Insurance Coverage: Know Your Choices Part 1

This useful article from : http://homeownersinsuranceguide.flash.org/knowyourchoices.htm

What is a Covered Property?

Generally, covered properties are divided into four separate categories. The definitions of the property, and the extent of coverage vary by state, company and product. So it is important for the consumer to understand the definitions of the covered property. The four separate categories for your home, as defined by insurance companies, are:
1. Dwelling – The structure of the house is considered a covered property.
2. Other Structures – These are structures that are separate from the house, or connected to the house by a fence, wire or other form of connection, but not otherwise attached to the dwelling, such as a tool shed or detached garage.
3. Personal Property – The contents of your home are your personal property. This includes furniture, appliances and clothing. Not all personal property is covered. Items more appropriately covered under different forms of insurance may have limited or no coverage for loss. These items include, but are not limited to, money, jewelry and firearms.
4. Loss of Use – When a loss occurs due to a covered peril and the dwelling becomes uninhabitable, the cost of additional living expenses is covered. Reimbursement of additional living expenses covers the cost to the insured for maintaining a normal standard of living.

“Open Perils” and “Named Perils” Coverage
A peril, as referred to in an insurance policy, is a cause of loss, such as fire or theft. Coverage can be provided on an “all perils” basis, or a “named perils” basis. Named Perils policies list exactly what is covered by the policy, while Open Perils (or All Perils) policies will list what is excluded from coverage. Named Perils policies are generally more restrictive. A dwelling policy usually provides coverage for both the dwelling and contents on a named perils basis, while a homeowners policy usually provides coverage for the dwelling on an all perils basis, and for the contents on a named perils basis.

Package Versus Peril-Specific Coverage
A package policy provides coverage for multiple, but usually not all perils. A homeowners policy, for example, is a package policy typically providing coverage for the perils of fire, lightning, and extended coverage. Extended coverage includes coverage for the perils of windstorm, hail, explosion, riot, civil commotion, aircraft, vehicles, smoke, vandalism, malicious mischief, theft, and breakage of glass. Some policies, such as earthquake or flood policies, provide coverage for specific perils that are often excluded in package policies. Fire and sprinkler leakage damage as a result of an earthquake may be covered by a standard homeowners policy. To purchase the most appropriate insurance, it is important for you to consider what additional perils you may face. And, you should always verify what is covered in your specific policy.

Does My Policy Cover That?
1. Earthquakes – Most property insurance policies exclude coverage for losses resulting from earthquakes (although they often cover losses related to fires following earthquakes). Separate policies are typically required to ensure coverage against losses from earthquakes. Some states with risk of loss from earthquakes have government mandated insurance plans that provide earthquake coverage to property owners who are unable to obtain insurance through the voluntary market. (See page 8 for explanation of voluntary and involuntary markets.)
2. Flood – Most property insurance policies exclude coverage for losses resulting from flood. So unless you purchase a flood policy, you do not have coverage for flood losses. (For a more comprehensive discussion of flood insurance, please see Preparing for a Flood, page 25.)
3. Hail – Most property insurance policies provide coverage for losses resulting from hail. Hail is a named peril, meaning for coverage to apply under a “Named Perils” policy, hail must be defined as a covered peril.
4. Hurricanes – Most property insurance policies provide coverage for losses resulting from hurricanes, except for flood loss associated with the hurricane. (See Preparing for a Flood, page 25, for more information.) However, some policies only provide limited coverage for hurricanes, or require that a higher deductible be purchased specifically for the hurricane peril. Most states with risk of loss from hurricanes have government mandated insurance plans that provide hurricane coverage to property owners who are unable to obtain insurance through the voluntary market. (See page 8 for explanation of voluntary and involuntary markets.)
5. Tornadoes – Most property insurance policies provide coverage for losses resulting from tornadoes (although they do not cover losses resulting from the peril of flood; see Preparing for a Flood, page 25, for insurance availability). While tornadoes may not be specifically mentioned as a covered form of loss, tornado losses are one event covered under the broader term windstorm. Windstorm includes tornadoes, straight-line winds and hurricanes. However, there may be instances where coverages and deductibles may apply specifically to hurricane and not to all windstorms.

6. Wildfires – All property insurance policies provide coverage for losses resulting from fires. Depending on the level of exposure, you may need to consider a higher deductible to obtain coverage, or keep it affordable. Most states have coverage available via the FAIR plan, or a JUA, if the voluntary market is not willing to provide coverage.

Next Part