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Homeowner's insurance is a package policy that combines more than one type of insurance coverage in a single policy. There are four types of property coverage in the homeowner's policy: dwelling, personal property, appurtenant structures and additional living expenses. Damage caused by most disasters is covered but there are exceptions. The most significant are damage caused by floods, earthquakes and poor maintenance. You must buy a separate policy for flood insurance. Earthquake coverage can be added to your policy by endorsement, for an additional premium. Maintenance-related problems are the homeowners' responsibility.
A homeowner's policy also includes personal liability insurance and medical payments coverage. Personal liability coverage provides coverage for your liability for non-auto accidents on or off your property if the injury or damage is caused by you, a member of your family, or your pet. Medical payments coverage pays for reasonable medical expenses if someone outside your family is injured at your home, regardless of fault.
The cost of homeowner's insurance depends on the type of construction, the location, and the amount of insurance. A brick building, for example, is more fire-resistant than a frame building and sometimes it costs more to insure a frame building. Many insurers also charge less to insure a newer home than an older one because newer homes are less likely to sustain damages in storms and fires.
The building's location affects the cost of coverage because some communities have better fire protection than others. Insurance companies divide the state into rating territories. Each city and locality in Wisconsin is given a fire protection classification ranging from 1 to 10, depending on the amount of fire protection in that area. These rating classes depend on such factors as water pressure, access to fire department, and the training and skills of firefighters. Most of the larger cities in Wisconsin are in classes 1-4, the lowest rating classes. Small towns and rural areas have higher fire protection classes and generally higher prices. The further your home is located from the fire department, the higher the cost of your insurance.
Insurance companies have also identified certain risks which may cause them to deny coverage or may cause a higher premium. These risks include woodburning stoves, trampolines, swimming pools and certain breeds of dogs.
The deductible is the amount you agree to pay out of your pocket for losses before your insurance policy begins to pay. The higher the deductible the lower the premium. A policy with a $500 deductible will cost more than one with a $1,000 deductible. Only you can decide how high a deductible to take, because only you can judge what you can afford to pay for an unexpected loss.
You will want to purchase enough to cover the value of all your financial assets--home, savings, etc., which are vulnerable to a lawsuit. Remember that your insurance company is liable only up to the limits of your policy. You would be personally liable for anything above that. We recommend a minimum limit of $500,000 plus a personal umbrella policy, which is available in $1,000,000 increments.
All insurance policies contain exclusions, but most companies allow you to add coverage for some of the exclusions by adding an endorsement to your policy and paying an additional premium. Some common endorsements are:
Business Personal Property Most homeowner's policies will cover business items up to $2,500 in your home or $500 away from your home, subject to your deductible. If you are operating a business from your home, you definitely need to discuss the matter with your agent.
Identity Theft Identify theft is the fastest growing crime in the U.S. One in 23 adults is likely to become a victim of identity theft. Most insurance companies have partnered with professional identity recovery firms to offer identify recovery services under the homeowners policy. Coverage can be added by endorsement for an additional premium, usually about $25.
Sewer and Water Back-up If the water is coming from seepage through the basement walls this is commonly excluded. Homeowner's insurance has very limited water damage coverage. Water damage caused by flood or water which, backs up through sewers or drains or overflow from a sump pump are excluded. However, for an additional premium you may purchase a limited amount of coverage for sewer backup or overflow of a sump pump. For the peril of flood, you can also purchase a separate flood insurance policy.
Personal Watercraft Theft to watercraft, including furnishings, equipment and outboard motors are typically excluded if the theft occurs away from your residential premises. Also, most policies limit your liability coverage to boats less than 26' in length, boats with engines less than 50 h.p. and sailing vessels. If you own a boat, you should discuss coverage with your agent.
Jewelry, Furs and Guns Most homeowner's insurance policies limit the amount of theft coverage they pay for certain items such as jewelry, furs and guns. You will need to read your policy to determine what the limit is. However, most insurance companies offer an endorsement for an additional premium which allows you to schedule your personal property (list the items individually and their value). You may need to provide the company with an appraisal of the jewelry.
Antiques and Fine Arts Homeowners policies have limitations on how much they will pay for antiques or fine arts. We recommend scheduling your antiques and fine arts (listing them individually and their value). There is an additional premium for scheduled items.
Boats, ATV's, Autos and Motorcycles The homeowners policy excludes coverage for "motor vehicles". Motor vehicle" means: (a) A self-propelled land or amphibious vehicle; or (b) Any trailer or semitrailer which is being carried on, towed by or hitched for towing by a vehicle described in (a) above. You must purchase separate coverage for Boats, ATV's, Campers, Autos, Motorcycles and other self-propelled vehicles.
We strongly recommend that you read your insurance policy, because most policies differ slightly. Consult with your agent if you have any questions.