Real Estate: Answering questions about homeowner’s insurance

Submitted by Jonathan Priest

* How does my local fire department impact my homeowner’s policy?

Each fire protection agency (including your local fire department) is reviewed by the Insurance Services Office (ISO) and ranked based on their fire protection services, such as fire equipment, staffing and available water supply. The ranking is called the Public Protection Class (PPCTM) with 1 being the best score and 10 being the worst score. Many insurance companies use the P P C rating and the distance your home is from the nearest legally responding fire department to determine whether they will insure your home and how much to charge. For more information on P P C, please contact your agent.

* What would it cost to replace the contents or personal belongings of my home?

If the unexpected happens, losing your home contents could be distressing as well as financially devastating. Your homeowners, Townhouse, Condo and Renters policies cover the loss of your personal belongings, subject to the policy limits and conditions.

There are two distinct ways to insure your personal possessions:

· Replacement cost coverage. This coverage pays you the dollar amount needed to replace personal property without any deduction for depreciation but is limited to a maximum dollar amount.

· Actual cash value. This coverage pays you 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.

Many people make the mistake of underestimating the value of their home contents. This mistake is easily made when you consider the amount of new items we purchase each year. Under-insurance can lead to heartache and inconvenience should the unexpected happen. Your local agent is available to assist you with insuring your home contents.

What is a deductible?

A deductible is the amount you’re responsible for in the event of a covered loss. In most covered loss cases, you are responsible for any amounts up to your deductible level and your insurance would cover anything beyond that up to your coverage limit. For example, if you select a $1,000 deductible and have a $4,200 covered loss, you would receive a claim payment of $3,200 after deducting the $1,000.

A homeowners deductible applies to each claim. If you have more than one claim in a policy period, you will be responsible for the deductible amount for each individual claim regardless of the number of claims you have during that policy period.

* What are the different types of home insurance deductible options?

For home policies, there are three common types of deductibles:

· A flat deductible is a specific or fixed dollar amount; for example, $2,500.

· A percent deductible is a percentage that it is based on the home’s dwelling coverage, often called Coverage A. For example, a 1 percent deductible on a home with $150,000 dwelling coverage is $1,500, and the same 1 percent deductible for a home with $300,000 dwelling coverage is $3,000. Keep in mind that as your home’s dwelling coverage increases the calculated amount of your deductible will also increase.

· A split deductible means there is a specific deductible that applies to some cause(s) of loss and a different deductible that applies to other causes of loss. For example, a percent deductible may apply to wind and hail losses, and a flat deductible may apply to all other causes of loss. A split deductible can be separate flat deductibles, separate percent deductibles, or a combination of both.

* How is my premium affected by selecting a higher or lower deductible option?

If you select a higher deductible, you will be responsible for paying more out of pocket. However, you’ll typically pay a lower policy premium. The opposite is true if you select a lower deductible option: because the insurer will pay a larger portion of any loss, you’ll typically pay a higher policy premium. Your agent can review available deductible options with you to help you decide what option you may want.

* How do I know what deductible applies to my policy?

The deductible you choose will be listed on your Declarations page. <

This article was brought to you courtesy of Farmers Insurance agent, Jonathan Priest, with an office at 57 Tandberg Trail, Suite 7, Windham. Call him at 207-893-8184 or send him an email at jpriest1@farmersagent.com