HOME AND PROPERTY INSURANCE PROTECT YOU AGAINST THREE KINDS OF ECONOMIC LOSS:

1. DAMAGE TO YOUR HOME OR PROPERTY,
2. ADDITIONAL EXPENSES YOU MUST PAY TO LIVE SOMEPLACE ELSE IF YOUR HOME IS BADLY DAMAGED, AND
3. LIABILITY LOSSES RELATED TO YOUR PROPERTY.

EVERY 16 SECONDS, A FIRE DEPARTMENT RESPONDS TO A FIRE SOMEWHERE IN THE UNITED STATES. FIRES CAUSE OVER $12 BILLION IN DAMAGE EVERY YEAR. MUCH OF THIS DAMAGE IS TO HOMES. THE DOLLAR AMOUNT OF DAMAGE GOES UP ALMOST EVERY YEAR. HOMES AND OTHER EXPENSIVE PROPERTY SHOULD BE INSURED FOR FIRE DAMAGE AS WELL AS DAMAGE CAUSED BY VANDALISM, UNAVOIDABLE ACCIDENTS, AND NATURAL DISASTERS SUCH AS LIGHTNING, EARTHQUAKE, WIND, AND FLOOD. IF YOUR HOME OR PROPERTY IS DAMAGED AND YOU ARE INSURED, THE INSURANCE COMPANY WILL PAY ALL OR A PORTION OF THE COST OF REPAIR OR REPLACEMENT.

IF A FIRE OR OTHER DISASTER STRIKES YOUR HOME, ONE OF THE FIRST SHOCKS YOU WILL EXPERIENCE IS THAT YOU DO NOT HAVE A PLACE TO LIVE. YOU MAY HAVE TO MOVE INTO A HOTEL, MOTEL, OT FURNISHED APARTMENT WHILE YOUR HOME IS BEING REPAIRED. PROPERTY INSURANCE THAT INCLUDES INSURANCE FOR ADDITIONAL LIVING EXPENSES WILL HELP TO PAY FOR THE EXPENSES YOU WOULD INCUR IF SOMETHING HAPPENED TO YOUR HOME.

THE THIRD KIND OF LOSS, LIABILITY LOSS, IS PROTECTED BY PERSONAL LIABILITY COVERAGE. PERSONAL LIABILITY COVERAGE PROTECTS YOU FROM CLAIMS ARISING FROM INJURIES TO OTHER PEOPLE OR DAMAGE TO OTHER PEOPLE’S PROPERTY CAUSED BY YOU, YOUR FAMILY, OR EVEN YOUR PETS. IF A NEIGHBOR SLIPS ON YOUR ICY SIDEWALK AND YOU ARE SHOWN TO BE AT FAULT, PERSONAL LIABILITY COVERAGE WILL PAY FOR ANY MEDICAL AND LEGAL COSTS UP TO A STATED LIMIT. IF A CHILD DAMAGES A CAR IN AN ADJACENT DRIVEWAY WITH A TRICYCLE, CLAIMS WILL BE PAID THROUGH THE PROVISIONS IN THE POLICY OF THE CHILD’S FAMILY THAT COVER LIABILITY FOR PHYSICAL DAMAGE TO THE PROPERTY OF OTHERS.

THESE KINDS OF EVENTS MAY SEEM REMOTE AND RATHER TRIVIAL. BUT COURT AWARDS TO THOSE WHO SUFFER THE DAMAGE OR INJURY OFTEN ARE NEITHER REMOTE NOR TRIVIAL. IN FACT, THESE AWARDS (AND CONSEQUENTLY PREMIUMS) ARE INCREASING SO QUICKLY THAT THE INSURANCE INDUSTRY OFTEN REFERS TO IT AS THE INSURANCE LIABILITY CRISIS. AWARDS TO INJURED PEOPLE FOR MILLIONS OF DOLLARS ARE NOT UNCOMMON. EVERYONE SHOULD HAVE SOME FORM OF LIABILITY PROTECTION FROM ECONOMIC LOSS.

WHEN CONSIDERING THE PURCHASE OF PROPERTY INSURANCE, YOU MUST FIRST DECIDE WHAT SHOULD BE INSURED AND AGAINST WHAT PERILS IT SHOULD BE INSURED. PERILS ARE THE CAUSES OF LOSS, SUCH AS FIRE, WIND, OR THEFT. PROPERTY PERMANENTLY ATTACHED TO LAND, SUCH AS A HOUSE OR GARAGE, IS CALLED REAL PROPERTY. PROPERTY NOT ATTACHED TO THE LAND, SUCH AS FURNITURE OR CLOTHING, IS KNOWN AS PERSONAL PROPERTY. REAL AND PERSONAL PROPERTY MAY BE PROTECTED BY INDIVIDUAL POLICIES OR BY A HOMEOWNERS POLICY. IF YOU ARE A RENTER LIKE SOME, THERE ARE ALSO SPECIAL POLICIES THAT WILL COVER YOUR PROPERTY—INDIVIDUAL, HOMEOWNERS AND RENTERS.

A PROPERTY OWNER CAN BUY SEPARATE POLICIES THAT INSURE AGAINST SPECIFIC PERILS. FOR EXAMPLE, A STANDARD FIRE POLICY INSURES AGAINST LOSSES CAUSED BY FIRE OR LIGHTNING. EXTENDED COVERAGE CAN BE INCLUDED IN A STANDARD FIRE POLICY. EXTENDED COVERAGE BROADENS THE COVERAGE TO INCLUDE DAMAGE CAUSED BY PERILS SUCH AS WIND, HAIL, SMOKE, AND FALLING AIRCRAFT.

POLICIES ALSO MAY BE PURCHASED SEPARATELY FOR DAMAGE CAUSED BY FLOOD IN A FLOOD-PRONE AREA. INSURANCE CAN BE PURCHASED TO PROTECT AGAINST ECONOMIC LOSSES CAUSED BY EARTHQUAKES. NEITHER OF THESE TWO PERILS IS TYPICALLY COVERED IN OTHER POLICIES. THE ADVANTAGE OF PURCHASING SEPARATE POLICIES IS THAT THE COMBINATION OF POLICIES PURCHASED CAN BE FITTED TO INDIVIDUAL NEEDS.

THE MOST COMMON FORM OF HOME AND PROPERTY INSURANCE POLICY SOLD TODAY IS A HOMEOWNERS POLICY. THE HOMEOWNERS POLICY IS A VERY CONVENIENT PACKAGE-TYPE INSURANCE POLICY DESIGNED TO FIT THE NEEDS OF MOST HOMEOWNERS WISHING TO INSURE THEIR HOMES AND PROPERTY. A HOMEOWNERS POLICY ALMOST ALWAYS COMES IN THREE FORMS: BASIC FORM, BROAD FORM, AND SPECIAL FORM. THE NUMBER OF PERILS COVERED BY A HOMEOWNERS POLICY DEPENDS ON WHICH FORM THE INSURED CHOOSES TO PURCHASE.

WITH A HOMEOWNERS POLICY, YOU ARE AS PROTECTED AS YOU WOULD BE IF YOU BOUGHT SEVERAL DIFFERENT POLICIES. YET THE COST OF A HOMEOWNERS POLICY IS USUALLY 20 TO 30 PERCENT LESS THAN IF THE SAME AMOUNT OF COVERAGE WERE OBTAINED BY BUYING SEPARATE POLICIES. IT IS ALSO MORE CONVENIENT TO HAVE ONE POLICY AND ONE PREMIUM RATHER THAN PAYING TWO PREMIUMS FOR SEPARATE INSURANCE POLICIES.

MANY PEOPLE IN OUR SOCIETY RENT HOMES, CONDOMINIUMS, OR APARTMENTS. THEY FILL THESE DWELLINGS WITH THEIR PERSONAL PROPERTY. RENTERS HAVE MANY OF THE SAME PROPERTY AND LIABILITY INSURANCE NEEDS AS HOMEOWNERS. IN RESPONSE TO THIS, THE INSURANCE INDUSTRY HAS DEVELOPED A RENTERS POLICY THAT IS PACKAGE PROPERTY AND LIABILITY POLICY APPROPRIATE FOR RENTERS. THIS POLICY COVERS HOUSEHOLD GOODS AND PERSONAL BELONGINGS AND PROVIDES PROTECTION AGAINST THE SAME KINDS OF PERILS COVERED BY HOMEOWNERS POLICIES. A RENTERS POLICY MAY INCLUDE PERSONAL LIABILITY COVERAGE, BUT IT DOESN’T PROTECT THE ACTUAL DWELLING. THE DWELLING SHOULD BE COVERED UNDER THE OWNER’S POLICY. RENTERS WHO DON’T WANT LIABILITY PROTECTION MAY CHOOSE A POLICY THAT COVERS ONLY PERSONAL PROPERTY.

AS WITH OTHER LARGE INSURANCE PURCHASES, A WISE CONSUMER WILL WORK TO FIND THE MOST APPROPRIATE PROPERTY PROTECTION AT THE LOWEST COST. THIS PROCESS INVOLVES MAKING CERTAIN THAT THE PROPERTY IS INSURED FOR THE CORRECT AMOUNT AND THAT THE FACTORS AFFECTING PROPERTY INSURANCE COSTS HAVE ALL BEEN CAREFULLY CONSIDERED.

THE VALUE OF A HOME AND FURNISHINGS REPRESENTS THE LARGEST INVESTMENT THAT MANY PEOPLE MAKE. THE PURCHASE OF A CAREFULLY SELECTED INSURANCE PLAN MAKES GOOD SENSE TO PROTECT THAT INVESTMENT.

PREMIUMS PAID FOR HOMEOWNERS INSURANCE HAVE GROWN EACH YEAR OVER THE LAST 10 YEARS TO OVER $30 BILLION ANNUALLY. THE PRICE THAT YOU PAY FOR INSURANCE ON A HOME AND FURNISHINGS IS BASED ON A NUMBER OF FACTORS. THE MOST IMPORTANT FACTOR IS THE ESTIMATED DANGER OF LOSS BASED ON THE INSURANCE COMPANY’S PAST EXPERIENCES. IN ADDITION TO THE LOSS EXPERIENCES, AN INSURANCE COMPANY CONSIDERS THE FOLLOWING FACTORS IN DETERMINING HOMEOWNERS INSURANCE PREMIUMS:

• THE VALUE OF THE PROPERTY INSURED.
• THE CONSTRUCTION OF THE BUILDING; THAT IS, WHETHER IT IS MADE OF BRICK, WOOD, OR CONCRETE; AND THE CONSTRUCTION OF THE ROOF.
• THE TYPE OF POLICY (BASIC, BROAD, OR SPECIAL).
• THE NUMBER OF PERILS COVERED.
• THE DISTANCE TO THE NEAREST FIRE DEPARTMENT AND WATER SUPPLY.
• THE AMOUNT OF DEDUCTIBLE (THE HIGHER THE DEDUCTIBLE, THE LOWER THE PREMIUM).

YOU SHOULD CONSIDER THESE FACTORS CAREFULLY BEFORE PURCHASING OR BUILDING A HOME AND WHEN SHOPPING FOR INSURANCE ON THAT HOME AND YOUR PROPERTY. ALSO, HOMEOWNERS INSURANCE DISCOUNTS ARE OFTEN AVAILABLE FOR POLICYHOLDERS WHO ARE NONSMOKERS, FOR INSTALLING SMOKE DETECTORS AND BURGLAR ALARMS, AND FOR BUYING MULTIPLE POLICIES SUCH AS LIFE AND AUTO INSURANCE FROM THE SAME COMPANY.

LIKE HOMEOWNERS, BUSINESSES INSURE THEIR PERSONAL AND REAL PROPERTY AGAINST ECONOMIC LOSS CAUSED BY A VARIETY OF PERILS. THE SAME TRAGEDIES HAPPEN WITH BUSINESSES AS WITH HOMES. FIRES, STORMS, WATER DAMAGE, BURGLARIES, AND LIABILITY PROBLEMS FACE BUSINESS OWNERS. BUSINESSES ARE ALSO THREATENED BY ANOTHER IMPORTANT ECONOMIC PERIL—LOSS OF INCOME. BUSINESSES CAN USE INSURANCE TO PROTECT AGAINST THE LOSS IF INCOME DURING TIMES WHEN THEY MUST BE CLOSED DUE TO A TRAGEDY.

IN THE UNHAPPY EVENT THAT YOU SHOULD HAVE TO MAKE A CLAIM TO YOUR INSURANCE COMPANY FOR A PROPERTY LOSS, YOU WILL WANT TO BE WELL PREPARED. YOU SHOULD KEEP A LIST OF PERSONAL PROPERTY THAT YOU HAVE INSURED. THE LIST, CALLED AN INVENTORY, SHOULD INCLUDE:

1. THE ORIGINAL COST OF EACH ARTICLE,
2. WHEN THE ARTICLE WAS PURCHASED, AND
3. HOW LONG THE ARTICLE IS EXPECTED TO LAST.

THE AGE OF AN INSURED ARTICLE OF PERSONAL PROPERTY IS QUITE IMPORTANT. AS MOST PROPERTY BECOMES OLDER, IT GRADUALLY WEARS OUT AND DECREASES IN VALUE. THIS DECREASE IN VALUE, CALLED DEPRECIATION, USUALLY AFFECTS THE AMOUNT THE INSURANCE COMPANY WILL PAY IF THE PROPERTY IS DESTROYED.

REPLACEMENT INSURANCE ACTUALLY REPLACES AN ITEM THAT HAS BEEN DESTROYED. NO DEPRECIATION IS DEDUCTED, BUT INSTEAD THE ITEM IS ACTUALLY REPLACED FOR WHATEVER THE CURRENT COST MAY BE. A REPLACEMENT COST POLICY WOULD PAY WHATEVER IT COST ON THE DAY OF THE LOSS TO REPLACE YOUR PROPERTY. AS SOON AS POSSIBLE AFTER YOU DISCOVER A LOSS, YOU SHOULD FILE A CLAIM WITH YOUR INSURANCE COMPANY. HOWEVER, BEFORE THE COMPANY WILL PAY, YOU MUST PROVIDE PROOF OF YOUR LOSS. THIS IS NOT A PROBLEM WITH REAL PROPERTY. A REPRESENTATIVE OF THE INSURANCE COMPANY, CALLED AN ADJUSTER, CAN LOOK AT THE DAMAGED PROPERTY, DETERMINE THE EXTENT OF LOSS, AND PAY YOU ACCORDING TO THE TERMS OF THE POLICY. THE DESTROYED CONTENTS OF A HOUSE, HOWEVER, WOULD POSE A PROBLEM. IN ORDER TO PROVE THE AMOUNT OF PERSONAL PROPERTY LOSS, YOU MUST KNOW THE APPROXIMATE VALUE OF EACH ARTICLE DAMAGED OR DESTROYED.

IN ADDITION TO MAINTAINING AN UP-TO-DATE PERSONAL PROPERTY INVENTORY, SOME INSURANCE COMPANIES SUGGEST KEEPING RECEIPTS FROM PURCHASES OF YOUR POSSESSIONS AND TAKING PHOTOGRAPHS OR VIDEOS OF YOUR FURNITURE AND OTHER PROPERTY. THESE RECEIPTS AND PICTURES CAN BE USED TO SUPPORT CLAIMS. INSURANCE COMPANIES CAN PROVIDE YOU WITH INVENTORY FORMS AND INFORMATION ABOUT HOW TO MAKE CLAIMS FOR LOSSES.