After months of searching and making offers you finally found the house of your dreams.
You even were willing to pay the full asking price for this beautiful homestead.
You got approval on your mortgage and then found out that the bank required fire or hazard insurance.
You may have even asked the loan officer who he would recommend.
The call was placed and you stopped and signed up for a homeowners policy.
In the excitement of moving into your dream home you probably didn't ask a lot of questions from the insurance agent at the time.
The first step in analyzing your homeowners insurance is getting the contract out and locating the declarations page.
The Declaration page is normally the first or second page of the contract and spells out the amount of coverage on the home, the contents, other structures, etc.
This page includes the information that you need to determine the type of coverage you currently own and if you are adequately covered.
Look the page over until you find the area that states "applicable forms" it may even appear to be written in secret code.
Now that you've located it, you need to find the form for your policy.
A form 2 is very basic, Form 3 is referred to as special form and a Form 5 is the cadillac of homeowners policies.
We'll get back to the forms in a bit.
Probably the single most important aspect of the policy you own is if it properly insures your home to value.
Considering that most policies are written on a replacement cost basis, the contract requires that you have insured the home for at least 80% of it's rebuild cost.
Even if your original agent did a rebuild cost evaluation, inflation may have left you under insured based on current rebuild costs.
You need to consult with a trusted agent and have a new rebuild cost estimate prepared for your home at current values.
Your top priority at that stage is to make sure you have insured to at least 80% of that estimate.
I promised to get back to the forms so here they are in condensed descriptions.
Form 2- Broad form coverage- this policy gives you "named perils" coverage on the structure and the contents.
Basically it means that if it is not specifically spelled out in the policy that you are covered for a peril, then coverage is excluded.
(very basic coverage) Form 3- Special form coverage is the most popular of all homeowners contracts and gives you "all risk" coverage on the structures and "named perils" coverage on the contents.
All Risk simply means that if it is not specifically "Excluded" in the contract then it is covered.
This is the broadest type of coverage available.
Of course your contents will still fall under named perils coverage.
Form 5- Special form gives you the best (all risk) coverage on both the structures and the contents of your home.
This coverage is normally reserved for the newer very well maintained homes.
Be sure to ask your agent if your home qualifies for this type of coverage.
You even were willing to pay the full asking price for this beautiful homestead.
You got approval on your mortgage and then found out that the bank required fire or hazard insurance.
You may have even asked the loan officer who he would recommend.
The call was placed and you stopped and signed up for a homeowners policy.
In the excitement of moving into your dream home you probably didn't ask a lot of questions from the insurance agent at the time.
The first step in analyzing your homeowners insurance is getting the contract out and locating the declarations page.
The Declaration page is normally the first or second page of the contract and spells out the amount of coverage on the home, the contents, other structures, etc.
This page includes the information that you need to determine the type of coverage you currently own and if you are adequately covered.
Look the page over until you find the area that states "applicable forms" it may even appear to be written in secret code.
Now that you've located it, you need to find the form for your policy.
A form 2 is very basic, Form 3 is referred to as special form and a Form 5 is the cadillac of homeowners policies.
We'll get back to the forms in a bit.
Probably the single most important aspect of the policy you own is if it properly insures your home to value.
Considering that most policies are written on a replacement cost basis, the contract requires that you have insured the home for at least 80% of it's rebuild cost.
Even if your original agent did a rebuild cost evaluation, inflation may have left you under insured based on current rebuild costs.
You need to consult with a trusted agent and have a new rebuild cost estimate prepared for your home at current values.
Your top priority at that stage is to make sure you have insured to at least 80% of that estimate.
I promised to get back to the forms so here they are in condensed descriptions.
Form 2- Broad form coverage- this policy gives you "named perils" coverage on the structure and the contents.
Basically it means that if it is not specifically spelled out in the policy that you are covered for a peril, then coverage is excluded.
(very basic coverage) Form 3- Special form coverage is the most popular of all homeowners contracts and gives you "all risk" coverage on the structures and "named perils" coverage on the contents.
All Risk simply means that if it is not specifically "Excluded" in the contract then it is covered.
This is the broadest type of coverage available.
Of course your contents will still fall under named perils coverage.
Form 5- Special form gives you the best (all risk) coverage on both the structures and the contents of your home.
This coverage is normally reserved for the newer very well maintained homes.
Be sure to ask your agent if your home qualifies for this type of coverage.
Source...