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Homeowner’s Insurance

Homeowner’s Insurance. Note Information in this presentation is derived from Insurance for Dummies by Jack Hungelmann . I highly recommend this book. Odds of a house burning down: 1 in 1,200 Source: www.ricedelman.com But there is more to home insurance than fire insurance.

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Homeowner’s Insurance

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  1. Homeowner’s Insurance Note Information in this presentation is derived from Insurance for Dummies by Jack Hungelmann. I highly recommend this book.

  2. Odds of a house burning down: 1 in 1,200 Source: www.ricedelman.com But there is more to home insurance than fire insurance

  3. Six Parts of a Homeowner’s Insurance Coverage A: Damage to residence B: Damage to detached structures C: Damage, theft of personal property at home or anywhere D: Living costs (e.g., hotel, meals) E: Non-vehicle personal liability for injuries/property damage at home and anywhere F: Medical payments to guests injured on your property

  4. Coverage A: Insuring Your Home • Bottom Line: Insure for 100 percent of the replacement cost of the property • Long story short, if you do not at least insure for 80%, you may not be fully insured in the event of partial damage (e.g., kitchen fire). • Keep in mind, if you pay, say $300,000 for a house, that cost includes the land. • If your house is appreciating each year, you may need to increase the insurance

  5. Example • Purchase home for $300,000 ($250,000 house, $50,000 land) X years ago • Original Insurance, Coverage A: $250,000 • If the replacement cost on the house is now $500,000, you would not be 100% insured

  6. Coverage B: Insuring Detached Structures (e.g., garages Bottom line Most policies extend 10% of Coverage A

  7. Coverage C: Personal Property Typically, coverage = 50-75% of coverage A Two ways policies value property • Actual cash value (used) • Replacement cost (new) Replacement cost is typically only 10 percent more so it should be a reasonable purchase

  8. Coverage D: Loss of Use Typically, coverage = 50-75% of coverage A Two ways policies value property • Actual cash value (used) • Replacement cost (new) Replacement cost is typically only 10 percent more so it should be a reasonable purchase

  9. Coverage E: Personal Liability Very Important Coverage! Covers liability for injuries and property damage, lawsuits, defending lawsuits, covering most non-vehicle personal liability worldwide

  10. Examples of Claims Coverage E Covers • You hit the catcher with a baseball bat playing baseball • You spill a drink on the neighbor’s living room carpet ruining the carpet

  11. Personal Liability, Coverage E General Rule: Set the personal liability on homeowner’s at the same level you set liability on other policies (e.g., auto) Rationale: nobody knows where a law suit or injury may come from, so buying the same dollar coverage makes sense.

  12. Coverage F: Guests’ Medical Bills For guests who get hurt at your home. Importance: Minimal because most people will have health insurance. If the individual sues, your personal liability insurance will protect you.

  13. Homeowner’s Insurance typically does not cover • Earthquakes, tremors, landslides, sinking or shifting • Water that enters the house at or below ground level (e.g., sewer backup, flood) • War

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