Q&A: Homeowner's Insurance Basics

Today we’re talking about homeowner’s insurance with Victoria Mendyka of Liberty Mutual. In particular, we’re interested in learning more about how to evaluate insurance policies to make sure the coverage is appropriate for our individual properties.

Greater Hartford Real Estate Blog (GHREB): Most people don’t know a lot about homeowner’s insurance. They know that they need to have it, and that it is supposed to protect them if something bad happens at their home. Let’s start at the beginning – what do homeowner’s insurance policies actually cover?

Victoria Mendyka: Insurance policies are designed to include 6 different coverages, which you will see reflected on your homeowners insurance declaration page:
1. Dwelling, most simply explained as replacement cost for the main structure. Policies provide coverage if your dwelling is damaged by perils such as wind, hail, fire etc.
2. Other structures, defined as detached, fences, sheds, swimming pools etc.
3. Personal property, generally a default percentage of dwelling. Where as personal property is for all the belongings in your home – if you were to turn you house upside down and shake it, everything that falls out would be considered personal property. Your personal items are covered for weather related perils and also extended to theft and vandalism.
4. Loss of use, additional living expenses.
5. Liability, legal protection in the event that injury or damage occurs that you are held at fault for.
6. Medical payments, your ‘don’t sue me money’ to pay a guest medical bill.
Insurance does not cover against earthquakes and floods. You can purchase additional coverage for both, but would have to specially request that.

GHREB: Are all policies the same? And if not, what are the big things that homeowners should look for when trying to compare policies?

Vicki: All policies are not created equal! The first thing homeowners should look for is a financially stable company who can be sure to pay out even in the event of a catastrophic loss. They should also ask what would happen in the event of a total loss, where the stated dwelling value wasn’t enough? Most companies will cover a certain amount over, as a buffer for inflation or other discrepancies. I have come across anywhere from an additional 10-50% extra expanded coverage. It is also important to determine how personal property will be evaluated in a loss. A good policy will contain an endorsement where covered losses will be settled on a replacement cost basis without deduction for depreciation – meaning it won’t matter how old an item is.

GHREB: How often should homeowners review their coverage to make sure it is still appropriate?

Vicki: Most homeowners should review their policies every few years. Number one they should make sure the replacement coverage is adequate. This coverage should be enough to rebuild your home from the ground to the roof, and anything attached to the structure. Most companies will either do a computer evaluation based on questions about the home, or some may be able to send out an inspector. You should touch base with your insurance agent if you make significant changes to the home that might increase the value. Finally, any big purchase such as jewelry, fine arts etc may require additional coverage, so you should run those things by your agent.

GHREB: Is there anything else we should think about when reviewing our insurance?

Vicki: Here’s a money saving tip for the day: look at your deductible. These days, home repairs cost much more than a few hundred bucks. So carrying a deductible of $1,000 or $2,500 would save significant premium in the annual payments, and would pay for itself in just a few years.

GHREB: This is all interesting and helpful information – thanks so much for your time, Vicki!

Victoria Mendyka is an insurance agent for Liberty Mutual, serving the Greater Hartford region. She can be reached at Victoria.Mendyka@libertymutual.com and www.libertymutual.com/lm/victoriamendyka.