A standard homeowners insurance policy includes four essential types of coverage. They include:
- Coverage for the structure of your home.
- Coverage for your personal belongings.
- Liability protection.
- Additional living expenses in the event you are temporarily unable to live in your home because of a fire or other insured disaster.
1. The structure of your house
This part of your policy pays to repair or rebuild your home if it is damaged or destroyed by fire, hurricane, hail, lightning or other disaster listed in your policy. It will not pay for damage caused by a flood, earthquake or routine wear and tear. When purchasing coverage for the structure of your home, it is important to buy enough to rebuild your home.
Most standard policies also cover structures that are detached from your home such as a garage, tool shed or gazebo. Generally, these structures are covered for about 10% of the amount of insurance you have on the structure of your home. If you need more coverage, talk to your insurance agent about purchasing more insurance.
2. Your personal belongings
Your furniture, clothes, sports equipment and other personal items are covered if they are stolen or destroyed by fire, hurricane or other insured disaster. Most companies provide coverage for 50% to 70% of the amount of insurance you have on the structure of your home. So if you have $100,000 worth of insurance on the structure of your home, you would have between $50,000 to $70,000 worth of coverage for your belongings. The best way to determine if this is enough coverage is to conduct a home inventory.
This part of your policy includes off-premises coverage. This means that your belongings are covered anywhere in the world, unless you have decided against off-premises coverage. Some companies limit the amount to 10% of the amount of insurance you have for your possessions. You have up to $500 of coverage for unauthorized use of your credit cards.
Expensive items like jewelry, furs and silverware are covered, but there are usually dollar limits if they are stolen. Generally, you are covered for between $1,000 to $2,000 for all of your jewelry and furs. To insure these items to their full value, purchase a special personal property endorsement or floater and insure the item for it’s appraised value. Coverage includes “accidental disappearance,” meaning coverage if you simply lose that item. And there is no deductible.
Trees, plants and shrubs are also covered under standard homeowners insurance. Generally you are covered for 5% of the insurance on the houseup to about $500 per item. Perils covered are theft, fire, lightning, explosion, vandalism, riot and even falling aircraft. They are not covered for damage by wind or disease.
3. Liability protection
Liability covers you against lawsuits for bodily injury or property damage that you or family members cause to other people. It also pays for damage caused by your pets. So, if your son, daughter or dog accidentally ruins your neighbor’s expensive rug, you are covered. However, if they destroy your rug, you are not covered.
The liability portion of your policy pays for both the cost of defending you in court and any court awardsup to the limit of your policy. You are also covered not just in your home, but anywhere in the world.
Liability limits generally start at about $100,000. However, experts recommend that you purchase at least $300,000 worth of protection. Some people feel more comfortable with even more coverage. You can purchase an umbrella or excess liability policy which provides broader coverage, including claims against you for libel and slander, as well as higher liability limits. Generally, umbrella policies cost between $200 to $350 for $1 million of additional liability protection.
Your policy also provides no-fault medical coverage. In the event a friend or neighbor is injured in your home, he or she can simply submit medical bills to your insurance company. This way, expenses are paid without a liability claim being filed against you. You can generally get $1,000 to $5,000 worth of this coverage. It does not, however, pay the medical bills for your family or your pet.
4. Additional living expenses
This pays the additional costs of living away from home if you cannot live there due to damage from a fire, storm or other insured disaster. It covers hotel bills, restaurant meals and other expenses, over and above your customary living expenses, incurred while your home is being rebuilt.
Keep in mind that the ALE coverage in your homeowners policy has limits, usually a percentage of the amount of coverage you have on your home, and some policies include a time limitation. But the amount of ALE coverage is separate from the amount available to rebuild or repair your home. For example, suppose you have a policy that provides up to $150,000 in rebuilding costs and up to $15,000 (10 percent) for ALE and you use up the entire $15,000, your insurance company will still pay what it costs to rebuild your home up to the policy limit of $150,000.
Coverage for additional living expenses differs from company to company. Many policies provide coverage for about 20 percent of the insurance on your house. You can increase this coverage, however, for an additional premium. Some companies sell a policy that provides an unlimited amount of loss-of-use coverage, but for a limited amount of time.
If you rent out part of your house, ALE coverage also reimburses you for the rent that you would have collected from your tenant if your home had not been destroyed. Courtesy of iii.org
Great strides have been made in constructing fire-resistant buildings and improving fire-suppression techniques, both of which have reduced the incidence of fire. However, in terms of property losses, these advances have been somewhat offset by increases in the number of and value of buildings. In 2014, on average, a fire department responded to a fire every 24 seconds in the United States, according to the National Fire Protection Association. A structure fire occurs every 64 seconds; a residential structure fire occurs every 86 seconds and an outside property fire occurs every 52 seconds.
There are about a half million fires in structures each year, according to the National Fire Protection Association (NFPA). In 2013, 79 percent of structure fires were in residential properties and 21 percent were in non-residential structures, including storage facilities, stores and offices, and industrial properties, and public assembly. Public assembly fires include fires in eating and drinking places and other entertainment venues, houses of worship and other places where people congregate. There are approximately 7,600 structure fires in eating and drinking establishments each year, according to a NFPA report based on data between 2006 and 2010.
According to the NFPA, fires in nightclubs are among the most deadly public occupancy fires, because they contain a large number of people in one main space. In January, 2013 a deadly nightclub fire in Brazil claimed over 230 lives, making it one of the most deadly nightclub fires on record. The deadliest nightclub fire in world history was the 1903 Iroquois Theater fire in Chicago, Illinois in which 602 people were killed, followed by a 1942 Cocoanut Grove fire in Boston, Massachusetts which claimed 492 lives and a fire at the Conway’s Theater in Brooklyn, New York in 1876 which killed 285 people. The 2003 Station Fire in Rhode Island claimed 100 lives, and ranks as number eight. The complete top ten ranking is posted at NFPA: Nightclub Fires.
HOLIDAY FIRE LOSSES
On Independence Day in a typical year, far more U.S. fires are reported than on any other day, and fireworks account for two out of five of those fires, according to the National Fire Protection Association (NFPA). Fireworks caused an estimated 17,800 reported fires, including 1,200 total structure fires, 400 vehicle fires, and 16,300 outside and other fires in 2011, according to a fireworks fact sheet from the NFPA. Key stats include:
- Fireworks fires resulted in an estimated eight reported civilian deaths, 40 civilian injuries and $32 million in direct property damage.
- In 2013, U.S. hospital emergency rooms treated an estimated 11,400 people for fireworks related injuries; 55 percent of those injuries were to the extremities and 38 percent were to the head.
- The risk of fireworks injury is highest for young people ages 0-4, followed by children 10-14.
- The National Fire Protection Association (NFPA) says Thanksgiving Day is the leading day for home cooking fires, with three times as many occurring on Thanksgiving as any other day of the year. In 2011, there were 1,210 fires on Thanksgiving, a 183 percent increase over the daily average.
- U.S. fire departments responded to an estimated annual average of 230 home structure fires that began with Christmas trees from 2007 to 2011, according to a fact sheet from the National Fire Protection Association (NFPA).
- Home Christmas tree fires caused an average of six civilian deaths, 22 civilian injuries and $18.3 million in direct property damage annually from 2007 to 2011.
- Electrical failures or malfunctions were involved in about one-third (32 percent) of the home Christmas tree structure fires. One in six (17 percent) occurred because some type of heat source was too close to the tree. Decorative lights were involved in 12 percent of these incidents. Seven percent of home Christmas tree fires were started by candles.
- The top three days for home candle fires were Christmas, New Years Day and Christmas Eve, according to another NFPA fact sheet.
- During the five-year-period of 2007-2011, the NFPA estimates that decorations were the item first ignited in an estimated average of 920 reported home structure fires per year. These fires caused an estimated average of six civilian deaths, 47 civilian injuries and $12.9 million in direct property damage per year, according to an NFPA fact sheet.
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Courtesy of http://www.entrepreneur.com/article/236953