Homeowner's Insurance is a form of property insurance that covers a private residence. This type of insurance provides coverage related to loss of one's home, its contents, loss of use (additional living expenses associated with temporary housing), or loss of other personal possessions of the homeowner. It also provides liability insurance for accidents that may happen at the home or within the boundaries of the property. If you own your house you may already be familiar with homeowner's insurance. It is important to know that lending institutions will not provide funding for the purchase of a house, or business-related buildings, unless the property is insured. Both farm owner's and homeowner's insurance covers property damage, fire, and liability coverage to the dwelling and contents.
A renter's insurance policy is similar to homeowner's insurance, tailored to cover specific risks that are common to individuals leasing residential properties from others. Standard losses that are covered by renter's insurance are: contents loss on the premises, contents loss off premises, additional living expenses (for temporarily having to move out of the residence), personal liability, medical payments loss, and property of others loss. Payment is provided when certain types of perils occur and cause financial or other damages to you, the policyholder. For example, if the rental unit next door to yours has a fire and your personal property gets destroyed, your insurance company will compensate you. This is a covered peril. However, if there is a flood from a nearby river and your personal property gets destroyed due to the water, you will not get compensated by the insurance company because natural floods are generally not covered by standard renter's insurance. If you are renting your living space, be it a house or apartment, renter's insurance is an important consideration because many landlords will not sign the lease without proof of require renter's insurance.
Both owner's and renter's products will take your personal credit score into account in determining the premium cost. Most home owner's and renter's coverage only extends to activities and items related to the structure as your home. If you are also operating a business the property, you will need to inform your insurance provider. Depending on the type of business that you operate from your home, you may be required to have commercial, or business owners, insurance instead of a standard homeowner's policy. When you own a farm, or generate agricultural items for sale, your homeowner's policy will not cover any of your production, because you are, in essence, operating a business. Your homeowner's coverage will not provide product liability or pollution insurances.
If agricultural production is your plan, consider a farm owner's (rather than homeowner's) policy. When you visit your insurance provider, discuss your ultimate goal of producing agricultural products. If production is several years from now, you may be able to purchase a homeowner's policy, now, and change to farm owner's when you begin production. Your provider will be able to tell you the types of activities or actions that will signal that it is time to change your policy.
Your insurance provider will need to know several pieces of information to provide this coverage, including (but not necessarily limited to):
- Your name
- Address of the property
- If this is your primary residence
- Amount of deductible you wish to use
- Name of person/company who holds mortgage on the property
- Type(s) of construction materials
- Distance to a fire hydrant or fire company
- Type of heating system
- If a woodstove is used for heat
- If the property includes a swimming pool
- If there is a trampoline on the property
- If there are underground fuel tanks on the property
- Do you have any pets? Is there a bite history? (Many insurance carriers have a "prohibited animal list.")
Assuming the coverage you need now is a home owner's policy, your personal items will be covered and it is recommended that you have a listing of all valuables that will normally be found in your residence. This list may include:
You can take pictures of these items and secure the pictures in a safe, fireproof place (such as a small lockbox in your home, or a safety deposit box at a bank). Having this documentation will assist the claims process, in the event of a loss due to fire or theft.
The insurance agent will visit the property and measure and photograph the property before providing a premium quote. It is also a good idea to provide copies of the photos of the above mentioned valuables to the provider during this visit, if he/she requests copies.
If you are currently renting a place to live and your landlord has not requested renter's insurance, you should consider purchasing this product. Renter's insurance will cover your personal belongings should an event such as a fire or property damage occur. It will also provide protection to the landlord in the event of a loss. If you have accidently caused a fire, your renter's insurance will cover your personal belongings and reimburse the landlord for damages. If it can be determined that you caused a property loss, your landlord's insurance company will hold you responsible and you will be sued for the damages. Renter's insurance is often very affordable, and having this coverage can provide great piece of mind.
Your insurance provider will need the following information:
- Your name
- Address of the property
- Landlord's name and address
- Value of your personal property on the premises
Home owner's and renter's insurance products are usually written using replacement cost value (RCV). This means that you will usually be able to replace any lost property at the current market value. Keep in mind that the higher the deductible you choose, the lower the premium, but the more out-of-pocket expense you will personally incur in the event of a claim.
Prepared by Lynn F. Kime, extension associate; Winifred W. McGee, extension educator; Robert Faubel, independent insurance agent, Danner's Insurance; and Maggie Garcia-Taylor, insurance agent, Garcia-Taylor Insurance Agency.
This document is based on work supported by USDA, Risk Management Agency, 2014 Risk Management Education Partnerships Program, Agreement Number 14-IE-53102-036.