WEDNESDAY, NOVEMBER 30, 2011
by Edward Sneineh, Illinois Homeowners Insurance Agent in Chicago
Before discussing the pros and cons of cheap homeowners insurance it is important to understand the fundamental coverages entailing homeowners insurance coverage. Understanding these coverages and the mechanism of homeowners insurance underwriting process will assist in understanding why some coverages are cheaper than others.
Homeowners insurance policies are insurance policies issued to cover personal residence of the insured persons. Homeowners insurance policies do not cover any residence that is not occupied by the insured person more than 90 days, or property held for investment.
Primary Homeowners Insurance Coverage. The following are basic coverages on all homeowners insurance policies:
1. Dwelling Coverage. This is to cover the structure of the residence such as walls, roofs, attached garages, etc.
2. Other Structures. This coverage aims at insuring detached structures such as sheds, porches, fences, detached car garages, car ports, etc.
3. Personal Property. The coverage applies to certain personal properties owned by the insured such as cameras, watches, TVs, refrigerators, clothes, etc. Certain limits apply to the certain items such as watches, firearms, coins, and other items.
4. Personal Liability. This covers against certain lawsuits brought against the insured because of the negligent acts of the insured or the insured households.
5. Increased Living Expense. When a covered loss occurs and makes residence unfit for human living, this coverage will pay for the increased in living expenses, up to a limit.
6. Medical Payment. This coverage is also known as Guest Insurance. The coverage pays up to a limit for any bodily injury that guest suffer because of causes not attributed to the negligent acts of the insured.
Other riders may be added to enhance homeowner policies. Important riders may include:
Replacement Cost Rider. This rider may apply to dwelling coverage and/ or personal property coverage. When included, the insurance company will pay for claims based on the cost of replacing lost property, rather than the actual cash value of lost property (actual cash value is replacement cost minus the depreciation attributed to the use of the lost property).
Back up of sewer or sump pump rider. This is a valuable rider for residences with finished basements. Without this rider, typical homeowners policies will not cover any water damage resulting from sewer backup because of any reasons including failure of sump pump.
Scheduled Personal Property. This will cover certain items are not usually covered under standard homeowners policy, or items that are covered but at limits that need to be increased to meet homeowners needs.
Homeowners Insurance Underwriting Guidelines
Standard homeowners insurers will run credit check on applicants for homeowners before a firm price is offered. Applicants with better credits get better / lower premium. Also, a CLUE report to examine prior property losses for the residence and prior property losses/ claims made by applicants will determine the price. Certain companies will consider the square footage of the house in determining the minimum coverage that must be purchased. Also, some companies may restrict coverage to certain properties with maximum age.
Homeowners insurance applicants with bad credits, or those with excessive prior claims, or properties located in depressed areas, or properties with age more than specific number may end up being disqualified from certain homeowners plan. In cases like those, cheaper homeowners insurance with companies that may accept applicants meeting the above conditions may be the solution. Applicants are encouraged to check the coverages included with cheap homeowners insurance policies and verify that these coverages are meeting their needs.