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A Consumer’s Guide to
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Coverage Component |
Typical Limit of Coverage |
|---|---|
Dwelling |
You Choose |
Other Structures |
10% of Dwelling Coverage Limit |
Personal Property |
50% of Dwelling Coverage Limit |
Loss of Use |
20% of Dwelling Coverage Limit |
Personal Liability |
You Choose |
Medical Payments |
You Choose |
Replacement Cost and Actual Cash Value
You can choose to insure your home and its contents for either replacement cost or actual cash value. Replacement cost is the cost to rebuild your home or repair damages using materials of similar kind and quality, or to replace damaged belongings with new ones of similar quality. Actual cash value (ACV) is the replacement cost of the property less depreciation, which considers its age and wear and tear. Actual cash value coverage pays you for the value of the damaged property at the time of the loss, and may not be enough to fully repair or replace the damaged property.
You should review your dwelling coverage from time to time to be sure it doesn't drop below the cost to replace your home (see Replacement Cost/ACV box above). Many insurers require homeowners to insure their homes for at least 80% of the replacement cost, and some require 100%. If the homeowner fails to insure for the percentage of replacement cost required by the policy, a penalty is applied to partial losses.
For example, if it would cost $100,000 to replace your home and it is insured for $80,000 (80% of its replacement value), and a fire causes $25,000 worth of damage, then your insurance will cover the full $25,000, if 80% of the cost to replace the home is the required minimum limit. However, if the same home is insured for $60,000 (which is less than 80%of its replacement value), and there is a $25,000 loss, your insurance would pay for only part of the loss. You would have to pay the balance yourself. Your company would pay for damages to your property based on the following formula:
Amount of Insurance on Your Policy $60,000 = 75%
Amount of Insurance Required $80,000
by Policy (80% of $100,000)
Using these figures, your company will only pay for 75% of your $25,000 loss: 75% x $25,000 loss = $18,750 paid by the company. You will have to pay the remaining $6,250.
Insuring your home for the appropriate percentage of its replacement cost is very important. Check with your insurance agent or company to see what is required. Most homeowners insurance policies cover the contents of a home on an ACV basis. Many insurers offer an option to insure contents at replacement cost. The premium will be somewhat higher for this coverage; however, you may want to consider this option.
Whether your home is insured for replacement cost or ACV, it is important to keep track of its value. For instance, improvements such as adding a new room or new insulation or upgrading your kitchen, increase the replacement cost of your home, as does inflation in the cost of building materials. This can occur even while the market value of the home may decreases in a bad economy.
Check with your insurance agent or company at least once a year to make sure your policy gives you adequate coverage.
A deductible is the amount you have to pay out-of-pocket on a claim before the policy pays the loss. The deductible applies to coverage for your home and personal property and applies to each claim. Higher policy deductibles help reduce your policy premium but put more of the loss on you. A policy with a $1,000 deductible will have a lower premium than the same policy with a $500 deductible. Some policies have special deductibles for certain perils, such as windstorm, that may be expressed as a percentage of your coverage limit. For example, if your dwelling limit is $150,000 with a 1% windstorm deductible, your deductible for that type of loss would be $1,500.
Having a higher deductible can be a good way to save money on your homeowners insurance premium and to submit fewer claims. However, be sure you can afford the deductible in case you have a loss.
You can select other coverages to add to your protection. Sometimes, you can add coverage by buying an endorsement to a policy that you already have; other times, you must buy another policy to cover a specific peril or a specific item of property.
Endorsement
An endorsement is a document that makes a change to an insurance policy to add coverages, policy terms or exclusions to a policy without having to create and issue a new policy.
Some reasons you might want to add coverages are:
While homeowners insurance is not designed to cover most business uses of your home, some business uses may be covered, at least partially. For example:
How Insurers Determine Your Premium
Many factors affect the premium you pay, including which insurance company you choose. Different insurance companies charge different premiums for similar coverage. (See Charts on Pages 15—17 for examples.) How much insurance coverage you decide to buy will also affect your premium. Some of the other things that are likely to affect your premium are:
The characteristics of your home
Your choices and characteristics
Other household characteristics
Different insurance companies charge different rates for the same coverage. Also, not all insurance companies provide the same level of claims service. Therefore, it makes sense to shop around for the best insurance company for your needs.
Insurance companies use these methods to sell their products:
You can find insurance companies and agents through the phone book, on the Internet and television, and by asking friends and neighbors. A premium comparison guide is included in this publication to indicate how premiums for the same risk can vary by company.
Use the Bureau’s complaint index
Customer service is important to most consumers, particularly when they have a claim. You can get a sense of how well an insurer serves its customers from its complaint index. The Maine Bureau of Insurance has a homeowners complaint index comparison brochure on its website at http://www.maine.gov/pfr/insurance/consumer/brochures.htm. The index measures how many complaints the Bureau received relative to how much business the company does in the state. You can use this to compare the prior year’s complaints against insurers.
Know your agent
It is illegal for unlicensed agents or companies to sell insurance. Business cards aren’t proof that an agent is licensed. The best way to make sure you are dealing with a legitimate business is to call the Bureau of Insurance or check our licensee database yourself. It's available online at http://www.maine.gov/pfr/insurance/license_search.htm. If you buy insurance from an unlicensed agent or company, you might not have coverage in the event of a loss. If you suspect or determine that you have been contacted by an unlicensed agent or insurer, notify the Bureau of Insurance immediately so it can investigate. Your actions may protect someone else from being victimized.
Know your company’s financial stability
You also want to buy insurance from a company that is financially sound. You can check the financial health of an insurance company by using ratings from independent ratings agencies such as Standard and Poor’s, A.M. Best and Moody’s.
Getting premium quotes is a good way to compare different companies’ prices. You should first decide what coverages and policy limits you need. It’s important that you know how much it would cost to rebuild your home. An insurance agent or a contractor might be able to help you estimate the cost to rebuild your home.
When you get quotes, give the same information to each agent or company. Ask for the same coverages and limits so that you know you are comparing apples to apples. To give you an accurate quote, the insurance agent or company will usually ask for a description of your house (such as where it’s located, its square footage, when it was built and the type of construction). He or she also might ask about items that increase your insurance needs (such as owning pets and certain possessions). An agent might visit your home to take photographs or ask you to provide photographs. The agent may also ask for other information (such as the distance from the nearest fire department, when the roof and furnace were last replaced, and the general condition of your home). Be sure to get rate quotes and key information in writing.
Ask if you qualify for any discounts. Some insurers offer a discount if you also buy your auto insurance from them, update the home’s electrical or plumbing systems, get a new roof or add home security devices (for example, a burglar alarm).
Also, be sure to find out how much your premium will change if you choose different deductibles.
On the following pages are rating examples for a homeowners policy for three different homes, each rated in seven different locations in the state.
The companies that provided quotes for our premium comparisons are only a few of the companies that write homeowners and dwelling policies in Maine, but these companies were responsible for over 60% of the homeowners market in 2009.
We asked the companies to price the examples without using discounts. Companies do not all offer the same type or amount of discounts and we wanted the premium comparisons to be as close to the same circumstances as possible. Companies were also requested to use a neutral credit score. These comparisons were rated in June 2010.
These rates are not necessarily representative of what you would be charged, as premium is dependent upon many individual characteristics. These give you the opportunity to see how different companies might rate the same household. The same deductible and limits, except for the dwelling value, were used in each example, except as noted.
| Example 1 | Coverage $200,000 on Dwelling built in 1985 | ||||||
| Augusta | Bangor | Farmington | Machias | Portland | Presque Isle | York | |
|---|---|---|---|---|---|---|---|
| Allstate 1 | $403 | $504 | $574 | $518 | $462 | $397 | $475 |
| Concord 2 | $702 | $702 | $795 | $629 | $640 | $676 | $629 |
| Hanover | $678 | $714 | $688 | $735 | $661 | $589 | $631 |
| Liberty | $783 | $777 | $762 | $932 | $1,131 | $616 | $961 |
| MMG 3 | $725 | $752 | $693 | $645 | $790 | $685 | $662 |
| Patriot | $761 | $629 | $871 | $618 | $635 | $788 | $618 |
| Patrons | $927 | $927 | $1,031 | $832 | $898 | $860 | $832 |
| Peerless 4 | $1,042 | $1,036 | $1,099 | $971 | $1,059 | $893 | $855 |
| State Farm | $1,053 | $1,017 | $1,296 | $1,106 | $911 | $1,120 | $1,296 |
| Vermont Mutual 5 | $798 | $783 | $834 | $685 | $786 | $691 | $677 |
| York | $948 | $638 | $938 | $769 | $768 | $734 | $674 |
| 1 Contents at 60% | 4 Contents at 75% | ||||||
| 2 Contents at 70%, ALE at 30% | 5 Contents at 70% | ||||||
| 3 ALE at 30% | |||||||
| Example 2 | Coverage $125,000 on dwelling built in 1940, systems updated within 10 years. | ||||||
| Augusta | Bangor | Farmington | Machias | Portland | Presque Isle | York | |
|---|---|---|---|---|---|---|---|
| Allstate 1 | $318 | $395 | $448 | $406 | $358 | $319 | $368 |
| Concord 2 | $446 | $446 | $501 | $401 | $408 | $429 | $401 |
| Hanover | $437 | $461 | $443 | $474 | $426 | $380 | $407 |
| Liberty | $641 | $641 | $629 | $746 | $869 | $525 | $869 |
| MMG 3 | $800 | $539 | $511 | $713 | $584 | $756 | $491 |
| Patriot | $485 | $401 | $554 | $395 | $404 | $502 | $395 |
| Patrons | $617 | $617 | $686 | $554 | $597 | $573 | $554 |
| Peerless 4 | $703 | $699 | $741 | $656 | $715 | $603 | $578 |
| State Farm | $847 | $818 | $1,042 | $889 | $733 | $900 | $733 |
| Vermont Mutual 5 | $532 | $521 | $555 | $457 | $524 | $461 | $453 |
| York | $628 | $422 | $623 | $509 | $505 | $487 | $442 |
| 1 Contents at 60% | 4 Contents at 75% | ||||||
| 2 Contents at 70%, ALE at 30% | 5 Contents at 70% | ||||||
| 3 ALE at 30% | |||||||
| Example 3 | Coverage $250,000 on Dwelling built in 2004 | ||||||
| Augusta | Bangor | Farmington | Machias | Portland | Presque Isle | York | |
|---|---|---|---|---|---|---|---|
| Allstate 1 | $406 | $507 | $576 | $521 | $474 | $400 | $487 |
| Concord 2 | $760 | $760 | $861 | $679 | $691 | $730 | $679 |
| Hanover | $718 | $756 | $728 | $778 | $699 | $622 | $668 |
| Liberty | $723 | $711 | $664 | $900 | $1,120 | $577 | $926 |
| MMG 3 | $695 | $695 | $677 | $632 | $758 | $657 | $636 |
| Patriot | $755 | $622 | $867 | $612 | $629 | $783 | $612 |
| Patrons | $1,166 | $1,166 | $1,296 | $1,045 | $1,127 | $1,080 | $1,045 |
| Peerless 4 | $912 | $907 | $962 | $851 | $924 | $782 | $748 |
| State Farm | $886 | $856 | $1,090 | $931 | $767 | $942 | $767 |
| Vermont Mutual 5 | $969 | $949 | $1,010 | $829 | $952 | $837 | $819 |
| York | $1,013 | $686 | $1,005 | $830 | $843 | $782 | $741 |
| 1 Contents at 60% | 4 Contents at 75% | ||||||
| 2 Contents at 70%, ALE at 30% | 5 Contents at 70% | ||||||
| 3 ALE at 30%, Special package with $500,000 liability, $5,000 medical payments, and contents at 70% | |||||||
More About Premium Quotes
While you're getting quotes, you should also ask some of these questions:
A homeowners insurance policy is a legal contract. It states your rights and responsibilities and those of the insurance company. You should read your policy and be sure you understand it.
If you have questions about your insurance policy, contact your insurance agent or company.
When you first buy homeowners insurance, you will receive a policy—not a photocopy. If you don’t receive a policy within 30 days, contact the insurance company, even if you bought the policy through an agent. (At renewal, often only forms that are new or have changed will be provided.) Keep your policy in a safe place and know the name of your insurer. If you still have questions, contact the Bureau of Insurance.
Other Helpful Tips
Pay the premium on time. Most insurers don’t offer a grace period for paying the premium; the due date is the due date, and Maine law allows an insurer to cancel if your premium is not paid when it is due.
Keep a file of all paperwork you completed online or received in the mail and signed—as well as any other documents related to your insurance, including the policy, correspondence, copies of advertisements, premium payment receipts, notes of conversations and any claims submitted.
Make a household inventory.
Maintain your home. A homeowners policy isn’t a maintenance contract; it insures against damage from perils such as fire, wind and hail. It doesn’t pay to repair items that simply wear out, like rotted porch railings or aging roof shingles. You are responsible for the upkeep of your home, such as repairing your roof when it begins to leak or cleaning your chimney flue so it doesn’t catch fire.
Read your policy. Your policy is your guide to the types of losses that may or may not be covered. How often you file a claim and the types of claims you file often affect your premium and whether your insurer will renew your policy.
If the cost to repair the damage is not much more than your deductible, you might want to pay for the repairs without filing a claim.
To file a claim, contact your insurance agent or company as soon as possible. Ask about forms or documents you’ll need to support your claim. You are also required to protect your home from further damage. For example, you might need to board it up or clean up water from a backed-up drain.
The insurance company will assign a claims adjuster to assess the damage and determine the payment. These adjusters may be employees of the company or independent contractors. You should cooperate with the adjuster’s investigation of your claim.
The adjuster will probably want to meet with you at your house to inspect the damage. Jot down notes and keep track of the dates of any conversations you have with your insurance agent or adjuster.
If there are disagreements between you, the insurer and the claims adjuster, first try to resolve them with your insurer. Don’t feel rushed or pushed to agree with something you aren’t comfortable with. It might help to have your contractor meet with you and the insurance adjuster.
If you and the insurer still disagree about the value of the claim, review the appraisal provision in your policy. It is a simplified procedure to resolve disagreements about the value of a property damage claim.
If you have trouble with or questions about your claim, you also may contact the Bureau of Insurance for help. The Bureau of Insurance has consumer services personnel who can help you work with your insurer to resolve disagreements.
There’s a difference between an insurance company cancelling your policy and not renewing it.
Cancellation means either you or your insurance company stop the coverage before the policy’s normal expiration date (a homeowners policy term is normally one year). You can always cancel your policy for any reason. When you’re a new policyholder, there’s a limited period of time (90 days for your primary residence/120 days for a seasonal home) in which your insurance company can cancel your policy for any reason. After that, it can only cancel you for specific reasons permitted by law, such as nonpayment of premium, failure to comply with loss control recommendations, and the property being vacant without custodial care. The cancellation reasons must be stated in your policy.
Your insurance company must give you at least 10 days’ notice before cancellation due to nonpayment of premium, and at least 20 days’ notice for other reasons. If you request to cancel your policy, the insurer may refund less than the total unearned premium amount. If the insurer cancels, the total unearned premium should be refunded.
Non-renewal means the company refuses to renew your policy when it expires. In Maine, the insurance company has the right to not renew your policy if its reason is an allowed cancellation reason or another reason that must be in good faith and related to the insurability of your property. For example, the home is no longer owner-occupied or the roof is in poor condition. If your company chooses not to renew your policy, it must give you at least 30 days’ notice before the expiration date and clearly state the reason for the nonrenewal in the notice.
If your policy is canceled after the initial 90-day underwriting period has ended, or if your policy is not renewed, you can appeal that action by contacting the Bureau of Insurance and requesting a hearing. Your request must be made within 30 days of receiving the cancellation or nonrenewal notice. Even if you think the company may change its mind and continue your coverage, request the hearing to preserve your rights. The hearing can always be cancelled.
If you choose to cancel or not to renew your policy, you should notify your agent or insurer. You will need to sign a special form requesting cancellation if you wish to cancel your policy before its expiration. You should also notify them if you do not want a renewal, as the company is obligated to renew you unless it has sent a nonrenewal notice. Failure to notify the company that you no longer want the policy can result in an earned premium being charged to you up until the date the insurer cancels the policy for nonpayment.
Visit the National Association of Insurance Commissioners (NAIC) Web sites for consumers: www.InsureUonline.org or www.naic.org.
Visit the National Flood Insurance Program website: www.floodsmart.gov.
Visit www.annualcreditreport.com or call 877-322-8228 to access your free annual credit report.
Although the Bureau can give general insurance information, and help when violations of insurance law have occurred, the Bureau cannot:
The Maine Bureau of Insurance regulates the insurance industry to protect and to serve the public.
This brochure is meant to be used only as a guide when you shop for homeowners insurance. We have tried to explain some commonly used insurance words to help you better understand the types of insurance you can buy, what and what each type of insurance covers should you have to file a claim.
Other brochures and additional consumer information are also available on our website.
The Maine Bureau of Insurance
34 State House Station
Augusta, ME 04333-0034
800-300-5000 (in state)
207-624-8475
TTY 1-888-557-6690
September 2010
Last Updated: December 8, 2011
| Copyright © 2006 All rights reserved. |
To be reimbursed for damage to your property, a covered peril (such as fire, theft or windstorm) must have caused your loss. Which perils your policy covers depends on the type of policy you buy. The most common types of homeowners (HO) policies are listed below. All of the policy types cover your dwelling and its contents, as well as personal liability and medical payments.