Coverage Basics

Homeowner insurance is a policy that packages coverage for your home, personal property, and your personal liability (legal responsibility) for injuries to others or their property while they're on your property.

• Oregon law does not require you to have homeowners insurance. However, most mortgage lenders require homeowners insurance as long as you have a mortgage. Even without a mortgage, homeowners insurance protects your assets from sudden and accidental events.
• Homeowners insurance coverage is determined by a policy contract. Many policies refer to "covered perils," meaning coverage for sudden and accidental damage to property. For example, a "peril" could be a fire or theft. It is important to understand what is and is not covered by your policy contract. Some policies cover all perils except ones specifically excluded, while other policies cover only the perils named in the policy.
• Consumers are often surprised to learn damage caused by a lack of routine maintenance and upkeep, or water damage that occurs over a period of time, are not covered.
• In addition, a homeowners policy usually does not cover damage caused by flooding, earthquakes, mudslides or landslides, sewer backup, or identity theft (although coverage may be purchased separately). Learn more about flooding and earthquake coverage at: Homeowner/Renter tips
• Refer to your policy exclusions section for more information on property and perils that are not normally covered.

Policy packages

Homeowner policies are sold as a package. In your policy, Part I provides protection for your real and personal property. Part II provides personal liability (legal responsibility) protection.

Property protection

The property-protection portion of your policy is in sections. These sections identify limits associated with your property coverage.

Coverage A: Covers your dwelling; attached structures and permanently installed fixtures in the home such as built-in appliances; plumbing, heating, air-conditioning, and electrical systems.

Coverage B: Covers detached structures such as garages; storage sheds; and shop buildings that are for personal use only. Fixtures attached to the land, such as fences, driveways, sidewalks, patios, and retaining walls, are covered for limited perils and amounts.

Coverage C: Covers personal property, including the contents of your home and other personal items owned by you or family members who live with you. This protection can be based on actual cash value or replacement cost. It's important that you know what coverage applies to your home and property. Read your policy and discuss this with your agent or company.

Coverage D: Covers living expenses over and above your normal living expenses if you cannot live in your home while repairs are being made.

Additional property coverages: Homeowner policies may provide limited coverage for debris removal; damaged trees, shrubs, other plants, and lawns; fire-department service charges; property removal; theft or illegal use of credit or transfer cards; collapse of buildings; or glass breakage if caused by a covered peril. Coverage for these items is controlled by individual policy limitations.

Replacement cost or actual cash value coverage?

You can choose to insure your home and its contect for either replacement cost or actual cash value. Replacement cost is the cost to rebuild your home or repair damages using materials of similar kind and quality.

Actual cash value is the value of your home considering its age and wear and tear. Actual cash value coverage pays you for your loss, but often doesn't pay enough to fully repair or replace the damage.

For example: you have a 10-year-old television. A covered loss damages your home and the television is damaged beyond repair. A replacement cost policy will pay to replace the television with a new one "of like kind and quality." If it was a medium-priced, 21-inch television, you will get a new, medium-priced, 21-inch television. If your coverage is actual cash value, the company will only pay you the value of the used television. If the average life of a television is 20 years on a standard depreciation schedule, you will get about half of the cost of a new television of like kind and quality. You will have to make up the difference in order to get a new television. Check your policy for details.

Because homeowner insurance is written and rated as a single package policy you cannot pick and choose coverage. For example; your policy may cover "other structures" and you pay the package premium even though you have no "other structures."

Insuring to value

It's important to have enough insurance to cover the value of your home and belongings. There are varied methods of reaching the proper coverage amount. Your agent or insurance company will have an established program that will estimate your home's approximate replacement cost. Your insurance policy is designed to cover the home only, not the cost of the land. You may wish to consult your agent or insurance company to find out if these endorsement options are available.

• Guaranteed replacement cost coverage will pay the cost to rebuild your home as long as you have met the requirements of your insurance policy and insured to value.
• Extended replacement cost coverage insures your home for a specific value and usually adds a 20 percent to 25 percent cushion - or extended limit - if reconstruction costs run over.
• Inflation guard increases the amount of your homeowner insurance to keep up with inflation so that you can maintain adequate coverage to replace your home in the event of a loss.
• Scheduled personal property protects articles such as jewelry, furs, stamps, manuscripts, money, guns, computers, antiques, silver and gold, memorabilia, tools, electronic apparatus, and other items that often exceed normal policy limits in your regular homeowner policy. It often provides coverage that is broader than the coverage in the home insurance policy. Increased limits on money and securities provide additional coverage for money, bank notes, securities, deeds, etc. The limit on business property also can be increased in most cases.
• Secondary residence provides protection for a second home, such as a summer residence. Be certain that both the property value and the extension of liability protection are included.
• Theft coverage protection can broaden the theft coverage to include personal contents in your motor vehicle, trailer, or watercraft to be covered without proof of forcible entry.
• Credit-card forgery and depositor's forgery coverage provides protection against loss, theft, or unauthorized use of credit cards. It also covers forgery of any check, draft, promissory note, etc. Consult your agent or insurance company regarding any exceptions that may apply.
• Code upgrade coverage provides protection for homes that may need to be upgraded due to building codes. For example, if a fire damaged the electrical system in your older home, you would probably be required to install circuit breakers instead of continuing to use fuses.
• Green insurance coverage pays to rebuild to green standards if your home or building already meets energy efficiency and sustainability standards. Or, you can purchase green insurance to upgrade to a green standard in case of a covered property loss. For more information, link to: Green insurance for homes and commercial buildings

Liability protection

• Personal liability: Your policy provides personal liability coverage against a claim or lawsuit resulting from bodily injury or property damage to others caused by an accident on your property or as a result of your personal activities anywhere. No coverage applies for auto, watercraft, aircraft, or business-related incidents. The policy extends to you and all family members who live with you.
• Personal umbrella policy: A separate personal umbrella policy can be purchased to provide extra liability protection. The umbrella will provide excess limits over the coverage in your homeowner policy and also can be written to extend over your auto policy. An umbrella policy will start paying when your regular homeowner policy's liability limits are exhausted.
  • For example, a friend is seriously injured while jumping on a trampoline in your back yard. The friend sues for damages. The amount of damage exceeds the homeowner policy's liability limits. A personal umbrella policy would provide additional protection if no exclusion applied.
• Watercraft liability can be obtained on a very limited basis on your homeowner policy. If you own boats or personal watercraft, a separate watercraft policy should be purchased.

Medical expenses for others

Your policy includes coverage to pay medical expenses for people accidentally injured on your property regardless of fault. Medical-expense payments do not apply to your injuries or those of family members living with you or to activities involving your at-home business. The standard policy is usually written to provide medical expense payments of $1,000 per person.

Policy exclusions: items not covered

Be aware of the exclusions that are included in most policies. The following exclusions normally apply:

• Damage caused by earthquake, flooding, landslide, mudslide, earth movement, and nuclear accident.
• Theft of furs, jewels, coin or stamp collections, or antiques (limited coverage applies to these items for covered perils other than theft).
• Damage or loss connected to a home business or storage of business goods.
• Cost to upgrade construction to meet building code requirements.
• Watercraft.
• Automobiles or other motorized vehicles unless they are used on premises only for maintenance purposes.
• Water damage that occurs over time and is not sudden and accidental.
• Damage caused by lack of routine maintenance and upkeep.
• Intentional acts by the homeowner or a family member.
• Mold.

Ask your agent or insurance company about special coverage that may be available for an additional premium.

Manufactured-home coverage

Insurance companies may offer protection for manufactured homes under a standard homeowner policy or under a manufactured-home policy. You may find extreme variances in both insurance coverage and premiums. It's wise to compare products carefully. Most companies look at the following criteria to determine whether to provide insurance coverage for a manufactured home:

• High-quality continuous skirting
• Continuous concrete foundation or a manufacturer-approved pier system
• Anchors or tie-downs
• Age and quality of the home (usually 10 years or less)
• Pitched composition roof

Many companies will not insure the following risks:

• Homes with a wood-burning device not installed by the manufacturer
• Homes in unprotected areas
• Homes occupied by tenant

Obtaining protection for certain perils

You can obtain additional protection for the following types of situations that are not covered under most homeowner policies:

• Flood insurance is a separate policy that can be purchased through the National Flood Insurance Program (NFIP). A lender will require flood insurance if your home is located on a floodplain. For more information, contact your producer (agent) or insurance company, call NFIP, 888-379-9531, or check NFIP's website: www.floodsmart.gov.
• Earthquake insurance is available through most insurance companies at an additional cost, usually as an endorsement to a homeowner policy.
• Landslides and mudslides are typically not covered on homeowner policies. Check with your producer (agent) or insurance company to see if your homeowner policy includes this protection.

Terrorism coverage

Insurance companies cannot exclude coverage of damage due to acts of terrorism.

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