bad, I am paid out the cost it would be to replace something. Actual cash value would pay out the cost of the item minus depreciation, it’s the worse of the two but comes with a lower premium.

Here are the details of my policy:

Section I – Property Coverages Limits of Liability Premium
A – DWELLING $226,000 $587.00
B – OTHER STRUCTURES $22,600 INCL
C – PERSONAL PROPERTY $158,200 INCL
D – LOSS OF USE $67,800 INCL
Section II – Liability Coverages Limits of Liability Premium
E – PERSONAL LIABILITY (BODILY INJURY AND PROPERTY DAMAGE) EACH OCCURRENCE $300,000 $16.00
F – MEDICAL PAYMENTS TO OTHERS – EACH PERSON $2,000 INCL
Policy Forms and Endorsements Limits of Liability Premium
HO-3 Homeowners 3 Special Form
HA-300 MD Special Provisions
HO-208 Water Back-Up and sump discharge or overflow $25.00
HO-827 Limited Fungi, Other Microbes or Rot Remediation $5,000
528064 Value Added Package $70.00
52873 Additional Replacement Cost Protection Increased Amount – Maximum Additional Amount of Insurance 50% $14.00
Total Premium $712.00
Security Credit -$31.00

Policy Deductible: $1000.00 All perils insurance against

In case of loss under section I, only that part of the loss over the stated deductible is covered.

Anyone have any thoughts?

{ 15 comments, please add your thoughts now! }

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15 Responses to “Please Analyze My Homeowner’s Policy”

  1. CK says:

    Would 226K be enough to replace your house if it was lost? I’d recommend checking with local builders to see what they build for aprox 226K. If it’s not comparable to your house I’d up that number.

  2. jim says:

    From how I understand it, the line item “Additional Replacement Cost Protection Increased Amount – Maximum Additional Amount of Insurance 50%” increases the amount they payout for replacement from $226k to $299k which is how much the house is worth and probably the most they’d pay out now anyway.

  3. CK says:

    Well just to be safe I would clarify with your agent. This is something you defintely want to have your i’s dotted and t’s crossed on.

    P.S. Are you going to shop this around to see if you can get a better deal?

  4. jim says:

    You’re right I should. I’ll be shopping around in a few days and doing a comparison with my Geico/Travelers combination versus a single-company policy (since they usually offer discounts) and see who can beat this.

  5. Nick says:

    I’ll have a long, drawn-out series of 23 posts about this someday, but here’s what I’d recommend for your situation (from what I know of it):

    For Dwelling Limits of Liability (LOL), set it at around $75 per square foot. $75/sq. foot will get you a very nice house in the event yours is completely annhialated. You could make that $100/sq. foot if you want to be extra-cautious.

    I obviously can’t tell, but I’m guessing you don’t have $158k in personal property. Or are you holding out on us? :)

    Up your personal liability lots. Hopefully you’ll never need it, but if your house ever kills someone, they may go after you for more than $300k. Fortunately you can probably reach $500k or even $1 million pretty cheap.

    Everything else looks great!

  6. Rob says:

    Here are some additional tips: Save purchase receipts and appraisals for everything you expect to have your insurance policy cover (structure & all contents); take digital and print photos of your household belongings (before they are fire-damaged or stolen); store the receipts and photos in a fireproof, lockable safe, or off-site. You will have a much easier time recovering an insurance settlement if you document what you had before your disaster!

  7. Chad Callahan says:

    I use a service called Inventory Safeguard. It is an online home inventory service. Accounts are free for a limited number of items, but the pay tier is cheap too, about the price of a safety deposit box in my area. It allows you to store pictures and scanned versions of receipts. This came in handy a few months ago when my house burned, I had most of my big ticket items online and was able to easily print a list to give to my insurance agent. The site is http://www.inventorysafeguard.com.

  8. KARL says:

    [1st of 23] Nick says “$75 per square foot. $75/sq. foot will get you a very nice house in the event yours is completely annihilated. You could make that $100/sq. foot if you want to be extra-cautious.”

    I say IT DEPENDS…on ALOT more than that. FIRST: your location [looks like Maryland]…I don’t know many areas in the USA where you can build a home with all the trim/finishes for $75 (unless you are the contractor). Home construction costs from the foundation up are more like $100-$150+ in normal circumstances. SECOND: Let’s say there is a forest fire (hurricane, earthquake…) that completely destroys not only your home but hundreds of others in your area. Consider 2004, when four (4) Hurricanes crisscrossed the State of Florida. Construction MATERIALS cost took a 20-30% JUMP in the Florida during the rebuilding period and the SKY was the limit for labor. THIRD: The “Additional Replacement Cost Protection” adds 50% to the Dwelling coverage (total replacement cost coverage of $339,000 BUT this generally means you must have your home insured for 100% of its replacement cost. This 50% additional protection will go to bring your home up to the current code and numerous other expenses you will incur in replacing the dwelling. ALSO: Are there any detached structures? (garage, boat house…) the max coverage you have in this category is $22,600…this amount may be ok and might not be. KEEP the backup of sewer and drains no matter what insurance company you choose, cheap valuable coverage. CONSIDER increasing the deductible to $2000 or $2,500 [depends on Travelers filed deductible levels in your state]. Evaluate your claim frequency along with the minimum claim amount you would consider filing to avoid non-renewal or cancellation so you continue to maintain your insurance for the BIG event. If you can cost recover in premium savings achieved by raising your deductible in a 4-5 year period, you should consider it. GOOD LUCK… BTW there is a free home inventory program you can download and personalize with your: store receipts, serial #’s, digital pics… @ http://www.knowyourstuff.org/ when you are done you can burn the inventory on a CD or DVD and store it away from your dwelling.

  9. Matt says:

    I’ll echo the commenter who said to up the liability coverage. All it’ll take to wipe out $300K of liability is a couple of lazy malingerers pretending to slip and fall on your sidewalk this winter and finding a crooked chiropractor to help them pretend to be injured.

    Liability coverage is cheap, whereas un-covered liability can bankrupt just about anybody.

    Also, I don’t know about you, but the coverage limitation on my policy is _higher_ than the assessed value of our house when I bought it. The cost of housing tends to rise.

  10. 2 million says:

    I added a $1 mill liability coverage to my policy and it was very minimal.

    I concur about bumping up your deductible – if something happens that costs about $1,000 to fix are you really going to file a claim with the insurance agent? Depending on how handy you are most insurance claims of $1,000 to fix problems are

  11. Steve says:

    Would it be reasonable in this case to get an umbrella policy to eliminate the various endorsements on the policy?

  12. GaryP says:

    An umbrella would not eliminate any endorsements – it only increases liability coverage. And by only I don’t mean you should not buy it. It is a definite must.

  13. Joe says:

    I’m a fee-only licensed insurance advisor (so I don’t have ties to any insurers). I usually work for large companies, but I know a bit about personal insurance too. Lots of good comments thus far. My add’l comments: (1) An umbrella policy provides excess coverage over both your homeowners policy and your automobile policy (the bigger liability risk) and it is usually very cost effective. I highly recommend these. (2) The additional replacement cost endorsement is good. You might also check to see if a true “guaranteed replacement cost” coverage is available so you are not limited to 50%. Whatever it takes to replace, you get it. As the previous commenter noted, this is particularly important in a major catastrophe since building materials and labor costs skyrocket. (3) Yes, consider increasing the deductible but there are dimishing savings when you go over a certain amount. (4) “Value-added Package” endorsement – have no idea what this is. I suspect it may increase certain sublimits, but review your policy carefully. If you have high-valued jewelry, art, silverware, precious metals, furs, etc. you may need to have these items specifically scheduled. (5) While rare, “all risks” coverage for contents is nice to have. Most policies offer only “named perils” for contents. (6) When you shop around, make certain you stick with quality companies that will (a) still be around after a major catastrophe, and (b) have a decent reputation for paying claims without a lot hassle (tough to find these days).

  14. Steve says:

    I actually work for GEICO-Travelers and I first raise your dwelling limit to what your current appraisal is plus 30k to be safe. For example if your home is worth 299K then you need a coverage A limit of 340K so that you will be able to have a BRAND NEW house built in the case of a total loss. With the way you have it set up now, you will only get a check for 225K to rebuild your home and you would have to use that check to pay for debris removal, cost for the contractor and other expenses. So you are going to be lucky if you end up with a 180K house when all is said and done. That 50% endorsement for Additional Home Replacement Cost is money you will receive only if there are many losses in your area and costs for debris removal and contractors (including labor) goes up, and that is only if the loss is due to a covered peril. This will obviously raise your premium, so if it is too much, then raise your deductible to 2,00 or 2,500 which will drastically lower it back down. Some people are worried about raising their deductible because they feel like they won’t be able to come up with that money if there is a loss. Actually if your deductible is 2,500 and your cov A limit is 340, you will get a check for 337.5. It’s just comes off of the top of the check, so I would definitely make a couple changes.

  15. TOM says:

    Wow- most of the advice is fairly solid. The worst advice probably came from the guy whoa ctually works for GEico-Travelers. You need a guaranteed Dwelling replacement cost policy. If you can’t get it, make sure your Dwelling A limit is plenty high, and you have the 50%. Her eis where the other guy was off. When you purchase a policy, the company generally will do an inspection to ensure that the replacement value is correct…at 100% to value. Then, as long as you have told them of any changes to your home that would affect replacement cost, and accepted the annual inflationary increases, you hav the full 150% coverage at your disposal. Also, $2500 is a ridiculous deductible for such a low replacement value. The cost savings will not warrant the change. In a total loss, he may have been right, but what about smaller losses. if you have a $5000 loss, are you going to be pissed about having to pay the first $2500. Probably.

    The valued added endorsement is usually increase to sublimits, but also the increase of the additional 50% to the replacement cost of the dwelling.

    Contents cannot be adjusted below what most companies deem their minimum. 50% to 75% typically. So don’t waste your time. ONly higher end companies differ.

    Im lat in on this show…Hopefully you’ve been given good advice from whome ever you’ve purchased the insurance from.


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