Choosing The Right Deductible

A deductible is the amount of money a policyholder must pay out-of-pocket toward damages or a loss before their insurance company will pay for a claim. You do not actually pay your deductible to your insurance company like you would a premium or bill. If you file a claim and it is covered, the deductible is subtracted from the amount claimed. For example, say you have a $500 deductible and you file a claim for $10,000. Your insurance company would pay you $9,500 for that claim.

There are generally two types of deductibles: a dollar-amount and a percentage based. The difference between them is how your deductible is calculated, and there are a couple of nuances depending on how much your home is valued at. Once calculated, the amount a homeowner pays if they file a claim is fixed for the length of that policy.

Your home insurance deductible should be as high as you can reasonably afford because the higher your deductible, the lower the cost of your premium. Raising your deductible can reduce the cost of your homeowners insurance premium as much as 20%, but that does not mean you should raise your deductible as high as possible.

When choosing a deductible, what you’re really doing is balancing the short-term cost you can afford (your deductible) and the long-term cost of a policy (your premiums). The more you can afford in the short-term, the more you’ll save in the long-term because your premiums will be lower. Insurance companies design the products this way to encourage homeowners to assume more of their own risk and to reduce administrative costs for small claims. For example, the premiums would be higher for a policy that has a $500 deductible versus a $1,000 deductible because the policyholder elected to assume greater financial risk. They would have to pay $1,000 toward a claim instead of $500 if they had to file one.

There are other reasons it makes sense to raise your deductible. Every insurance company is different but typically if you file a claim for any amount, the cost of your premium will increase because you’ve essentially become a riskier and costlier homeowner to insure. And the more claims you file, the higher your premium will be. For that reason, there are circumstances in which even if you have a low deductible, it might not be in your best financial interest to file a claim.

For example, say you have a $500 home insurance deductible. If wind destroys a small part of your roof and causes $1,000 in damages, you probably shouldn’t file a claim if you can afford to pay for the damages out-of-pocket. Yes, you could have your insurance company cover the $500 after your deductible but the cost of your premium might increase. That increase might be small or large, depending on the amount claimed and especially the number of claims you’ve made. If you file multiple claims, the cost of your premiums could go up as much as 25% or more and you never know what what the future holds. After the small wind damage, hail could destroy your roof entirely and a tornado could damage your home a month later. All of a sudden you haven’t made it through the spring of one calendar year and you’ve already filed three claims. So if you’re in a financial position to consider paying for small damages or losses out-of-pocket, then you should increase your deductible and lower your monthly premiums. If you remain claim-free for usually three years, companies can lower your premium rate.

Keep in mind that many insurance companies offer a one-time discount to customers who have never filed a home insurance claim. The discount might lower the cost of a standard policy anywhere from 5 to 20% depending on the company. If you file a claim and negate that discount, the cost of your premium will increase.

You should also keep in mind your emergency or available funds with an eye toward paying your deductible. While raising it can drop your rates, it should not do so at the cost of financial stress. Everyone should have a liquid emergency fund in the event of unpredictable circumstances. A homeowners insurance deductible might be one of those so consider what you you have saved for an emergency when choosing your deductible. At the same time, it’s not a good idea for your deductible to entirely wipe out the savings you’ve set aside for an emergency. You might need additional emergency funds at the time you have to file a homeowners insurance claim. For example, say a fire or tornado destroys half of your home and it is uninhabitable. Most homeowners policies also offer additional living expense coverage to take care of hotels bills, restaurant meals and other expenses. But what if you reach your limits for those expenses or need money for another emergency? If your deductible consumes your entire emergency savings, you might not have the money to cover those expenses.

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Is Ice Damage Covered?

In many parts of the country, winter is accompanied by snow and ice. And ice can cause a lot of headaches for homeowners. According to the Insurance Information Institute (III), one in every 55 insured homes has a claim related to water damage or freezing every year. Typical homeowners insurance policies include protection against ice-related damage, but there are some important things to keep in mind.

Hail

Hail can do serious damage to roofs and windows. Most homeowners insurance policies include dwelling coverage, which may help protect your home against specific perils, including hail and other ice-related losses. If hail damages a building on your property that’s not your home, such as a shed or unattached garage, it may be covered by other structures coverage, which is a component of some homeowners insurance policies. It’s important to keep in mind that insurance provides protection up to the limits indicated in a policy and that other policy restrictions or limitations may apply. Your insurance agent can provide you with information to help you choose levels of protection to fit your needs.

Roof Collapse

During the coldest months of the year, ice forming on your roof can cause serious problems. Roof collapse can happen when a roof can’t bear the weight of ice and snow. You may find that insurance may help cover the cost of replacing or repairing a damaged roof that is damaged by a collapse. If your house is uninhabitable after a roof collapse, homeowners insurance may also help cover living expenses, such as hotel bills, while your home is being repaired. Coverage limits and terms will apply, so be sure to check your policy to learn what it covers. Of course, no one wants to deal with a roof collapse. You may be able to prevent a situation like this by taking some preventative measures, such as cleaning gutters or clearing the roof of ice and snow as necessary. Consider hiring a professional if you’re concerned about safety or causing damage to the roof.

Ice Dams

Ice dams may result when ice forms on the edge of a roof and stops melting water from running off. When water gets backed up against the ice dam, it may leak through the roof and cause water damage. Dwelling coverage may help protect your home if an ice dam causes a loss. Personal property coverage provides coverage for named perils only and does not generally provide protection for ice dam situations.

You may find that homeowners insurance doesn’t cover ice dam removal, but resulting water damage to the dwelling is typically covered. And again, even if a loss is covered, policy terms and limits will apply. Check your policy to learn about what protections you have in place and talk with your agent to help determine whether you may benefit from additional coverage. Keep in mind that some routine maintenance may help you avoid this kind of damage. The III advises watching gutters for ice dams and keeping gutters clean so water can flow freely.

Frozen and Burst Pipes

Homeowners insurance may help cover damage to homes from burst, leaking or frozen pipes. However, the National Association of Insurance Commissioners warns that frozen pipes may not be covered if a proper temperature wasn’t maintained inside the house. Check your policy limits and terms to see how much coverage you have for burst pipes.

Injuries on Ice

Ice on the ground can be dangerous and sometimes hard to see. What happens if a visitor falls on ice on your property, suffers an injury and sues you? Liability coverage typically comes with homeowners insurance. This type of coverage may help protect you if you’re found legally responsible after a visitor is injured on your property. For example, liability coverage may help cover a person’s medical bills or lost wages if they’re injured. It may also help cover your legal costs.

Like other types of coverage, liability coverage has limits and conditions, and legal claims can be very expensive. If you’re concerned you may not have enough liability coverage, talk to your insurance agent about a personal umbrella policy, which can offer additional protection. As you prepare for another chilly winter, your local insurance agent can help you understand the specifics of your policy and provide you with information to help you make any necessary changes. You may not be able to escape the cold, but you can pass the months with the peace of mind that comes with knowing you have protections in place, just in case.

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What’s Not Covered

Most standard homeowners policies provide protection from water damage if the cause is sudden and accidental. According to the Insurance Information Institute, you’ll likely be protected if, for instance, your drywall is drenched after your water heater ruptures or an upstairs pipe bursts and water saturates the ceiling below. Homeowners insurance does not cover all types of water damage, however.

Damage from unresolved maintenance issues: While your insurance will probably help cover the cost of replacing or repairing a damaged floor if your dishwasher suddenly goes on the fritz, coverage generally will not kick in if the damage results from an unresolved maintenance issue, such as continuous leaking near a faucet or other plumbing fixture.

Replacing or repairing the source of the water damage: Most insurance policies will not cover the source of the water damage. So while your policy may cover the cost of tearing out and replacing that damaged floor, you shouldn’t expect it to cover the cost of replacing your broken dishwasher or washing machine.

Water backup from an outside sewer or drain: You also will not typically be covered by a traditional homeowners policy if water backs into your home through an outside sewer or drain. You may, however, be able to purchase additional sewer or water backup coverage that may help provide protection in case of such an event.

Flood: No type of flood damage, no matter the source of the water, is covered by standard homeowners policies. Flooding, for example, can occur from storms, over-saturated ground, overflowing or surging bodies of water such as rivers, ponds, lakes and oceans, You can, however, purchase flood insurance through the National Flood Insurance Program.

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Taking Home Inventory

As we enter the New Year, it might just be the perfect time to take stock of your material possessions. Did you get a great gift for the holidays? Maybe a diamond ring, a new musical instrument or a beautiful watch? All of these items should be insured, and, just as importantly, added to your home inventory.  If a fire or major water loss should occur in your home, or if you become a victim to thieves, not having these items removed may not get you compensated.

What is a home inventory, you ask? Once created, it will be the most valuable item in your house.

The first step is to make a record of every item in your house that you would want and expect to be covered by your insurance. This list should include your computers, TVs, jewelry, antiques, china, art, furniture, gardening equipment, tools and many other things. Include serial numbers if you have them, and take pictures of each item. Mark down the item’s condition, and how much you paid for it (including a receipt image would be ideal).

Another way to approach this is to create a home inventory video. Videotape all of the valuable items in your home, making sure to zoom in on the smaller items. You should still document, whether by video, in an accompanying report or in a mobile app, their serial numbers and other identifying markers. The more specificity you include, the more likely you’ll be able to get a claim filed quickly, and at the right amount, should anything ever happen to your stuff.

In addition, there are several software programs and apps available to help you create a home inventory. However you choose to make yours, it’s important to back up this information and store a copy outside your home, just in case your home is severely damaged.

This is an opportunity to learn the real value of your items, especially art and jewelry, and serves as a reminder to get them appraised often. The value of these types of items can go up over time, so you should also make sure they are insured for the right amount. Be sure to check with your independent agent that your policy covers all your belongings, even the most personal and valuable items.

Smoke Damage To Do List

Experiencing a fire in your home can be devastating. But even if you have fire insurance, you may have trouble filing a claim for smoke damage in your home. If you’ve been frustrated by an insurance agency that’s refusing to pay for smoke damage, then we want to help. Here are some of the most important tips to know about smoke damage insurance claims.

 1. Your insurance policy will likely cover losses you experienced in the fire. With that in mind, your first job after experiencing smoke damage in a fire is to thoroughly document your losses and damages.

Make a list of information that includes all of the following about your property:

  • Date of Loss
  • Type of Loss or Damage
  • Location or Damage
  • Any Related Injuries
  • Others Involved
  • Condition of the Home
  • Description of Damaged Contents
  • Whether or Not Temporary Repairs or Complete Replacements Are Necessary
  • A Police and Fire Department Report

Remember: your insurance company likely requires you to contact them within a certain amount of time after a loss has occurred. Make sure you know that amount of time and file your damage claims on-time.

2. You’re going to exchange hundreds of emails and documents with your insurance company over the next few months. Make sure you document everything. Get a binder or good storage system, to start.

A typical homeowner’s insurance policy will cover damage caused by wind, fire, and lightning. If your home is destroyed by a fire, then the insurance company needs to pay to build you a new home. A typical insurance policy will also pay to replace or repair anything inside that home that may have been damaged by flames, smoke, soot, ash, and other byproducts of the fire. Smoke damage is nasty and can affect virtually everything in your home. Many of your possessions and furniture may need to be discarded – even if they don’t look badly damaged.

Remember: you pay for insurance specifically to cover situations like this. Document all of the items in your home that have even small amounts of smoke, soot, or ash damage. Your walls may be stained black, for example. Floors and carpeting may be permanently ruined with soot. Even your ceilings could turn an ugly shade of black. Upholstery, drapes, clothing, and family heirlooms can all suffer damage.

3. After documenting smoke damage and speaking with your insurance agency, you should pay for professional cleaners or remediation experts to enter your home. Most insurance policies will cover professional cleaning costs (check to make sure). It’s unsafe for you to clean your home after a fire. Soot and ash can have lifelong effects on your health. Professional cleaners and remediation teams have specialized equipment and personal protection devices to safeguard them against smoke damage in your home.

Many homeowners will try to clean up smoke damage themselves, only to realize that water-based cleaners only make the stains worse. In more extreme cases, you may also have to pay to deodorize the house or replace insulation in the walls or attic. However, professional cleaning or remediation is a good start.

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After a Claim

After a claim has been filed, and if you filed the claim yourself, your work is not finished. You have to be diligent when filing a claim in a water loss, or any loss for that matter, because you want to be sure you’re getting what you deserve.  Here’s a short list of things to do after a claim has been filed:

Reviewing the Claim Process

After you’ve reported the claim, the following steps will take place:

  • The loss report is assigned a claim number and assigned to a claims handler.
  • A property adjuster will contact you to confirm the facts of the loss. This may include an inspection of the damaged property. The adjuster will then determine if coverage applies, and, if so, evaluate the damages.
  • After the claim is initiated, the adjuster or claims handler will check on the progress of the claim and make every effort to efficiently complete the process. Some claims can be settled quickly. Others—especially those involving severe damages—may take longer.

Keeping Track of the Details

To help stay organized and involved, you may want to maintain a file regarding your homeowners insurance claim/loss that includes the following:

  • Customer’s name as it appears on the policy
  • Policy number
  • Claim number
  • Claim handler or adjuster’s name, mailing address, phone number and title
  • Estimates, correspondence and notes of phone conversations regarding the claims settlement

Keep this file with you. Wherever you talk to your homeowners insurance claims handler or adjuster—at home or at work—your documentation will help ensure the claim is processed in a timely, accurate manner.

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Homeowners Insurance Checklist

Having a water loss in your home is something no one ever wants to think about it.  But when it does happen, it’s better to be prepared then to be caught off guard.  Here’s a short list of things to do when you have a water damage loss:

  1. Quickly report the claim. You can file a homeowners insurance claim by contacting your insurance company, hiring a public adjuster or you can file your claim online. The sooner you report the loss, the faster they can get moving on your claim.
  2. Protect your home from further damage. Stop water from leaking by shutting off the valve, place buckets in rooms with water leaks, hang plastic over damaged areas to prevent water from leaking into your home or board up broken windows, for example.
  3. Record the damage done to your home. Take pictures or video of any damage to your house and its contents. Make a list of what is damaged in your home. Include details when possible—such as the brand name, manufacturer, serial number and approximate price you paid. Organize your list by room.
  4. Maintain a list of repair expenses. Keep track of the time you spend cleaning up or repairing your home after the claim. Also record any money you’ve spent on materials to temporarily fix the damage. It’s important that you don’t make any permanent repairs until your ERIE adjuster has seen the damage.

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