All to often we speak with insurance consumers that don't fully understand the industry or the products that are available. Consumers understand deductibles and generally co insurance percentages if they have any and the rest is somewhat of a mystery.
We fully understand that insurance can be a confusing and frustrating experience and that's exactly why we've put together this website. To educate and give you non biased information on Life, Auto, and Homeowners Insurance. Hopefully, we will shed some light on some questions you may have and give you information you didn't even know you needed.
Thursday, January 31, 2008
LIFE INSURANCE
If you have only yourself to worry about, even insurance agents admit that you may be better off putting your money back into your business than investing it in life insurance. If you have a family or other people depending on you, life insurance is recommended.
As a business owner, you may also want to look at how your life insurance policy can be used for your business. For example, you may be able to use it as collateral for a business expansion loan from your bank. Only cash-value policies (which build up in tax-deferred investment accounts) can be put to business use.
As a business owner, you may also want to look at how your life insurance policy can be used for your business. For example, you may be able to use it as collateral for a business expansion loan from your bank. Only cash-value policies (which build up in tax-deferred investment accounts) can be put to business use.
WORKERS' COMPENSATION INSURANCE
This insurance covers employees in case of work-related accidents. Most states require you to have workers' compensation insurance for any employees, even part-timers. Some states only require workers' comp insurance for companies with three or more employees.
To keep the cost of your workers' compensation as low as possible, be sure your employees are classified properly. If you do not inquire about this, all your workers may be lumped into the highest - and most expensive - category of coverage. Some states also require you to purchase disability insurance that covers employees in case of any accident regardless of where it happens.
To keep the cost of your workers' compensation as low as possible, be sure your employees are classified properly. If you do not inquire about this, all your workers may be lumped into the highest - and most expensive - category of coverage. Some states also require you to purchase disability insurance that covers employees in case of any accident regardless of where it happens.
Small Business Insurances
It can be difficult to determine which kind of insurance you need for your small business. Different types of insurance have confusingly similar names; your state, town, or county may have its own insurance requirements; and many industries have coverage specific to them.
Insurance is one of the most neglected small business responsibilities. Not having the appropriate insurance for your small business is a mistake because a disaster can shut down your company permanently, or at least wreak havoc on your assets.
The Insurance Information Institute (III) in New York City estimates that about 40 percent of small business owners have no insurance at all, because many falsely believe they can't afford coverage. The truth is a small business can't afford not to have adequate insurance. Without insurance, you're unnecessarily putting your livelihood at risk. That's also why many landlords, suppliers, and other entities you work with will probably require you to have coverage.
If you're having difficulty determining which kind of insurance your business should have, you might want to check with the following agencies:
Insurance is one of the most neglected small business responsibilities. Not having the appropriate insurance for your small business is a mistake because a disaster can shut down your company permanently, or at least wreak havoc on your assets.
The Insurance Information Institute (III) in New York City estimates that about 40 percent of small business owners have no insurance at all, because many falsely believe they can't afford coverage. The truth is a small business can't afford not to have adequate insurance. Without insurance, you're unnecessarily putting your livelihood at risk. That's also why many landlords, suppliers, and other entities you work with will probably require you to have coverage.
If you're having difficulty determining which kind of insurance your business should have, you might want to check with the following agencies:
- The county or city clerk
- A local chapter of your industry association
- The state insurance office
CAR RENTAL INSURANCE
In most states, car rental companies are prohibited from refusing to rent you a car unless you purchase the additional insurance, but many companies still try to do it. The coverage's that you can get are all optional. Combined, they can add up to $30 per day to the rental bill. Each coverage protects against a different risk, but your car, home, life, or health insurance policies, or your credit card, may provide all or part of the protection you need, particularly when they are combined with the minimum insurance the car rental company is required by law to provide as a part of every rental.
There are four different types of insurance and insurance-like coverage's the companies try to sell to consumers at the rental counters: Collision Damage Waiver (CDW), Supplemental Liability Protection (SLP), Personal Accident Insurance (PAI), and Personal Effects Coverage (PEC). While this coverage may make sense for some renters, in most states you already have this coverage for a rental vehicle as part of your primary auto insurance, unless you declined to accept it when you purchased that policy.
SLP usually provides $1 million of liability protection, considerably more coverage than most consumers have under their own automobile insurance policies. So if there is a reason that you want more coverage for the rental than you ordinarily carries for your own car or you do not have an automobile insurance policy, buying the SLP may make sense. However PAI coverage, usually costing about $3 per day, provides medical, ambulance and death benefits for the renter and passengers of the rental car in the event of an accident. The medical coverage is usually around $3,500 and the ambulance benefit $150 and REC coverage typically costs $2 per day, usually provides $500 per person of insurance coverage, with a $1,500 maximum, for theft of personal effects of the renter and his or her family. The motto here is that before you buy into rental car insurance, you should check to see if your own car policy covers you already.
There are four different types of insurance and insurance-like coverage's the companies try to sell to consumers at the rental counters: Collision Damage Waiver (CDW), Supplemental Liability Protection (SLP), Personal Accident Insurance (PAI), and Personal Effects Coverage (PEC). While this coverage may make sense for some renters, in most states you already have this coverage for a rental vehicle as part of your primary auto insurance, unless you declined to accept it when you purchased that policy.
SLP usually provides $1 million of liability protection, considerably more coverage than most consumers have under their own automobile insurance policies. So if there is a reason that you want more coverage for the rental than you ordinarily carries for your own car or you do not have an automobile insurance policy, buying the SLP may make sense. However PAI coverage, usually costing about $3 per day, provides medical, ambulance and death benefits for the renter and passengers of the rental car in the event of an accident. The medical coverage is usually around $3,500 and the ambulance benefit $150 and REC coverage typically costs $2 per day, usually provides $500 per person of insurance coverage, with a $1,500 maximum, for theft of personal effects of the renter and his or her family. The motto here is that before you buy into rental car insurance, you should check to see if your own car policy covers you already.
EMERGENCY EVACUATION
Not all medical facilities were created equal. Depending on the plan, Emergency Medical Evacuation insurance covers the cost of transporting a seriously injured or ill person to one of the following locations:
- The nearest adequate medical facility
- A hospital near home
- Or the hospital of his/her choice
Why you need a Travel Insurance?
Travel insurance covers a number of possible mishaps that can occur on the road. Peace of mind comes from knowing that if one experiences terrorism, a need for medical attention, emergency evacuation, or bankruptcy of a trip organizer, there will be recourse. Travel should be about wonder and delight, not anxiety and lost funds.
Travel insurance is much more affordable than people think, whether they buy it for one trip or for unlimited annual use. Some of the travel insurance types available include flight accident insurance, trip cancellation insurance, travel medical insurance, and even custom insurance products. Nearly every conceivable mishap can be insured against, to ensure against financial loss.
Travel insurance is much more affordable than people think, whether they buy it for one trip or for unlimited annual use. Some of the travel insurance types available include flight accident insurance, trip cancellation insurance, travel medical insurance, and even custom insurance products. Nearly every conceivable mishap can be insured against, to ensure against financial loss.
What Insurance Do You Need?
Many people who thoughtfully protect their families against the loss of income from a breadwinner's death fail to think about what would happen if that breadwinner were unable to earn a living because of a disability. In fact, long-term disability may worsen a family's financial situation more than a wage earner's death because income stops, but expenses continue.
Consider Bob and Ann Jackson. Bob and Ann, who live in a Midwestern city, are parents of a 6-year-old girl. Bob, 31, earns $32,000 selling computers. His monthly take-home pay is $1,994. After staying home several years to care for their daughter, Ann is now a part-time saleswoman in a local boutique. She brings home $338 a month.
Life is uneventful for the Jacksons, until Bob becomes so ill that he can no longer work. Suddenly there is a dramatic reduction inn the Jacksons' income. Because they live in a rental apartment, they have no mortgage disability insurance to cover basic housing costs. Bob isn't eligible for Social Security disability. (To be eligible, Bob would have to demonstrate that he is unable to engage in any gainful work that exists in the national economy, regardless of whether such a job exists in the area in which he and Ann live.) Bob has no prior military or civil service that might qualify him for other government disability programs. He does not qualify for workers' compensation benefits because his illness is not job-related.
The specifics of what happens next depend greatly on whether or not Bob's employer offers group disability benefits, whether these benefits are short term (STD) or long-term (LTD), whether the policy includes a cost-of-living adjustment, and how the group policy defines disability.
If Bob's employer does provide Group LTD, Bob would be entitled to benefits under his employer's policy--probably 60 percent of his gross salary, or $1,600 a month. Of this amount, he would have to pay $193 in federal income taxes and $100 in state income taxes. To continue his family's group medical policy, he will have to pay the portion of his health insurance premium that was previously paid by his employer. Under this scenario, the Jacksons' monthly income (including Ann's current salary) would be almost 30 percent less than their former income. Will this be adequate or not? The Jacksons may save money with Bob staying at home (he is no longer commuting to work, for example), and Ann may adjust to the situation by becoming the principal wage earner. Thus, the employer-provided group disability policy may well be enough.
However, not all employers provide disability benefits. What if Bob is employed by a small firm that has no group disability benefits at all? Or what if the Jackson's situation is such that they need more than they would get under the group policy? Under such circumstances, an individual disability income insurance policy might be just the right answer.
Consider Bob and Ann Jackson. Bob and Ann, who live in a Midwestern city, are parents of a 6-year-old girl. Bob, 31, earns $32,000 selling computers. His monthly take-home pay is $1,994. After staying home several years to care for their daughter, Ann is now a part-time saleswoman in a local boutique. She brings home $338 a month.
Life is uneventful for the Jacksons, until Bob becomes so ill that he can no longer work. Suddenly there is a dramatic reduction inn the Jacksons' income. Because they live in a rental apartment, they have no mortgage disability insurance to cover basic housing costs. Bob isn't eligible for Social Security disability. (To be eligible, Bob would have to demonstrate that he is unable to engage in any gainful work that exists in the national economy, regardless of whether such a job exists in the area in which he and Ann live.) Bob has no prior military or civil service that might qualify him for other government disability programs. He does not qualify for workers' compensation benefits because his illness is not job-related.
The specifics of what happens next depend greatly on whether or not Bob's employer offers group disability benefits, whether these benefits are short term (STD) or long-term (LTD), whether the policy includes a cost-of-living adjustment, and how the group policy defines disability.
If Bob's employer does provide Group LTD, Bob would be entitled to benefits under his employer's policy--probably 60 percent of his gross salary, or $1,600 a month. Of this amount, he would have to pay $193 in federal income taxes and $100 in state income taxes. To continue his family's group medical policy, he will have to pay the portion of his health insurance premium that was previously paid by his employer. Under this scenario, the Jacksons' monthly income (including Ann's current salary) would be almost 30 percent less than their former income. Will this be adequate or not? The Jacksons may save money with Bob staying at home (he is no longer commuting to work, for example), and Ann may adjust to the situation by becoming the principal wage earner. Thus, the employer-provided group disability policy may well be enough.
However, not all employers provide disability benefits. What if Bob is employed by a small firm that has no group disability benefits at all? Or what if the Jackson's situation is such that they need more than they would get under the group policy? Under such circumstances, an individual disability income insurance policy might be just the right answer.
Insurance Counseling
This directory lists numbers to call for free insurance counseling in the United States. These offices are federally and state funded. Toll-free numbers are for in-state use only.
- Alabama 800-243-5463
- Alaska 800-478-6065 / 907-562-7249
- Arizona 800-432-4040
- Arkansas 800-852-5494 / 501-686-2940
- California 800-927-4357 / 916-323-7315
- Colorado 303-894-7499 ext. 356
- Connecticut 800-443-9946
- Delaware 800-366-9500
- District of Columbia 202-994-7463
- Florida 904-922-2073
- Georgia 800-669-8387
- Hawaii 800-586-0100
- Idaho 800-247-4422
- Illinois 800-252-8966
- Indiana 800-452-4800
- Iowa 515-281-5705
- Kansas 800-432-3535
- Kentucky 800-372-2991
- Louisiana 800-259-5301 / 504-342-5301
- Maine 800-750-5353 / 207-624-5335
- Maryland 800-243-3425
- Massachusetts 800-882-2003 / 617-727-7750
- Michigan 517-373-8230
- Minnesota 800-882-6262
- Mississippi 800-948-3090
- Missouri 800-390-3330
- Montana 800-332-2272
- Nebraska 402-471-4506
- Nevada 800-307-4444 / 702-367-1218
- New Hampshire 603-271-4642
- New Jersey 800-792-8820
- New Mexico 800-432-2080
- New York 800-333-4114
- North Carolina 800-443-9354
- North Dakota 800-247-0560
- Ohio 800-686-1578
- Oklahoma 405-521-6628
- Oregon 800-722-4134
- Pennsylvania 717-783-8975
- Puerto Rico 809-721-5710
- Rhode Island 800-322-2880
- South Carolina 800-868-9095
- South Dakota 605-773-3656
- Tennessee 800-525-2816
- Texas 800-252-3439
- Utah 801-538-3910
- Vermont 800-642-5119
- Virginia 800-552-4464
- Virgin Islands 809-774-2991
- Washington 800-397-4422
- West Virginia 304-558-3317
- Wisconsin 800-242-1060
- Wyoming 800-438-5768
What Kind Of Business Protection Is Available In The Event Of Disability?
Income replacement insurance is particularly important if you own a small business. In addition to standard disability policies, some polices have such special features as:
- Recovery benefits that pay after you return to work full time, during the period in which you are reestablishing a customer or client base.
- Overhead expense coverage that pays for certain office expenses, over and above the disability benefits that replace personal income.
- For jointly owned businesses, a disability buy-out policy disburses funds for one partner, or the business entity, to buy a disabled partner's share of the business.
- Key-person insurance, which protects a firm against the loss of income resulting from the disability of a key employee.
What About Social Security Disability Benefits?
in the federal government's Social Security program. Social Security is best known for its retirement benefits. But the Social Security Administration also administers disability benefits. In 1992, 2.4 billion dollars in Social Security disability payments were sent to 4.8 million Americans.
Your salary and the number of years you have been covered under Social Security determine how much you can receive. In 1992, the average monthly payment for a disabled worker was $642; the average monthly payment for a family consisting of a disabled worker, spouse, and one or more children was $1093.
Here are some important points to remember:
Your salary and the number of years you have been covered under Social Security determine how much you can receive. In 1992, the average monthly payment for a disabled worker was $642; the average monthly payment for a family consisting of a disabled worker, spouse, and one or more children was $1093.
Here are some important points to remember:
- Eligibility is based on being unable to perform any gainful employment, not just the job you were performing at the time the disability began.
- You are eligible for benefits after you have been disabled for 5 months and if the disability is expected to last 12 months. Claim processing may take up to 3 months, so file as soon as possible.
- Social Security payments may be reduced by disability entitlements under other government programs. Why? Because total combined payments under Social Security, workers' compensation, civil service, and military programs generally cannot exceed 80 percent of average predisability earnings. A government pension also may reduce Social Security disability payments.
- After 24 months of benefits, recipients qualify for Medicare. If you want the medical insurance portion of Medicare, in addition to hospital coverage, you must enroll and pay a monthly premium.
- Social Security disability payments are subject to federal income tax if your adjusted gross income plus any nontaxable interest income and half of you Social Security benefits exceed a total of $25,000 (if you file tax returns individually) or $32,000 (if you file jointly). For taxable years 1994 on, up to 85 percent of Social Security disability payments are subject to federal income tax if the total--as calculated above--exceeds $34,000 (individually) or $44,000 (jointly).
- Social Security disability payments can be an important part of you income should you suffer a disabling illness or injury. Contact your local Social Security office for an estimate of the disability benefits to which you would be entitled.
What Is Disability Insurance?
Disability income insurance provides you with an income should you become sick or injured and unable to work. It helps protect against family financial catastrophe by giving you an income to meet daily expenses.
Disability income insurance comes in two major forms:
Disability income insurance comes in two major forms:
- A variety of employer-paid and government sponsored programs, generally cost-free to the recipient, covering certain categories of workers.
- Private policies (paid for by individuals) that protect income when there are no applicable employer or government programs or when those programs do not adequately meet income needs.
What is a Health Insurance?
It's a fact of life — you need health insurance — and the time to get it is before you have an accident, suffer a serious illness, or discover you're pregnant. Insurance doesn't cover health care for medical problems or conditions that start before the moment you have your policy. Finding adequate coverage may seem overwhelming, but knowing the basics can help make your search less stressful.
Finding solutions for your retirement gap
To get a more accurate idea of what your gap in retirement funds may be, talk with your financial representative as soon as possible. They will help you:
- Verify your actual Social Security benefits from the Social Security Administration.
- Estimate what your present retirement funding vehicles will be worth at retirement, assuming various rates of interest.
- Develop a computerized retirement analysis, employing inflation factors and other sophisticated calculations to help forecast your estimated retirement income needs.
- Set up a plan designed to achieve your retirement goals within your current means.
- Update your retirement plan annually to reflect any changes in your objectives or present situation.
Estate planning
Concepts included on this site dealing with federal estate tax issues may not be the most acceptable or best solutions to your situation. You should consult your attorney for advice on your particular situation.
On June 7, 2001, the Economic Growth and Tax Relief Reconciliation Act was signed by President Bush, bringing many changes over the next decade. Effective January 1, 2002, federal estate taxes will be steadily reduced and eventually abolished in 2010. Without further congressional action, however, the law as it existed in 2001 comes back into effect for 2011 and thereafter.
Estate Planning involves developing a "plan" that will accomplish the goals and objectives of an estate owner while living and at death. These goals and objectives could include:
On June 7, 2001, the Economic Growth and Tax Relief Reconciliation Act was signed by President Bush, bringing many changes over the next decade. Effective January 1, 2002, federal estate taxes will be steadily reduced and eventually abolished in 2010. Without further congressional action, however, the law as it existed in 2001 comes back into effect for 2011 and thereafter.
Estate Planning involves developing a "plan" that will accomplish the goals and objectives of an estate owner while living and at death. These goals and objectives could include:
- Providing cash payment of estate expenses including federal estate tax.
- Providing income to family members after the estate owner's death.
- Providing for the disposition of a business at death.
- Distributing assets to family members and other heirs with the least amount of shrinkage possible.
Why should you consider a Rollover?
- Compare your options
- Expand your investment selection. The wide range of choices for a Traditional IRA, for example, provides investment flexibility to diversify your financial approach.
- Adapt to new circumstances. A rollover is one way to adjust your investment mix to reflect changes in your investment goals, time frame, or performance expectations. And there is no limit to the amount of money that may be rolled into a qualified retirement account.
- Stay open to future possibilities. With a rollover, you may retain the option of moving your money into a future employer’s qualified retirement plan.
- One provider for multiple financial solutions. A rollover lets you consolidate your savings with your agent, so you can continue working with someone who’s already familiar with your needs.
- Consolidate and manage your retirement assets. The more accounts you have, the more difficult it is to keep track of your money. Consolidating your assets into a single traditional IRA can make it simpler to track balances and monitor your withdrawals.
Potential Tax Benefits
- No current income tax. With a rollover, you don't have to immediately pay federal income tax on the amount you've rolled over.
- No tax on earnings. Your money can potentially grow tax-deferred until you begin to make withdrawals from your account. No tax withholding. You'll avoid the 20% federal withholding for federal income taxes, so the entire balance of your account continues to work for you.*
- No penalty tax. Your rollover isn't considered a taxable distribution, so it doesn't trigger the 10% penalty tax for early withdrawals made prior to age 59 1/2.
What is a Rollover?
A rollover occurs when you move your money from a qualified retirement plan, such as an employer-sponsored 401(k) plan, into a Traditional IRA or another qualified retirement plan. Typically, you are eligible for a rollover only under the following circumstances:
- Retiring. You’ve been saving for years and years...and now it’s finally time to enjoy your hard-earned savings. Many people find that consolidating their retirement assets into a Traditional IRA makes it easier to manage and monitor their money.
- Changing jobs. When people change jobs, they often have money in a qualified retirement plan sponsored by their employer. A rollover lets them move this money into a Traditional IRA of their own choosing.
- Between jobs or switching careers. Perhaps you’re taking advantage of opportunities to explore a new profession. Or maybe you’re simply spending time away from the work force to raise a family or go back to school. Whatever your situation, you may wish to simplify your finances by transferring the money from a previous employer’s plan to a Traditional IRA.
What is a Life Insurance?
Life insurance is bought by someone in order to protect his or her family in case of death. This may be mainly bought by people who are the sole breadwinners of the family: without that money in the event of that person's death, the family couldn't survive. However, not many people truly know how life insurance policies work. Many people don't believe they can afford any life insurance and a few see it as an unneeded cost.
What is 'no-fault' insurance?
No-fault insurance is a system adopted in some states that essentially bypasses the conventional legal procedure which finds fault in an accident. (This is the procedure by which you hire a lawyer, file suit and possibly go to court to prove the accident was the other guy's fault.) No-fault simply does away with the concept of one party or the other being at fault--no lawyers, no court, no judge, no jury, no lengthy lawsuits against the other party. This is considered beneficial to taxpayers, because it eliminates costly legal proceedings that the state must manage, and to insurance policyholders, because it helps keep rates down.
If you are insured in a no-fault state and have an accident, you don't go after the other driver. You contact your own insurer and file a claim. Your own insurance policy guarantees you immediate compensation for damages, medical expenses, lost wages, etc.
The type and range of no-fault coverage varies from state to state. What defines the limitations of no-fault policies can differ in two critical areas:
Threshold--The type of damage/injury or the cost of repair/recovery that triggers the need for legal action.
Mandated--Benefit Level--The package of benefits (medical, wage loss, replacement services and other expenses) your state requires you to carry.
The details of no-fault insurance can be complicated. Contact your agent or state's insurance department for further information.
If you are insured in a no-fault state and have an accident, you don't go after the other driver. You contact your own insurer and file a claim. Your own insurance policy guarantees you immediate compensation for damages, medical expenses, lost wages, etc.
The type and range of no-fault coverage varies from state to state. What defines the limitations of no-fault policies can differ in two critical areas:
Threshold--The type of damage/injury or the cost of repair/recovery that triggers the need for legal action.
Mandated--Benefit Level--The package of benefits (medical, wage loss, replacement services and other expenses) your state requires you to carry.
The details of no-fault insurance can be complicated. Contact your agent or state's insurance department for further information.
Why do I need car insurance?
Your car has two unique qualities. First, it is probably one of the most expensive things you own. Insurance protects your investment and guarantees you a way of coping with the expense of accidents, vandalism or theft, as well as securing your financial responsibility to the bank or other institution lending the money to buy your vehicle.
Second, when you drive, you are operating a powerful machine, weighing one ton or more and capable of moving at over 100 miles per hour. You are responsible for the safety of your passengers, your fellow drivers, other people's property, pedestrians and yourself. Insurance helps you live up to that responsibility by ensuring your ability to cover the costs of potential damages or injuries.
You are also required to be financially responsible by state laws, which are best satisfied through your insurance coverage. In fact, in most states insurance is a prerequisite to registering your car. So if you want to drive your own vehicle, you must be insured.
Second, when you drive, you are operating a powerful machine, weighing one ton or more and capable of moving at over 100 miles per hour. You are responsible for the safety of your passengers, your fellow drivers, other people's property, pedestrians and yourself. Insurance helps you live up to that responsibility by ensuring your ability to cover the costs of potential damages or injuries.
You are also required to be financially responsible by state laws, which are best satisfied through your insurance coverage. In fact, in most states insurance is a prerequisite to registering your car. So if you want to drive your own vehicle, you must be insured.
What is a Car Insurance?
This is insurance which protects the insured against losses involving the use of automobiles. Various coverages may be bought depending on the desires of the insured. Such coverages include the liability coverages of bodily injury, property damage, and medical payments, and the physical damage coverages of collision and comprehensive.
You've worked hard to get your home. We’ll work hard to help you protect it
Before you purchase a new home, make sure that you determine the appropriate amount of coverage needed. When you have the home appraised, ask if a replacement cost estimate is available. Or consult with your local builder association or a reputable builder for an estimate.
Be aware of any architectural details or unique building materials that may affect your estimated replacement cost, such as:
Building contractors or professional replacement cost appraisers are a good source for obtaining an estimated replacement cost of your home. Estimates from these sources should reflect your home’s features, like those mentioned above. If you are unable to obtain a detailed estimate from these sources, your State Farm agent can help provide one for you.
Review your policy annually to make sure that your coverage meets your needs
Have you recently remodeled or improved your home? When you upgrade or improve your home, you may increase your home’s estimated replacement cost.
Has the rate of inflation risen since your last appraisal? Your agent provides coverage that automatically adjusts each year in an effort to compensate for increases in construction costs in your area. However, certain conditions such as severe weather can increase the demand for labor and materials, and raise costs beyond normal inflation. It is important to update your coverage amount each year to keep up with the changing economy.
What influences the building costs in your area? Market conditions in your area may impact the amount it will cost to rebuild your home if you experience a loss. Replacement cost estimates are influenced by supply of labor, demand for labor, and cost of construction materials. Staying abreast of the current market conditions in your area, and changing your coverage amount accordingly, will help you maintain 100% estimated replacement cost coverage for your home.
Some important things to consider when determining your coverage amount: Your home’s estimated replacement cost is different than its market value (real estate cost)
Each time you remodel or improve your home, you should adjust your coverage amount accordingly.
If your home is made of unique building materials, make sure they are reflected in your replacement cost estimate.
Stay abreast of the fluctuating building costs in your area and update your coverage amount accordingly. Make sure that you maintain coverage at 100% of your home's estimated replacement cost at all times.
It is important to review your coverage annually and inform your agent of any changes you’d like to make.
Be aware of any architectural details or unique building materials that may affect your estimated replacement cost, such as:
- Upgraded bathrooms or kitchens (including cabinets)
- Additional rooms
- Custom molding or arched windows
- Other unique features
- A contractor or appraiser can help estimate your home's replacement cost
Building contractors or professional replacement cost appraisers are a good source for obtaining an estimated replacement cost of your home. Estimates from these sources should reflect your home’s features, like those mentioned above. If you are unable to obtain a detailed estimate from these sources, your State Farm agent can help provide one for you.
Review your policy annually to make sure that your coverage meets your needs
Have you recently remodeled or improved your home? When you upgrade or improve your home, you may increase your home’s estimated replacement cost.
Has the rate of inflation risen since your last appraisal? Your agent provides coverage that automatically adjusts each year in an effort to compensate for increases in construction costs in your area. However, certain conditions such as severe weather can increase the demand for labor and materials, and raise costs beyond normal inflation. It is important to update your coverage amount each year to keep up with the changing economy.
What influences the building costs in your area? Market conditions in your area may impact the amount it will cost to rebuild your home if you experience a loss. Replacement cost estimates are influenced by supply of labor, demand for labor, and cost of construction materials. Staying abreast of the current market conditions in your area, and changing your coverage amount accordingly, will help you maintain 100% estimated replacement cost coverage for your home.
Some important things to consider when determining your coverage amount: Your home’s estimated replacement cost is different than its market value (real estate cost)
Each time you remodel or improve your home, you should adjust your coverage amount accordingly.
If your home is made of unique building materials, make sure they are reflected in your replacement cost estimate.
Stay abreast of the fluctuating building costs in your area and update your coverage amount accordingly. Make sure that you maintain coverage at 100% of your home's estimated replacement cost at all times.
It is important to review your coverage annually and inform your agent of any changes you’d like to make.
Understand the difference between market value and replacement cost
“Replacement cost” is the amount needed to repair the damage or to rebuild the home to its pre-loss condition. The replacement cost of a home is NOT the market value of the home, its purchase price or the outstanding amount of any mortgage loan. It does not include the value of the land, but is the cost of rebuilding your home. New improvements or required upgrades are also not accounted for in the replacement cost.
How to determine your homeowner's coverage
Your first step in determining the right homeowners coverage is estimating the replacement cost of your home. The second step is selecting the coverage amount that best fits your needs. We recommend that you purchase an amount of coverage equal to the estimated replacement cost. But the choice is yours. Determining your home’s estimated replacement cost is important because this will ultimately determine which policy options are available to you. Since it is impossible to predict today what the exact cost will be to replace your home in the future, it’s important to have enough coverage to account for unforeseen circumstances.
Additional Living Expenses
If it is necessary for you to move into a motel or apartment temporarily because of damage caused by a peril covered by your policy, your insurance company will pay reasonable and necessary additional living expenses. The typical policy will pay an amount up to 20% of the policy limit on your dwelling for these expenses. If you move in temporarily with a friend or relative and do not have any extra expenses, you will not be paid any additional living expenses by your insurance company.
Medical Payments Coverage
Medical payments coverage pays if someone outside your family is injured at your home regardless of fault. This includes payment for reasonable medical expenses incurred within one year from the date of loss for a person who is injured in an accident in your home. The coverage does not apply to you and members of your household. The medical payments portion of your homeowner’s policy will also pay if you are involved in the injury of another person away from your home in some limited circumstances. Medical payments coverage limits are generally $1,000 for each person. Higher limits of medical payments coverage are available at additional cost.
Personal Liability Coverage
Homeowner’s policies provide personal liability coverage that applies to nonauto accidents on and off your property if the injury or damage is caused by you, a member of your family, or your pet. The liability coverage in your policy pays both for the cost of defending you and paying for any damages the court rules you must pay. And unlike the other coverage in your policy, liability insurance does not have a deductible that you must meet before the insurer begins to pay losses. The basic limit for liability coverage is usually $100,000 for each occurrence. You can request higher limits that are available for an additional cost.
Personal Property Floater
Your homeowner's insurance policy may provide only limited coverage for furs, jewelry, silver, and other valuables. It may be necessary to insure these valuables with a special addition to your homeowner's policy, such as a personal property floater. A personal property floater itemizes each article, gives a description of the article insured, and lists excluded perils. It often provides coverage that is broader than the coverage granted in the home insurance policy. You should discuss this with your insurance company or agent to determine the availability and cost of this additional coverage.
Your homeowner’s insurance policy does not cover your pets, your car, and any aircraft. Although your policy does not cover your pet or damage it does to your possessions, it will cover damage your pet does to others or their possessions.
Your homeowner’s insurance policy does not cover your pets, your car, and any aircraft. Although your policy does not cover your pet or damage it does to your possessions, it will cover damage your pet does to others or their possessions.
Property Damage Coverage
Property damage coverage helps pay for damage to your home and personal property. Other structures such as a detached garage, a tool shed, or any other building on your property are usually covered for 10% of the amount of coverage on your house.
Personal property coverage will pay for personal property including household furniture, clothing, and other personal belongings. The amount of insurance coverage is usually 50% of the policy limit on your dwelling. The coverage is also limited by the types of loss listed in the policy. The coverage only pays the current cash value of the item destroyed, unless you purchased replacement cost coverage.
Your homeowner’s policy also provides off-premises coverage. This means that the policy covers your belongings against theft even when they are not inside your home. Your insurer will reimburse you for the cost of replacing your suitcase and its contents if it were lost or stolen while you were on vacation, but only for replacing them with items of like kind and quality.
Personal property coverage will pay for personal property including household furniture, clothing, and other personal belongings. The amount of insurance coverage is usually 50% of the policy limit on your dwelling. The coverage is also limited by the types of loss listed in the policy. The coverage only pays the current cash value of the item destroyed, unless you purchased replacement cost coverage.
Your homeowner’s policy also provides off-premises coverage. This means that the policy covers your belongings against theft even when they are not inside your home. Your insurer will reimburse you for the cost of replacing your suitcase and its contents if it were lost or stolen while you were on vacation, but only for replacing them with items of like kind and quality.
Basic Coverage included in Homeowner's insurance
The homeowner’s insurance policy is a package policy that combines more than one type of insurance coverage in a single policy. There are four types of coverages that are contained in the homeowner’s policy: dwelling and personal property, personal liability, medical payments, and additional living expenses.
Why you need a Homeowner Insurance?
The largest single investment most consumers make is in their home. The consumer can protect his or her home, possessions, and liability with a homeowner’s insurance policy.
In addition to its availability to homeowners, similar coverage is available to those who rent homes or apartments. These policies are referred to as tenants’ or renters’ homeowner’s policies. If you are a renter, you do not need protection against damage to the building itself, but you do need protection against damage to or theft of your personal property and liability in the event someone falls or gets hurt on the part of the premises you rent.
A condominium owner may purchase a condominium homeowner’s policy to insure personal property. Some policies may also include any additions or alterations not insured by the condominium association. It is important to check with your condominium association and your agent before buying a policy to make sure you are adequately covered.
In addition to its availability to homeowners, similar coverage is available to those who rent homes or apartments. These policies are referred to as tenants’ or renters’ homeowner’s policies. If you are a renter, you do not need protection against damage to the building itself, but you do need protection against damage to or theft of your personal property and liability in the event someone falls or gets hurt on the part of the premises you rent.
A condominium owner may purchase a condominium homeowner’s policy to insure personal property. Some policies may also include any additions or alterations not insured by the condominium association. It is important to check with your condominium association and your agent before buying a policy to make sure you are adequately covered.
What is homeowner insurance?
Homeowners is one of the most popular forms of personal insurance on the market. The typical homeowners policy has two main sections: Section I covers your property, and Section II provides personal liability coverage (to cover you in case of lawsuits arising from things that happen on your property). Almost anyone who owns or leases property should have this type of insurance. Often, homeowners insurance is required by lenders as a requirement to obtain a mortgage.
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