Homeowners Insurance NJ Quotes and Consumer Resources

DETERMINING THE AMOUNT OF YOUR Home Insurance COVERAGE is below quotes.

NJ Homeowners Insurance Policies

Introduction
The largest single investment most consumers make is in their home. In order to best protect your family, your home, and your worldly possessions, it is wise to take the initiative to fully understand your homeowners insurance policy. While it is difficult to predict future loss, you can minimize the impact of loss on yourself and your family by spending the time necessary to familiarize yourself with your policy and how it specifically addresses your needs in the event of a loss.

Homeowners insurance is a package policy consisting of different types of coverage for the house, its contents, additional living expenses, personal liability claims against the policyholder and other members of the household, and medical payments to others. The policyholder pays a single premium amount for the combination of coverage listed in the policy..

When you purchase insurance, it is important to remember to shop for insurance in the same way that you shop for any other consumer product. Take the lead in shopping for and understanding your insurance policy. Make sure to compare prices, policy coverage and conditions, and complaint information. Also, research the coverage options that are available to you. Don't rely only on the word of someone else, including an insurance agent or broker, as to what is the "best coverage" for you. Find an agent or broker who is willing to spend time discussing your needs and how specific insurance coverage can best meet your needs. It is always wise to compare policies on your own to help determine the best product for you.

Always try to plan ahead when you need to purchase insurance. Allow the proper amount of time to make an informed decision. Never make important decisions on the spot without conducting research first. Remember, this is your home, not the insurance agent's or lender's. You should always take the lead in deciding what sort of homeowners insurance to buy and how much insurance you need.

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Not All Insurance Companies Charge the Same Price
Each insurance company calculates its own rates, subject to Department of Insurance approval. Since each company's loss experience differs, the rates will differ as well. Therefore, it is wise to shop for the best price and coverage available in relation to your insurance needs.

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Costs and Payments
Most companies sell their policies through independent agents, who are often representing several companies and should be able to get the most competitive prices. However, some companies deal directly with the consumer and can offer competitive prices because of lower expenses. Again, premiums can vary greatly between insurers!

Many companies have their own methods of premium installment or payment plans, so ask for the details regarding premium installments or payments available through the company you consider for coverage. You can use this information to compare with premium financing options.

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Discounts
Sometimes companies offer discounts for burglar alarms and fire protection devices such as smoke detectors, alarms, and sprinklers. Ask about the discounts available through the companies you are considering.

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What Is Covered By Homeowners Insurance?
Typical homeowners coverage insures your dwelling, other structures and contents, and may cover against losses such as:

You may elect to buy specialized homeowners insurance coverage that provides additional protection for your dwelling and contents beyond the standard coverage limitations in most homeowners policies. Ask your insurance agent or broker about available endorsements to extend coverage. Endorsements to coverage such as building code upgrade can greatly add to your protection in a loss. You may also want to consider separate earthquake coverage or flood insurance, as these types of hazards are specifically excluded in most homeowners insurance policies.

Your policy also covers loss of use, including increases in living expenses due to fire or other insured loss. It is a good idea to be familiar with the coverage provisions for living expenses and include the information in your regular disaster plan in case of emergency.

Liability coverage protects you for injuries or damages to others caused by you, a member of your family, or pet. Medical payments insurance covers medical expenses to non-family members injured at your home.

Important: Read exclusions in your insurance contract. Earthquake, flood, mold, earth movement, and "wear and tear" are some of the perils that are usually excluded.

Tenants (renters) insurance covers the loss of personal property and loss of use due to the above-mentioned perils, and may include liability and medical payments coverage.

Condominium insurance is similar to tenants insurance and covers personal property and improvements. Loss of use is generally limited to 40 percent of the contents limit. The condominium association generally purchases insurance for the building structure and common areas, such as corridors. Loss Assessment Coverage can be an important policy provision for you. It covers you for certain assessments the condominium association makes. However, you should check if it covers you for earthquake losses and how much it will provide you in the event of an earthquake loss. You should also carefully analyze the type of insurance your association has and how it would affect you in the event of a loss. Most condominium association policies cover the common areas and walls. Your condominium owner's policy will cover interior damage to your unit.

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What Limits Should I Set on My Policy?
The "dwelling" limit should be the amount it would cost to replace your home. This may have nothing to do with the purchase price or the current market value of your home, as homeowners insurance does not generally cover the land value of your insured property. Your insurance policy is not governed by the real estate market, but by the cost of the materials and labor involved in rebuilding your home. Insurance companies have formulas that they use to evaluate the replacement cost of your home. Since the formulas developed are unique for each company, different insurers may suggest or require different limits of coverage for your dwelling limit.

The following information can assist you to determine if the limit set by your company accurately reflects the price it would cost to rebuild your home in the event of a total loss:

If you believe that your dwelling limit is undervalued or overvalued, and you have submitted documentation in writing to your agent, broker, or insurer to raise or lower the limits and your request is refused, then contact the Department of Insurance in your state for assistance.

The "contents" limit is generally around 50% of the dwelling amount; however, this is a guideline only, as the most competent source on the replacement value of your personal possessions is you. Be sure to take into account all of your personal property when calculating the contents limits. Read and understand the limited coverage amounts for specific types of personal property such as:

The limited coverage amounts for specific types of personal property are not separate limits in addition to the contents limit. These limits are included in the overall contents limit and represent the maximum paid out for that specific type of personal property. Therefore, it is very important to add an endorsement (sometimes referred to as a "rider" or a "floater") to coverage which specifically schedules and takes into account the value of personal property that you may own above the special limits. Contact your agent or broker to discuss how to adequately cover any personal property that is valuable, falls above the limits, or is in any way out of the ordinary. Also, make sure to take into account commonplace household items when calculating your contents limit. Often, people concern themselves only with big ticket items purchased for use in their homes and neglect to account for all the many things you need to run your household and enjoy your home such as small appliances, kitchen utensils, linens, window coverings, and sundries. Remember, personal property also includes clothing, shoes, accessories, and personal items.

Two major problems suffered by homeowners on their Residential Property/Homeowners insurance policies in the California fires were

(a) Many of the dwellings were under-insured, i.e., insured for amounts inadequate for rebuilding. Insurers sometimes refer to this as inadequate insurance-to-value.

(b) The problem of increased cost of construction was evident in many situations. When rebuilding, homeowners have to comply with new building code requirements. In some instances the difference between the dwelling limit and the code upgrades was a significant amount. Also, the extreme heat of some fires (and some new building code requirements) necessitated building new foundations along with appropriate debris removal. This is a situation that can be easily overlooked when determining building limits.

An important part to owning any property is protecting the property to the best of your ability. Homeowners insurance is a vital component to the protection of your property. By knowing and understanding the coverage and limits of your policy, and by making sure that values are current, your greatly add to you and your family's peace of mind in any loss situation.

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Will My Policy Completely and Totally Replace My Home If It Is Destroyed?
This depends on whether your policy is a replacement cost value policy or an actual cash value policy. If your policy is an actual cash value policy, it will not. California courts have decided that actual cash value, unless otherwise specified in the insurance contract, is the fair market value. Fair market value can be loosely defined as the amount that a knowledgeable, willing buyer would pay and that a knowledgeable, willing seller would take for an item, neither being under unusual pressure to buy or sell. Insurers are permitted to provide an alternate definition of actual cash value in the policy if another method of determining value is to be used.

If you have a replacement cost policy, the chances that you will be able to completely rebuild your home are better; however, there are many types of replacement cost policies, so you need to be careful to purchase a replacement cost policy that best meets your needs. A policy cannot be sold as a "guaranteed replacement cost" policy unless it will pay to completely rebuild the home. Other types of replacement cost policies will pay your policy limits, plus a certain percentage above those limits. Some policies do not have building code upgrade (ordinance or law) coverage. Cities and counties periodically change their building codes. Unless your policy has this coverage, your insurance company may not pay for changes you may need to make to the structure of your home to bring it up to current building codes.

As discussed earlier your agent, broker, or insurer can assist you in establishing a limit that is adequate to rebuild your home. It is important to update that limit periodically to maintain a limit that reflects current construction costs. You may want to ask your agent, broker, or insurer if they automatically review or increase limits on a regular basis or if they offer an automatic inflation guard option that increases limits according to current inflation information.

In short, there is no substitute for reading your policy and your renewal declarations carefully. Whenever you are unclear about your policy, you need to contact your agent, broker, or company for clarification in writing. Discovering after a loss that you did not have the right coverage is not a situation you want to experience.

For more detailed information on residential claims, please see the CDI's Residential Property Claims Guide. This brochure helps you navigate the claims process and discusses hot topics such as water damage, mold, and replacement cost.

Remember, if you only shop by comparing prices only and not by comparing coverage, you are doing yourself a disservice. Your home is one of the most important purchases you will make. Take the time to get the facts straight before you purchase homeowners insurance. It may be one of the best decisions you make for yourself and your family.

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Some Final Tips

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The price you pay for your homeowners insurance can vary by hundreds of dollars, depending on the insurance company you buy your policy from. Here are some things to consider when buying homeowners insurance.
1. Shop Around

It'll take some time, but could save you a good sum of money. Ask your friends, check the Yellow Pages or contact your state insurance department. (Phone numbers and Web sites are listed here.) National Association of Insurance Commissioners (www.naic.org) has information to help you choose an insurer in your state, including complaints. States often make information available on typical rates charged by major insurers and many states provide the frequency of consumer complaints by company.

Also check consumer guides, insurance agents, companies and online insurance quote services. This will give you an idea of price ranges and tell you which companies have the lowest prices. But don't consider price alone. The insurer you select should offer a fair price and deliver the quality service you would expect if you needed assistance in filing a claim. So in assessing service quality, use the complaint information cited above and talk to a number of insurers to get a feeling for the type of service they give. Ask them what they would do to lower your costs.

Check the financial stability of the companies you are considering with rating companies such as A.M. Best (www.ambest.com) and Standard & Poor's (www.standardandpoors.com) and consult consumer magazines. When you've narrowed the field to three insurers, get price quotes.

2. Raise Your Deductible

Deductibles are the amount of money you have to pay toward a loss before your insurance company starts to pay a claim, according to the terms of your policy. The higher your deductible, the more money you can save on your premiums. Nowadays, most insurance companies recommend a deductible of at least $500. If you can afford to raise your deductible to $1,000, you may save as much as 25 percent. Remember, if you live in a disaster-prone area, your insurance policy may have a separate deductible for certain kinds of damage. If you live near the coast in the East, you may have a separate windstorm deductible; if you live in a state vulnerable to hail storms, you may have a separate deductible for hail; and if you live in an earthquake-prone area, your earthquake policy has a deductible.

3. Don't confuse what you paid for your house with rebuilding costs

The land under your house isn't at risk from theft, windstorm, fire and the other perils covered in your homeowners policy. So don't include its value in deciding how much homeowners insurance to buy. If you do, you will pay a higher premium than you should.

4. Buy your home and auto policies from the same insurer

Some companies that sell homeowners, auto and liability coverage will take 5 to 15 percent off your premium if you buy two or more policies from them. But make certain this combined price is lower than buying the different coverages from different companies.

5. Make your home more disaster resistant

Find out from your insurance agent or company representative what steps you can take to make your home more resistant to windstorms and other natural disasters. You may be able to save on your premiums by adding storm shutters, reinforcing your roof or buying stronger roofing materials. Older homes can be retrofitted to make them better able to withstand earthquakes. In addition, consider modernizing your heating, plumbing and electrical systems to reduce the risk of fire and water damage.

6. Improve your home security

You can usually get discounts of at least 5 percent for a smoke detector, burglar alarm or dead-bolt locks. Some companies offer to cut your premium by as much as 15 or 20 percent if you install a sophisticated sprinkler system and a fire and burglar alarm that rings at the police, fire or other monitoring stations. These systems aren't cheap and not every system qualifies for a discount. Before you buy such a system, find out what kind your insurer recommends, how much the device would cost and how much you'd save on premiums.

7. Seek out other discounts

Companies offer several types of discounts, but they don't all offer the same discount or the same amount of discount in all states. For example, since retired people stay at home more than working people they are less likely to be burglarized and may spot fires sooner, too. Retired people also have more time for maintaining their homes. If you're at least 55 years old and retired, you may qualify for a discount of up to 10 percent at some companies. Some employers and professional associations administer group insurance programs that may offer a better deal than you can get elsewhere.

8. Maintain a good credit record

Establishing a solid credit history can cut your insurance costs. Insurers are increasingly using credit information to price homeowners insurance policies. In most states, your insurer must advise you of any adverse action, such as a higher rate, at which time you should verify the accuracy of the information on which the insurer relied. To protect your credit standing, pay your bills on time, don't obtain more credit than you need and keep your credit balances as low as possible. Check your credit record on a regular basis and have any errors corrected promptly so that your record remains accurate.

9. Stay with the same insurer

If you've kept your coverage with a company for several years, you may receive a special discount for being a long-term policyholder. Some insurers will reduce their premiums by 5 percent if you stay with them for three to five years and by 10 percent if you remain a policyholder for six years or more. But make certain to periodically compare this price with that of other policies.

10. Review the limits in your policy and the value of your possessions at least once a year

You want your policy to cover any major purchases or additions to your home. But you don't want to spend money for coverage you don't need. If your five-year-old fur coat is no longer worth the $5,000 you paid for it, you'll want to reduce or cancel your floater (extra insurance for items whose full value is not covered by standard homeowners policies such as expensive jewelry, high-end computers and valuable art work) and pocket the difference.

11. Look for private insurance if you are in a government plan

If you live in a high-risk area -- say, one that is especially vulnerable to coastal storms, fires, or crime -- and have been buying your homeowners insurance through a government plan, you should check with an insurance agent or company representative or contact your state department of insurance for the names of companies that might be interested in your business. You may find that there are steps you can take that would allow you to buy insurance at a lower price in the private market.

12. When you're buying a home, consider the cost of homeowners insurance

You may pay less for insurance if you buy a house close to a fire hydrant or in a community that has a professional rather than a volunteer fire department. It may also be cheaper if your home's electrical, heating and plumbing systems are less than 10 years old. If you live in the East, consider a brick home because it's more wind resistant. If you live in an earthquake-prone area, look for a wooden frame house because it is more likely to withstand this type of disaster. Choosing wisely could cut your premiums by 5 to 15 percent.

Check the CLUE (Comprehensive Loss Underwriting Exchange) report of the home you are thinking of buying. These reports contain the insurance claim history of the property and can help you judge some of the problems the house may have.

Remember that flood insurance and earthquake damage are not covered by a standard homeowners policy. If you buy a house in a flood-prone area, you'll have to pay for a flood insurance policy that costs an average of $400 a year. The Federal Emergency Management Agency provides useful information on flood insurance on its Web site at FloodSmart.gov. A separate earthquake policy is available from most insurance companies. The cost of the coverage will depend on the likelihood of earthquakes in your area. In California the California Earthquake Authority (www.earthquakeauthority.com) provides this coverage.

If you have questions about insurance for any of your possessions, be sure to ask your agent or company representative when you're shopping around for a policy. For example, if you run a business out of your home, be sure to discuss coverage for that business. Most homeowners policies cover business equipment in the home, but only up to $2,500 and they offer no business liability insurance. Although you want to lower your homeowners insurance cost, you also want to make certain you have all the coverage you need.

Glossary of Homeowners Insurance Terms
Actual Cash Value (ACV) -Unless otherwise defined in the policy, actual cash value in California means fair market value. The fair market value of an item is the dollar amount that a knowledgeable buyer (under no unusual pressure) is willing to pay, and a knowledgeable seller (under no unusual pressure) is willing to accept.

Agent - A licensed individual or organization authorized to sell and service insurance policies for an insurance company.

Binder - A short-term agreement that provides temporary insurance coverage until the policy can be issued or delivered.

Broker - A licensed individual or organization who transacts insurance on your behalf.

Claim - Notice to an insurance company that a loss has occurred that may be covered under the terms and conditions of the policy.

Declarations - Usually the first page of an insurance policy that contains the full legal name of your insurance company, your name and address, the policy number, effective and expiration dates, premium payable, the limits of insurance, covered property, deductibles, and any applicable lien holder information.

Deductible - The amount of loss that the policyholder is responsible to pay up-front before covered benefits from the insurance company are payable.

Depreciation - A decrease in value due to age, wear and tear, or obsolescence.

Endorsement - A written agreement that changes the terms of an insurance policy by adding or subtracting coverage.

Exclusion - A contractual provision in an insurance policy that denies or restricts coverage for certain perils, persons, property, or locations.

Insured - The policyholder who is entitled to covered benefits in case of an accident or loss.

Insurer - The insurance company that issues the insurance policy, and agrees to pay for losses and provide covered benefits.

Premium - The price of insurance paid to the insurance company for a policy.

Quote - An estimate of the cost of insurance based on information supplied to the agent, broker or insurance company.

Replacement Cost - The amount that it costs to replace lost or damaged property with new property of like kind and quality in the local market.

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SECTION I - PROPERTY COVERAGES

Coverage A applies to homeowners and condo owners policies.

Coverage B applies to homeowners policies.

Coverage A Dwelling provides coverage for your home (while used as a private residence) and any structures attached to it.

Note: The basic condo owners policy (HO-6) provides $5,000 for Building Additions and Alterations Coverage under this part of the policy at no additional premium charge. This coverage applies to that part of the building which is the responsibility of the unit-owner. If necessary, the amount of coverage can be increased for an additional premium.

Coverage B Other Structures automatically provides coverage for structures located on your premises but not attached to your home (detached garage, storage shed, etc.).

The remaining coverages apply to homeowners, condo owners and renters policies.

Coverage C Personal Property provides coverage for the property you own or use anywhere in the world (furniture, clothing, etc.).

Special Limits apply to Personal Property as listed below.

  1. $200 for money, bank notes, bullion, gold other than goldware, silver other than silverware, platinum, coins and medals.
  2. $1000 for securities, accounts, deeds, evidences of debt, letters of credit, notes other than bank notes, manuscripts, personal records, passports, tickets and stamps.
  3. $1000 for watercraft, including their trailers, furnishings, equipment and outboard motors.
  4. $1000 for trailers not used with watercraft.
  5. $1000 for loss by theft of jewelry, watches, furs, precious and semi-precious stones.
  6. $2000 for loss by theft of firearms.
  7. $2500 for loss by theft of silverware, silver-plated ware, gold ware, gold-plated ware and pewterware.
  8. $2500 for property, other than computer equipment, on the residence premises, used at any time or in any manner for any business purpose.
  9. $250 for property, other than computer equipment, away from the residence premises, used at any time or in any manner for any business purpose.
  10. $1000 for loss to certain electronic apparatus, other than computer equipment, covered by the policy.
  11. $4000 for loss to computer equipment.

If you feel that you need extra protection for one or more of these items, please refer to the description of HO-65 in the Endorsement section of this Guide.

The classes of property listed above may not account for all of your valuables. We will review your particular insurance needs if you have items such as fine arts, antiques and/or collections.

Coverage D Loss of Use provides coverage for additional expenses you would incur if your home was uninhabitable as a result of a covered loss.

SECTION I - PROPERTY COVERAGES

Now that we have discussed the different types of policies, let's see how the actual amount of coverage is determined.

Homeowners (HO-2 and HO-3)
Coverage A Dwelling - In order for your home to be protected completely, you should buy insurance which equals the full rebuilding cost of your home rather than the selling price.

Coverage B Other Structures - 10% of Coverage A

Coverage C Personal Property - 50% of Coverage A (can be increased to a greater amount if needed, or decreased to an amount not less than 40% of Coverage A)

Coverage D Loss of Use - 20% of Coverage A (can be increased if necessary)

Example: Your home is insured for $100,000

Coverage A Dwelling = $100,000

Coverage B Other Structures = $10,000

Coverage C Personal Property = $50,000

Coverage D Loss of Use = $20,000

DON'T BE UNDERINSURED
If you don't maintain enough insurance coverage and your dwelling is damaged, your loss may not be covered in full.

Obviously, if the full cost of rebuilding your dwelling is $100,000 but you buy only a $60,000 policy, and your dwelling is completely destroyed, you will receive only $60,000 in insurance coverage.

But there is another impact of buying too little insurance. If you don't have the proper coverage and part of your dwelling is damaged (for instance, a windstorm destroys your roof), you may not receive full insurance reimbursement for repairing that part of your home. You may receive only partial reimbursement.

This is true even though the cost of repairing that part of your home would be much less than the face value of your policy.

So, if the full cost of rebuilding your dwelling is $100,000 but you buy only a $60,000 policy and the cost of replacing your roof is $2,000, you would receive less than $2,000 insurance reimbursement. The actual amount would depend upon how underinsured you are, or upon the wear-and-tear depreciation of that portion of your dwelling before the loss occurred.

To receive full reimbursement for your losses under Coverage A Dwelling, you should buy coverage for 100% of the replacement cost of your dwelling. The replacement cost is the amount needed to rebuild the structure, not necessarily the market value. If your insurance coverage is less than 80% of the dwelling's replacement cost at the time of the loss, you will be considered underinsured and may receive only partial coverage.

How do you determine if you have enough dwelling coverage? We can assist you in estimating the approximate reconstruction cost of your home through the use of a program developed by the leading provider of building cost information. Customers are receiving surveys, which provide details about the various components of their homes, to fill out and return. New policyholders receive these forms after their initial home inspections take place; renewing policyholders get them before receiving their renewal questionnaires. Customers are reminded - it is required to insure homes to their proper value.
Renters and Condo Owners (HO-4 and HO-6)

Coverage C Personal Property - As a service, you will be provided with our Personal Protection Guide and Questionnaire. By completing the easy steps outlined in the Guide, you can determine the estimated replacement cost of your property which will approximate the amount of coverage you need. (Condo owners also can use the Guide to help approximate the amount of real building property you own.)

As a form of supplemental homeowner's insurance, HO-6, also known as a Condominium Coverage, is designed especially for the owners of condos. It includes coverage for the part of the building owned by the insured and for the property housed therein of the insured. Designed to span the gap between what the homeowner's association might cover in a blanket policy written for an entire neighborhood and those items of importance to the insured, typically the HO-6 covers liability for residents and guests of the insured in addition to personal property. The liability coverage, depending on the underwriter, premium paid, and other factors of the policy, can cover incidents up to 150' from the insured property, all valuables within the home from theft, fire or water damage or other forms of loss. It is important to read the Associations By-laws to determine the total amount of insurance needed on your dwelling.

Coverage D Loss of Use - 20% of Coverage C for Form HO-4, 40% of Coverage C for Form HO-6. This amount can be increased if necessary.

Coverage C Personal Property = $30,000
Example: For an HO-4 Policy, Coverage D Loss of Use = $6,000
For an HO-6 Policy, Coverage D Loss of Use = $12,000

Homeowners Insurance

An informational Consumer guide on Home Insurance.

SECTION II - LIABILITY COVERAGES

Applies to home owners, condo owners and renters policies.

Coverage E Personal Liability provides coverage for Bodily Injury or Property Damage for which you are legally liable.

Coverage F Medical Payments to Others provides coverage for medical expenses incurred by others.

Neither Coverage E nor F applies to you or any regular members of your household.

All policies automatically provide a Coverage E Personal Liability limit of $100,000 and a Coverage F Medical Payments to Others limit of $1,000. Higher limits are available for a reasonable charge. You may wish to consider choosing a Personal Liability limit consistent with your other insurance at a level not less than $300,000.

FACTORS AFFECTING THE COST OF YOUR POLICY
Some of the factors considered when determining the cost of your insurance are:
  • The quality of local fire protection - Municipalities have different capabilities in combating fire. Many factors such as volunteer vs. full-time firefighters and the availability of approved fire hydrants and equipment make up the protection classification assigned to your area.

  • Type of construction - Masonry or noncombustible materials decrease the possibility of severe damage or total destruction in the event of a fire. A home with at least two thirds of its exterior wall area constructed of these materials may benefit from a lower premium.

  • Where you live - The average cost of a Homeowners policy is affected by the different loss experience of the cities and counties throughout the state.

  • Coverages, limits and deductible - The more coverage, the higher the limits, and the lower the deductible, the more your insurance will cost.
DEDUCTIBLES
Every Homeowners policy has a deductible that applies to Section I Property Coverages. A deductible is the dollar amount for which you are responsible in the event of a covered loss. You will have a PREMIUM SAVING by selecting the highest deductible you could afford if a loss occurs.

The Homeowners deductible routinely quoted is $500, but we offer other choices. The higher the deductible, the lower your premium. We require a minimum deductible of $1,500 in certain circumstances where the exposure to wind damage is high or for homes located in coastal regions.

Special hurricane deductibles also may be imposed on certain risks located at the New Jersey shore. These special deductibles apply only to New Jersey Re-Insurance Company policies.

The primary purpose of Homeowners coverage is to protect you against a catastrophe, not for reimbursement of smaller losses which you could handle yourself. Consider the likelihood of having a claim versus the premium saving provided by a larger deductible.


Potential sources of risk that may give rise to claims are known as perils. Examples of perils might be fire, theft, earthquake, hurricane and many other potential risks. An insurance policy will set out in details which perils are covered by the policy and which are not.

Insurance policies can be complex and some policyholders may not understand all the fees included in a policy. As a result, people could buy policies at unfavorable terms. In response to these issues, governments often make detailed regulations that set down minimum standards for policies and govern how they may be advertised and sold.

Location is one of the variables used to set rates. Insurers are also starting to use credit "scores", occupation, marital status, and education level to set rates. Many consider these practices to be "unfair" and even racist. An interesting refutation to this is that the job of an insurance underwriter is to properly categorize a given risk as to the likelihood that the loss will occur. Any factor that causes a greater likelihood of loss should in theory, be charged a higher rate. This is a basic principle of insurance and must be followed for insurance companies or groups to operate properly, even for non-profit groups. Thus, discrimination of potential insured by legitimate factors is central to insurance. Therefore the only thing that can be considered legitimately "unfair" are practices that discriminate against a given group without actual factors that show that the group is a higher risk.

PERILS INSURED AGAINST
Coverages A, B and C (Dwelling, Other Structures and Personal Property) are insured against various causes of loss. These causes of loss are called perils. Different policy forms insure against different perils. The following perils are covered by all of our policy forms - HO-2 and HO-3 for homes, HO-4 for renters and HO-6 for condominium units:
  • Fire or lightning;
  • Windstorm or hail;
  • Explosion;
  • Riot or civil commotion;
  • Damage by aircraft;
  • Smoke from fireplaces; other smoke unless it is from agricultural smudging or industrial operations;
  • Vandalism or malicious mischief to contents if the dwelling is occupied;
  • Theft to contents;
  • Damage by falling objects;
  • Damage by weight of ice, snow or sleet to a building or to property inside the building;
  • Accidental discharge or overflow of water or steam from within a plumbing, heating, air conditioning or automatic fire protective sprinkler system or from within a household appliance;
  • Sudden and accidental tearing apart, cracking, burning or bulging of a steam or hot water heating system, an air conditioning or automatic fire protective sprinkler system, or an appliance for heating water;
  • Freezing of a plumbing, heating, air conditioning or automatic fire protective sprinkler system or of a household appliance;
  • Sudden and accidental damage from an artificially generated electrical current, excluding loss to tubes, transistors or similar electronic components;
  • Damage by glass or safety glazing material which is part of a building, storm door or storm window;
  • Volcanic eruption, other than loss caused by earthquake, land shock waves or tremors.

Additionally, the HO-2 and HO-3 forms for homes and the HO-4 form for renters will cover damage by a vehicle to the dwelling or to personal property. For HO-2 and HO-3 forms only, there is coverage for damage to fences, driveways or walks caused by a vehicle driven by a nonresident. The HO-6 form provides all of this same protection for condo owners, but it is limited to the property which is the condo unit owner's responsibility under a corporation or association of property owners agreement.

For structure damage, the HO-3 policy provides special, broader coverage than the HO-2. Instead of naming specific perils that are covered, the HO-3 covers damage to the dwelling and other structures unless the cause is specifically excluded. The exclusions - such perils as earthquake, flood, neglect, wear and tear, deterioration and others - are listed in the policy.

Here are examples of losses that would be covered only by the HO-3:

  • Vandalism or malicious mischief even if the dwelling has been vacant for more than 30 consecutive days.
  • Damage to fences, driveways or walks by a vehicle even when it was driven by a resident.
  • Accidental damage to floors, ceilings and walls.
  • Scorching of countertops, such as inadvertently placing a hot pan on a kitchen counter.
  • Water damage to walls and ceilings caused by alternate freezing and thawing of snow and ice on roofs.

The HO-3 policy costs more than the HO-2, usually an average of approximately 5%, and is subject to Company approval, but home owners should consider the value of this insurance protection.

WORKERS' COMPENSATION COVERAGE
Workers' Compensation laws provide a no-fault remedy to employees injured in the course of their employment. Eligibility of specific categories of worker for Workers' Compensation benefits depends upon the specific laws of the state in which the employment occurs.

The Workers' Compensation Law applies generally to regular residential employment. Homeowners policies in some states are automatically endorsed to provide Workers' Compensation coverage for residence employees for a nominal premium.

Some State laws do not mandate Workers' Compensation coverage for residence employees, and Homeowners policies in some states do not provide any Workers' Compensation coverage.

Except for the limited coverage provided for residence employees under certain policies, Workers' Compensation claims are not covered. If you employ anyone other than an occasional residence employee, it may be necessary for you to purchase additional insurance to cover your Workers' Compensation risk. We suggest that you contact a Customer Service Representative to discuss your possible needs in this regard.

The Personal Liability and Medical Payments to Others coverages afforded by a Homeowners policy apply to Bodily Injury claims of residence employees other than those made through the Workers' Compensation system.

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