Homeowners and Flood Policies & What Determines Premium
Flood and Your Homeowners Insurance Policy
When you start thinking about insurance, there are a lot of different terms and policy options that can be easily misunderstood. Many consumers don’t realize the full extent of what their policies do and don’t cover, some don’t understand what their deductibles and limits are, and others aren’t sure whether or not special situations are covered in their auto or homeowners policies. All of these sources of confusion are easy to remedy with a call to your insurance agent or a quick read of your policy. But not all insurance misunderstandings are harmless. If you assume some insurable incident is covered by your existing auto or homeowners insurance policy and it actually isn’t, you could be exposing yourself and your family to financial risks that you just can’t carry on your own. One consistent source of this type of dangerous confusion involves flood insurance. Many consumers assume that flood insurance is automatically included in their homeowners policy. Unfortunately, this assumption is so prevalent that many policy holders don’t ask their agent or insurance company if their homeowners insurance policy will cover the damages associated with flood waters—they just assume that it will. This assumption can turn out to be an extremely expensive mistake after a flood actually occurs because assuming that their homeowners insurance policy provides flood coverage prevents them from taking the steps necessary to find out the truth about flood insurance and protect their family and their assets accordingly. Now that we all know that homeowners insurance policies do not cover damage caused by flood waters, let’s figure out what actually constitutes as flood waters. The National Flood Insurance Program defines a flood as: “A flood is a general and temporary condition where two or more acres of normally dry land or two or more properties are inundated by water or mud-flow.” The definition of flood is easy enough to understand, but the reason that many homeowners think it’s included in their homeowners insurance policy is because many of the events that can cause floods cause other damages that ARE covered under a homeowners insurance policy. For instance, a hurricane may cause wind damage to your home that is covered in your policy, but it may also cause normally dry land to be temporarily inundated by water, which could run into your house and damage your floors and furniture—but because those are flood waters, they will only be covered if you have a flood policy. So make sure you have a flood policy in place today. Whether you live in a flood zone or not, its protection that isn’t covered in your homeowners policy but needs to be in place to secure your family.
How is My Home Owner’s Insurance Premium Calculated?
How insurance premiums are determined can vary from insurance company to insurance company, however, most companies will implement the following when deciding what to charge you for your home insurance. Location – Insurance companies will take into consideration the crime rate in your neighborhood, how near your house is to the fire station, and the chance for “act of God”claims. Type of construction – whether your house is made of wood, stucco siding, brick, or stone. When your home was built – new homes usually qualify for reduced cost. Amount of coverage – the amount of coverage you purchase on your home, the contents of the home, and the liability limit will be factors in the price of your policy. Loss assessment – how your policy will pay for your home in the occurrence of a claim, whether it will pay the actual cash value or the amount it costs to replace the contents lost. Deductible – how much of a loss you are willing to pay before your coverage starts. If you have a mortgage on your home, the maximum amount of your deductible will often be set by your lender.
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