California Insurance > California Homeowners Insurance|
The premiums charged for homeowners and renters insurance vary widely from company to company, so it pays to take the time and effort to shop around in order to get the best value for your insurance dollar.
The cost of homeowners and renters insurance depends on a number of factors such as location, local fire protection, age and construction of building, choice of deductibles, application of discounts and the scope and amount of insurance coverage you purchase. Under California law, each insurance company calculates its own rates, subject to California Department of Insurance (CDI) approval. Since each company's loss experience differs, the rates will differ as well.
It is wise when shopping to review and compare all quotations to determine if the coverage, deductibles, and limits are similar to each other. Make a list of what is important to you and be sure to discuss it with the agent. To help find competitive rates the CDI is please to offer online premium comparisons that cover over 90% of California's homeowners' and renters' insurance market. You can receive these comparisons here or by calling the CDI Hotline at 1-800-927-HELP (4657).
Insurance companies compete for your business on the basis of price, quality and service and use various marketing methods such as telephone, mail, television advertising, Internet Web sites, agents or sales offices, to make you aware of their products. Many insurers use independent agents to sell their products. An independent agent may represent one or more licensed insurance companies, and when you deal with an independent agent, you are, in effect, dealing directly with the company. The agent is paid a commission by the insurer for the services he or she provides. Other insurance companies are direct writers that use only their own employees or sales representatives and Internet Web sites. You may deal with a direct writer by telephone, the Internet, mail, or a visit to their sales office.
Many companies have their own methods of premium installment or payment plans, so ask for the details regarding premium installments or payments available through the company you consider for coverage.
An insurance broker is an independent go-between who searches the marketplace for an appropriate policy in the interest of clients and is not an insurance company employee. The broker represents you, the customer.
A broker-agent acting in a broker capacity can charge you a broker fee for the services you receive. In order to charge a broker fee, a broker must meet the following requirements:
Your producer must provide you with a copy of the current Department of Insurance pamphlet "Residential Insurance" when placing residential insurance coverage.
Sometimes companies offer discounts for burglar alarms and fire protection devices such as smoke detectors, alarms, and sprinklers. Ask about the discounts available through the companies you are considering.
The homeowners policy contains two sections. Section I provides property coverages (A, B, C and D) while Section II provides liability coverages (E and F). A brief description of the individual coverages follows:
Coverage A - Dwelling
Coverage A provides major property coverage that protects your house and attached structures if it is damaged by a covered peril.
Coverage B - Other Structures
This coverage provides protections to other structures on the residence premises that are not attached to the dwelling. Items covered include detached garages, tool sheds, etc. Coverage B is normally limited to 10% of the coverage A limit. However, you may purchase more coverage for an additional premium.
Coverage C - Personal Property
This coverage provides protection for the contents of your home and other personal belongings owned by you and other family members who live with you. Coverage C is normally 50% of coverage A or is subject to an established amount agreed upon by you and the insurance company.
Coverage is limited on certain types of property that are especially susceptible to loss, such as:
Additional amounts of insurance may be purchased. You may want to consider scheduling these items separately. Ask your agent for specifics.
Coverage D - Loss of Use
This coverage will help with additional living expenses if your home is damaged by a peril insured against to the extent that you cannot live in your home. These expenses include, but are not limited to, housing, meals and warehouse storage. Coverage D is normally limited to 20 percent of Coverage A.
Coverage E - Personal Liability
This section of the homeowners policy will provide coverage in the event you or a resident of your household are legally responsible for injury to others. Coverage E normally providess a defense and will pay damages, as the insurance company deems appropriate. There are some exceptions. The liability coverage will not protect you in all situations, such as an intentional act. All of the exclusions and specific language can be found in your policy.
Coverage F - Medical Payments to Others
This coverage pays for reasonable medical expenses for persons accidentally injured on your property. For example, if a neighbor's child is injured while playing in your home, the medical payments portion of your homeowner's policy may pay for necessary medical expenses. medical payments coverage does not apply to your injuries or injuries of thos who reside in your household. It is not a substitute for health insurance. Business activities are also excluded. All of the exclusions and specific language can be found in your policy.
Perils Generally Covered by a Homeowners Policy if Damage is caused by:
Perils Generally not covered by a Homeowners Policy if Damage is caused by:
Important: Read exclusions in your insurance contract.
Earthquake, flood, mold, earth movement, and "wear and tear" are some of the perils that are usually excluded. When an insurer writes your homeowners coverage, the insurer is legally obligated to offer you earthquake coverage for an additional premium. The earthquake coverage may be written directly by the homeowner's insurer, by a separate insurer, or through the California Earthquake Authority (CEA).
You may elect to buy specialized homeowners coverage that provides additional protection for your dwelling and contents beyond the standard coverage limitations in most homeowner's policies. Ask your insurance agent or broker about available endorsements to extend coverage. Endorsements to coverage such as building code upgrade can greatly add to your protection in a loss.
News reports of apartment fires often include tragic stories of renters who have lost everything because they weren't insured. Your landlord does not provide insurance for your personal property. Having all your personal possessions destroyed in a fire or other insurable event, without coverage, is a tragedy that does not have to happen.
To protect your belongings, you should consider purchasing renter's insurance, also known as "tenant's insurance." The renter's policy may be used to provide coverage for your personal contents located in the property that you occupy. Coverage is also provided for loss of use, personal liability protection and medical payments to others.
Coverage generally Provided under a Renter's Policy:
Condominium insurance covers the unit-owner and is similar to renters insurance. Coverage includes interior damage to your unit, personal property and improvements. Loss of use is generally limited to 40 percent of the contents limit. The condominium association generally purchases insurance for the building structure and common areas, such as corridors. Loss Assessement Coverage can be an important policy provision for you. It covers you for certain assessments the condominium association makes. However, you should check if it covers you for earthquake losses and how much it will provide you in the event of an earthquake loss. You should also carefully analyze the type of insurance your association has and how it would affect you in the event of a loss. Most condominium association policies cover the common areas and walls.
The "dwelling" limit should be the amount it would cost to replace your home. This may have nothing to do with the purchase price or the current market value of your home, as homeowners insurance does not generally cover the land value of your insured property. Your insurance policy is not governed by the real estate market, but by the cost of the materials and labor involved in rebuilding your home. Insurance companies have formulas that they use to evaluate the replacement cost of your home. Since the formulas developed are unique for each company, different insurers may suggest or require different limits of coverage for your dwelling limit.
The following information can assist you to determine if the limit set by your company accurately reflects the price it would cost to rebuild your home in the event of a total loss:
If you believe that your dwelling limit is undervalued or overvalued, and you have submitted documentation in writing to your agent, broker, or insurer to raise or lower the limits and your request is refused, then contact the CDI for assistance by using the information in the "Talk to Us" section below.
The "contents" limit is generally around 50% of the dwelling amount; however, this is a guideline only, as the most competent source on the replacement value of your personal possessions is you. Be sure to take into account all of your personal property when calculating the contents limits. Read and understand the limited coverage amounts for specific types of personal property such as:
The limited coverage amounts for specific types of personal property are not separate limits in addition to the contents limit. These limits are included in the overall contents limit and represent the maximum paid out for that specific type of personal property. Therefore, it is very important to add an endorsement (sometimes referred to as a "rider" or a "floater") to coverage which specifically schedules and takes into account the value of personal property that you may own above the special limits. Contact your agent or broker to discuss how to adequately cover any personal property that is valuable, falls above the limits, or is in any way out of the ordinary. Also, make sure to take into account commonplace household items when calculating your contents limit. Often, people concern themselves only with big ticket items purchased for use in their homes and neglect to account for all the many things you need to run your household and enjoy your home such as small appliances, kitchen utensils, linens, window coverings, and sundries. Remember, personal property also includes clothing, shoes, accessories, and personal items.
Two major problems suffered by homeowners on their Residential Property/Homeowners insurance policies in the Northern and Southern California fires were:
(a) Many of the dwellings were under-insured, i.e., insured for amounts inadequate for rebuilding. Insurers sometimes refer to this as inadequate insurance-to-value.
(b) The problem of increased cost of construction was evident in many situations. When rebuilding, homeowners have to comply with new building code requirements. In some instances the difference between the dwelling limit and the code upgrades was a significant amount. Also, the extreme heat of some fires (and some new building code requirements) necessitated building new foundations along with appropriate debris removal. This is a situation that can be easily overlooked when determining building limits.
An important part to owning any property is protecting the property to the best of your ability. Homeowners insurance is a vital component to the protection of your property. By knowing and understanding the coverage and limits of your policy, and by making sure that values are current, your greatly add to you and your family's peace of mind in any loss situation.
This depends on whether your policy is a replacement cost value policy or an actual cash value policy. If your policy is an actual cash value policy, it will not.
Actual cash value recovery is determined as follows:
(1) In case of total loss to the structure, the policy limit or the fair market value of the structure, whichever is less, or (2) in case of a partial loss to the structure, the amount it would cost the insured to repair, rebuild, or replace less fair and reasonable deduction for physical depreciation, or the policy limit, whichever is less.
If you have a replacement cost policy, the chances that you will be able to completely rebuild your home are better;however, there are many types of replacement cost policies, so you need to be careful to purchase a replacement cost policy that best meets your needs. A policy cannot be sold as a "guaranteed replacement cost" policy unless it will pay to completely rebuild the home. Other types of replacement cost policies will pay your policy limits, plus a certain percentage above those limits. Some policies do not have building code upgrade (ordinance or law) coverage. Cities and counties periodically change their building codes. Unless your policy has this coverage, your insurance company may not pay for changes you may need to make to the structure of your home to bring it up to current building codes. As discussed earlier, your agent , broker, or insurer can assist you in establishing a limit that is adequate to rebuild your home. It is important to update that limit periodically to maintain a limit that reflects current construction costs. You may want to ask your agent, broker, or insurer if they automatically review or increase limits on a regular basis or if they offer an automatic inflation guard option that increases limits according to current inflation information.
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In short, there is no substitute for reading your policy and your renewal declarations carefully. Whenever you are unclear about your policy, you need to contact your agent, broker, or company for clarification in writing. Discovering after a loss that you did not have the right coverage is not a situation you want to experience.
For more detailed information on residential claims, please see the CDI's Residential Property Claims Guide. This brochure helps you navigate the claims process and discusses hot topics such as water damage, mold, and replacement cost.
Remember, if you only shop by comparing prices only and not by comparing coverage, you are doing yourself a disservice. Your home is one of the most important purchases you will make. Take the time to get the facts straight before you purchase homeowners insurance. It may be one of the best decisions you make for yourself and your family.
If you are unable to find an insurance company that will sell you a homeowners or renters policy because you do not meet their eligibility requirements, or if you cannot find certain coverage, such as fire or flood insurance, you can turn to special insurance programs. They include:
The California Fair Access to Insurance Requirements (FAIR) Plan
The FAIR Plan is an association of all property insurers licensed to conduct business in California. It is designed to make property insurance more readily available to people who have difficulty obtaining it from private insurers because their property is considered "high risk."
The FAIR Plan offers a standard fire insurance policy for both the structure and contents. This is a basic property policy that has coverage limitations. No coverage is provided for liability or coverage for other perils such as burglary. Read the policy carefully for a detailed description of coverages. A "wrap around" policy or other supplemental coverage offered by private insurers should also be considered when purchasing a FAIR Plan policy. Be sure to discuss these coverages with your agent or broker.
Detailed information is available from the California FAIR Plan.
You may contact:
National Flood Insurance Program (NFIP)
Insurance coverage for losses resulting from floods is for the most part not provided in a homeowners or renters policy. In 1968, Congress created the National Flood Insurance Program (NFIP) in response to the rising cost of taxpayer funded disaster relief for flood victims and the increasing amount of damage caused by floods.
This program allows homeowners and renters to purchase insurance which will protect their residences and contents against direct physical loss by flood, loss resulting from flood-related erosion and damage caused by mudslide. The National Flood Insurance Program (NFIP), administered by FEMA, makes federally backed flood insurance available in communities that adopt and enforce floodplain management ordinances to reduce future flood losses.
The maximum coverage amounts for a single-family home are $250,000 for the structure and $100,000 for its contents. Renters may also purchase up to $100,000 of coverage for their personal belongings.
For information about flood insurance, property owners or renters should contact their insurance agent or call the NFIP's toll-free information line at 1-800-427-4661.
Cancellations and nonrenewals
After a residential policy has been in effect for sixty days it can be cancelled for limited reasons which include; nonpayment of premium, fraud, material misrepresentation, or physical changes in the insured property that increase any hazard insured against.
The company must mail or deliver a notice of cancellation to you at your last known address based on the number of days stated on the policy. The reason for cancellation must be disclosed on the notice. The insurance company must mail or deliver a notice of cancellation at least 20 days prior to the effective date of cancellation, and 10 days for nonpayment of premium or for fraud. However, it is important to know that companies may sometimes provide more generous cancellation notification in their policies. If the policy provides for a cancellation notice period of longer than 20 days, the policy language will apply.
A written notice of nonrenewal must be forwarded to you at least 45 days before the expiration date. If the company fails to give you the proper notice as required by law, your existing policy, with no change in its terms and conditions, will remain in effect for 45 days from the date the notice is sent.
The insurer has sixty days from the policy's effective date in which to verify the rating and underwriting of a new policy. Within these sixty days, a company must notify you of any error and change in premiums. After sixty days, no notice of change of premium shall be effective.
If the premium revision results from an error made by the company or its agents, or from incomplete information provided by you, the insurance company is required to notify you of the error within sixty days and the higher premium shall be charged from the effective date of coverage. If you do not accept the increase in premium, you may ask the company to cancel the policy. The earned premium must be calculated on a pro rata basis on the original quotation.
If the premium revision results from an error made by the company or its agents and you are not notified of the error within sixty days, the policy shall remain in force as written at the original premium. After the sixty day period has expired, the insurance company may flat cancel the contract for misinformation and/or misstatement or other matters sufficiently serious to justify a flat cancellation.
In general, whenever the policyholder initiates a cancellation, the premium is calculated on a short rate basis whereby the company retains part of the unearned premium to cover administrative expenses. However, some companies may calculate the premium on a pro rata basis. you will need to review your policy contract to find out the cancellation provisions of the company.
In addition, if you have acquired the services of a broker and signed an agreement, the broker may be entitled to retain the broker fee. You may be entitled to a full refund of the broker fee if the broker acted incompetently or dishonestly. Unresolved disputes over non-refunded broker fees can be forwared to the CDI for review.
Traditionally, home warranties have protected homeowners from repair costs that aren't covered by homeowners insurance. Home warranties cover such things as the plumbing, heating, electrical, and major appliances. Structural items are generally not covered.
Home warranties will usually cover malfunctions of major appliances such as washers, dryers, ovens, and refrigerators. In some cases, or for additional fees, the warranty might extend to air conditioning units, garbage disposals, doorbells, ceiling fans, garage-door openers, water softners, trash compactors, and built-in microwaves.
It is important to note that a home warranty is not an insurance policy. However, for the protection of consumers, these companies are regulated by the CDI and must be licensed by our Department. These warranties, sometimes described as service contracts, typically last one year, and cover the repair or replacement of major home systems and appliances that break down due to normal wear and tear. Home warranties don't overlap or replace the homeowners insurance policy. For example, if your hot water heater burst and destroyed a wall in your home, the warranty would repair the water heater and your insurance company would pay to fix the wall and any floor damage.
The age of your home usually doesn't matter, as far as warranty coverage is concerned. You obtain a home warranty, as long as the covered items are in good working order at the start of the contract. Generally, home warranties cost about $350 to $400 a year, plus $35 to $50 per service call. If your home is in good condition, the expense might not be necessary. On the other hand, when you do need to pay for repairs in an aging home, the costs can mount quickly.
The 2003 Southern California firestorms resulted in new legislation providing additional protections to homeowners. They include:
Actual Cash Value (ACV) -The measure of the actual cash value recovery shall be determined as follows: (1) in case of total loss to the structure, the policy limit or the fair market of the structure, whichever is less, or (2) in case of a partial loss to the structure, or loss to its contents, the amount it would cost the insured to repair, rebuild, or replace the thing lost or injured less a fair and reasonable deductiion for physical depreciation, as specified, based upon its condition at the time of the injury or the policy limit, whichever is less.
Agent - A licensed individual or organization authorized to sell and service insurance policies for an insurance company.
Ambigous - Terms or words that are unclear or uncertain; being open to more than one interpretation.
Application - A written request for insurance coverage containing statements made by the applicant.
Binder - A short-term agreement that provides temporary insurance coverage until the policy can be issued or delivered.
Broker - A licensed individual or organization who transacts insurance on your behalf.
Broker-Agent - A licensed individual who can act as an agent representing one or more insurance companies and also as a broker dealing with one or more insurance companies representing your interests.
Broker Fee - An amount of money charged by a broker to obtain insurance for an insured. This fee is usually earned and usually not refundable. It must be disclosed to and agreed upon by the insured. This fee is not part of the insurance premium. It is a contractual agreement between the boker and the client.
Commission - That portion of the premium paid to the agent by the insurer as compensation for his/her services.
Declarations - Usually the first page of an insurance policy that contains the full legal name of your insurance company, your name and address, the policy number, effective and expiration dates, premium payable, the limits of insurance, covered property, deductibles, and any applicable lienholder information.
Deductible - The amount of loss that the policyholder is responsible to pay up-front before covered benefits from the insurance company are payable.
Depreciation - A decrease in value due to age, wear and tear, or obsolescence.
Earned Premium - That portion of a policy's premium payment for which the protection of the policy has been provided.
Endorsement - A written agreement that changes the terms of an insurance policy by adding or subtracting coverage.
Exclusion - A contractual provision in an insurance policy that denies or restricts coverage for certain perils, persons, property, or locations.
Flat Cancellation - A policy cancelled as of its effective date. Usually under a flat cancellation no premium charge is made.
Fraud - Dishonest and willful act of obtaining money or value under false pretenses.
Hazard - Circumstances that increase the probability or severity of a potential loss.
Insured - The policyholder who is entitled to covered benefits in case of an accident or loss.
Insurer - The insurance company that issues the insurance policy, and agrees to pay for losses and provide covered benefits.
Material Misrepresentation - A false statement given by an applicant of any important fact that had the insurance company known the truth, it would not have insured the risk.
Nonrenewal - The insurance company's option of not renewing a policy at the end of the policy period.
Premium - The price of insurance paid to the insurance company for a policy.
Producer - A term used by the insurance industry to encompass agents and brokers.
Quote - An estimate of the cost of insurance based on information supplied to the agent, broker or insurance company.
Replacement Cost - The amount that it costs to replace lost or damaged property with new property of like kind and quality in the local market.