What’s In Your Homeowner Insurance Policy?
By: Vic Lefeve

Do you know exactly what you’re buying when you purchase an insurance policy on your home?

Most people, when purchasing a Homeowner Insurance Policy, are under the impression that they will be covered for all contingencies. There is no question that a Homeowner Policy is by far the best way to adequately protect one of your most valuable assets, but unless you are one of the few people who actually read their insurance policies from cover to cover, you may not be aware of the numerous exclusions and limitations of coverage which are in all insurance company contracts.

In recent years most insurance companies felt the need to limit windstorm coverage on the roof of a home, particularly in the event of a hurricane. Each insurance company has adopted its own windstorm limitation, and the limitation is usually in the form of a separate specified deductible or a percentage of the loss deductible.

Another common technique now being used to limit coverage for roof damage is to provide coverage on an actual cash value basis rather than the usual replacement cost basis, which is normally used for damage to your home from any other covered peril.

The difference in these methods of adjustment is that replacement cost coverage will pay for the replacement of the damaged roof at current prices. Actual cash value coverage will start with a current price, but at this point there will be a deduction in the payment of the claim for what is know as “utility depreciation”. The insurance adjuster will consider the age and condition of the roof at the time of loss to determine an appropriate deduction.

Another situation, which has surprised many homeowners, is when water or sewage backs up into their home. Coverage for this situation can be provided under the Homeowner Insurance Policy, but the problem is most insurance companies have a separate charge for this coverage, and it is often overlooked, or confused with flood insurance which is purchased under a separate insurance policy. Water or sewage back up is a particularly common problem for homes in South Louisiana.

The section of the Homeowners Insurance Policy most commonly misunderstood is the Liability Insurance section. Coverage under this section is termed Personal Liability and this is where the confusion begins.

Most insurance companies define personal liability as coverage for bodily injury or property damage to a third party. What is often overlooked is that this coverage can be extended to include personal injury which would provide additional coverage for libel, slander, false arrest, defamation of character, wrongful eviction, invasion of privacy, etc. It would not occur to most homeowners that coverage for these situations can be purchased at a very modest additional premium.

By now everyone has heard of the horror stories of having your identity stolen. Insurance companies have recently recognized the high costs of recovering from an identity theft, and they are beginning to offer coverage for Identity Fraud Expenses under the Homeowners Insurance Policy. Since this coverage is relatively new, you must ask your insurance agent if it is offered by your homeowners insurance company. It is estimated that ten million people in the United States become victims of identity theft each year.

The comments in this article are merely my personal observations in buying and selling Homeowner Insurance Policies over the years, and the best advise I can give anyone in selecting a policy is ask lots of questions, trust your insurance agent to give you professional advise in helping you to protect one of your most valuable assets, and last, but not least, take the time to read your insurance policy after the decision is made to purchase.

Victor J. Lefeve, CPCU, CIC, CPIA, is President of Employees Insurance Representatives, Inc., a local independent insurance agency.