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CONSUMERS: TIPS ON HOMEOWNERS INSURANCE
Important insurance information for homeowners.
What you should do right now:
Ask for written guidelines from the adjuster on how the claim will be adjusted.
Welcome the help offered by the adjuster, but stick to business and share only the information you actually know to be fact -- don't speculate about what's been damaged or lost.
Keep a log of all phone calls to and from the adjuster.
Keep copies of all correspondence between you and the adjuster/insurer.
Gather all receipts of your living expenses and other documents that pertain to insurance or your property. Keep the receipts in one-easy to find location and in chronological order if possible.
Get copies of the Unfair Practices Act and the Fair Claims Settlement Practices Regulations from the California Department of Insurance, either from the Website or by calling the hotline at 1-800-927-HELP.
If you're thinking of hiring a public adjuster, call the California Department of Insurance to make sure he or she is properly licensed.
Homeowner’s coverage falls into one of two general categories: Replacement Cost Coverage and Actual Cash Value Coverage.
Replacement Cost Coverage (consists of three types):
1. Replacement Cost Coverage provides a dollar amount to repair damaged property or to replace it with new property of like kind and quality, without deducting for depreciation (that is, the decrease in value due to age, obsolescence, wear and tear and other factors.)
Replacement cost policies cover the full cost of replacing the damage to your home up to your policy’s limits. For example, a replacement cost policy with a $100,000 coverage limit on the dwelling would cover the cost of replacing a $100,000 house, regardless of whether the house rose or fell in value.
2. Extended (or Modified) Replacement Cost coverage will provide a certain percentage over the policy limit to rebuild your home – 20 percent or more, depending on the insurer -- so if building costs go up unexpectedly, you will have extra funds to cover the bill. These types of policies are not offered by all insurers.
3. Guaranteed Replacement Cost policies are rare. This policy pays out whatever it costs to rebuild your home as it was before the disaster--well over the policy limit if necessary.
Actual Cash Value Coverage
Actual Case Value Coverage pays the fair market value of the dwelling up to an identified policy limit. Fair market value is determined by way of an appraisal based on comparisons to other similarly situated structures, less the value of the land. Coverage for actual value policies are limited to a specific amount, regardless of whether the value of the house increases. For example, a $70,000 actual cash value policy would cover only $70,000 in damages, even if the value of the house rises to $100,000. This type of coverage could end up costing the insured out-of-pocket more than they expected. Therefore, increases in limits to keep up with inflation are more important with these types of policies.
Other Coverages
Building Code Upgrade (BCU) coverage provides monies to pay for any building code upgrades that may be required during the repair / rebuilding process. Policies may or may not include BCU coverage. Some companies offer such coverage in the form of an add-on or "rider." If the insured does not have this coverage, it will be an out-of-pocket expense.
Structures other than the dwelling coverage can include other structures at the residence premises not attached to the dwelling, sidewalks, driveways, permanently installed yard fixtures, and private or decorative fences. Typical limits on coverage are 10 percent of the value of the dwelling.
Personal Property (contents) coverage protects against damage to or loss of personal property (contents). Typical limits on coverage are 50 percent of the value of the dwelling. These limits can be reached easily under certain circumstances. Policyholders can purchase Inland Marine policies (riders) that cover specified items such as artwork and jewelry.
Loss of Use coverage covers expenses beyond replacing property if a home cannot be lived in as a result of fire. Typically the coverage pays for the living expenses incurred to maintain normal lifestyle.
Additional living expense (ALE) method is most common way to calculate loss of use. This method permits you to maintain your normal standard of living by covering the increased living expenses incurred as a result of the fire. Typical items covered by ALE coverage include extra food costs, increased housing costs, furniture rental, relocation and storage costs, telephone installation, extra transportation costs to and from school or work.
Renters Insurance: This insurance covers the loss of personal property and loss of use of the rental unit due to fire and may include liability and medical payments coverage.
Condo Insurance: This insurance covers personal property and improvements to the individual condominium. Loss of use is generally limited to 40 percent of the value of the contents.
Mobile Homes: This coverage is considered residential if the mobile home is established as a permanent residence. A few companies offer this coverage.
The California Fair Access to Insurance Requirements (FAIR) Plan offers both actual cash value (ACV) and replacement policies, but in both cases provides more limited fire coverage than is normally available in the private market.
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