By Maria Murzyn
There are many surprises that can arise when dealing with homeowner's insurance.
Whether you're selling your home or buying one, it's an emotional and exhilarating time. Both parties in the transaction are considering the money involved, closing dates, and trying to find the answers to the question: How do we move all this stuff and why did we buy it anyway?
One aspect which many people get excited about is the homeowner's insurance that must be purchased as a condition of a mortgage either for your new home or for the one in which you now reside. Everyone must have insurance but how well do we understand what we are buying? And how do we know we're getting a fair price?
A standard homeowner's policy will protect you in four basic areas: coverage for the structure, the contents, liability protection, and reimbursement for additional living expenses if the home becomes uninhabitable.
It's best to know that coverage for the structure is not based on current market values but on any replacement costs. Construction costs have not declined. If you're curious about your own home, visit Building-Cost.net and find a free tool to help you estimate what it might cost to rebuild at today's prices.
Water damage is the most common problem, and your claim will depend on the water's source. Sorry to say but many homeowners think they are covered for flooding, and we've seen too much of that in the last few years in our immediate area. No, you are not covered in a standard policy. In order to be covered, you must purchase additional flood insurance. Go to FloodSmart.gov to consider your options. Technically, a "flood" is an excess of water which comes in through a door or window.
Don't confuse flooding with seepage. Seepage is not covered by insurance and considered your maintenance responsibility. The water may be caused by foundation cracks, faulty gutters, downspouts, roof problems, etc. If water damage is caused by sewer lines backing up in the drain pipes, the appropriately named Sewer Backup Coverage is a separate policy.
Another potential problem we see in this area is thunderstorms. Be advised that most standard policies do not cover damage to trees and landscaping but some do have debris clean-up allowances. And, suppose it's your tree which falls on your neighbor's roof — what's your responsibility can be a rather daunting question.
As to your possessions, you may remember what you originally paid for them but do you have any idea as to today's replacement costs? Take an inventory with photos/videos, and keep the drawers, cabinet, closet doors open to jog your memory. If you go to KnowYourStuff.org , you'll find a free inventory guide.
Here's a tip for buyers: When seriously considering a home, ask the owner to provide a C.L.U.E. report from LexisNexis. It details a five-year insurance loss history of the property.
For sellers, if you rent your home, you'll need a Rental Dwelling policy, which may be 25 to 50-percent more than your homeowner's policy. Factor any increase into your rental rate. Also, insist that renters purchase adequate rental insurance from a reputable company as part of the rental agreement.
Cathy Hall, vice-president at Forest Agency Insurance in Forest Park, advises to thoroughly review a policy and to ask as many questions as possible.
"With the new year, it's a good idea to check your policy and ask your agent about any concerns you may have," she says. "Also, I strongly recommend that you increase your deductible to a minimum of $1,000 and check to see if your replacement value is accurate. Our website offers many helpful tips."
Another helpful hint is to ask about discounts for bundling all of insurance needs with the same company, and securing discounts for alarms and sensors, etc. You can also check your potential or current insurer's complaint record at https://eapps.naic.org, which is the National Association of Insurance Commissioners Consumer Information Source. Most importantly, read the policy you have or are considering. Know what you're paying for, that way you won't be surprised.
Maria Murzyn works part-time for Wednesday Journal and is also a Realtor for Better Homes & Gardens Gloor Realty Company in Oak Park. Read Maria's Fun & Frugal Events blog for free and inexpensive events in the area.