You need the right type and amount of homeowners insurance in order to truly protect yourself should something happen to your home and possessions.

This guide contains helpful information for new homeowners and longtime owners as well. Especially important is information on flood insurance and on updating your insurance needs if you haven't checked or changed your policy in a long time.
                      

The main types of homeowners insurance are: 

Broad (HO-2) provides coverage for losses to your house and its contents from 17 perils, including fire and lightning, smoke, windstorms and hail, explosion, riot, damage from vehicles or aircraft, theft or vandalism, broken windows and other building glass, the weight of snow, sleet or ice, building collapse, falling objects, electricity surges or shorts (though TV and radios aren’t included), as well as problems from accidents with your plumbing, heating, air conditioning, and appliances, including frozen pipes. 

Special (HO-3) is the most commonly used type of homeowners policy and covers losses from everything listed in HO-2 as well as about anything else you can imagine, except those things that are specifically excluded in the policy. Damage covered under HO-3 but not HO-2 could include rare situations like condensation on attic insulation causing water stains on the ceiling of the room below or damage to draperies that froze to a large plate glass window. The specific exclusions usually include intentional damage, floods, earthquakes, wear and tear, insect or rodent damage, nuclear accidents and war.  

There are also policies designed for renters (HO-4), comprehensive coverage for your home and possessions (HO-5), condominiums (HO-6) and older homes (HO-8). Other types of policies variously called endorsements, floaters or riders extend protection to specific items you own. You can find more about these policies elsewhere here.

Structures.  Damage or destruction of your house, garage, shed and other structures are covered under the typical policy. Landscaping is also generally insured for up to five percent of the value of your policy.

Personal Property. The typical homeowners policy extends its protection to your possessions, including your furniture, appliances, electronics, clothes, jewelry, sports equipment and lawn tools. And these items are not just covered when they are at your home, but anywhere. So if your luggage is lost on a trip or something is stolen out of your car while parked at your work, your homeowners insurance probably covers it, though there may be limits.

Most policies cover personal property at 50 to 70 percent of the policy limit. So if you have $100,000 worth of insurance on your home, you would have between $50,000 to $70,000 worth of coverage for your belongings. The best way to determine if you have enough coverage for your belongings is to conduct a home inventory (see Inventory in this guide).

Liability. Besides insuring your property, the typical homeowners policy includes coverage for injuries or loss to other people. If someone trips on your steps or sidewalk, it will cover that person’s medical bills and other losses. It also may pay for injuries in accidents (not auto accidents) caused by you, a family member or even your pet away from home, such as if you run into someone with your bike. The policy also may pay your legal bills if you are sued in one of these situations.  You can buy larger amounts of liability coverage at a relatively small cost. 

Temporary Living Expenses. If your home is damaged or destroyed and you must live somewhere else while it is repaired or rebuilt, your homeowners policy should cover some or all of the costs. 

 Make sure you know whether you have insured your property for "replacement cost" or "actual cash value." The difference is explained under Replacement Cost in this guide. Also be aware of the standard limits under What's Not for different kinds of personal property. 

You will need specific or additional policies to cover the following:

Floods. Flood insurance is never included in a standard homeowners policy. Most flood insurance is offered by the federal government and can be obtained through an insurance agent. It also is offered by some private companies. If you live in an area that is prone to flooding, you are advised to purchase flood insurance, otherwise you may suffer a total loss in the event of a flood. 

To type in your address and see your risk of being flooded, or to find a list of agents in your area that sell federal flood insurance, go to www.floodsmart.gov on the web. 

Valuable personal items. Under most policies, there will be a limit on how much you can be reimbursed for certain kinds of items, such as jewelry, fine arts, camera equipment, coin or stamp collections, computer equipment and satellite dishes. Though policies vary, typical limits include:

$200 on money and coins
$1,000 on stamps, tickets, securities (such as stocks), deeds and passports
$1,000 for loss by theft of jewelry, watches or furs
$1,000 on trailers (not used for watercraft)
$2,000 for loss of theft of guns and firearms
$2,500 for loss by theft of silverware
$5,000 for computer equipment

These limits are for the entire category of items in your home, not each individual item. So, for example, if you had a $1,000 limit for jewelry and had three rings worth $3,000 combined, you would only receive $1,000 for all three if they were stolen. 

If you have something that is worth more than these limits, you may want to insure such an item separately with an addition to your policy called an “endorsement” (also known as a “floater” or a “rider”). You will likely need an independent appraisal of the item’s worth in order to obtain an endorsement. Talk to your agent for details. 

Replacement cost is what it would take to repair or rebuild your home should it be damaged or destroyed. However, standard homeowners policies contain a limit on the replacement value. If your limit is less than what it would take to rebuild your home at current construction material and labor costs, then you may want to increase your policy limit. 

The amount of insurance coverage you buy should be based on the true cost of rebuilding or replacing your home. It should not be based on what you paid for your home or its current market value, because those values do not represent what it would cost to rebuild and also will include the value of your land, which does not need to be replaced. And it should not be based on your mortgage, which usually is much less than the cost to rebuild. 

Be aware that many policies are written at 80 percent of replacement cost. For example, if it would take $100,000 to rebuild your home, then the property is actually insured at replacement cost for $80,000. You the homeowner would be responsible for the remaining amount to replace the home. Check with your agent. 

Depending on your home, you may have the option of buying a guaranteed replacement cost or an extended replacement cost policy, though either will have higher premiums. A guaranteed replacement cost policy will pay whatever it takes - 100 percent - to rebuild your home should something happen to it. This type of policy may not be available for older homes, since they are hard to duplicate. An extended replacement cost policy will pay 20 percent or more beyond the policy limit, depending on the insurance company.  

For your possessions, such as appliances and furniture, replacement cost is what it would cost to replace it with a new item with similar features, while actual cash value is what the item was worth. For example, actual cash value on a 10-year-old TV set may only be about $50. What you would need to replace it with a similar model might be more like $500. An actual cash value policy would give you $50. A replacement cost policy would give you $500. Most homeowners insurance policies cover contents on an actual cash value basis, so check with your insurance agent.

To help you estimate the value and replacement cost of your possessions in order to ensure that you have sufficient coverage under your homeowners or renters insurance policy; and 

To create a record of what you have in case disaster strikes and you need to provide your insurance company with a comprehensive list of what needs to be replaced. 

A proper home inventory will create a record of what you own and what it's worth. To perform an exhaustive home inventory, you should:

1. Make a list. Go through each room in your house and list every piece of furniture, every appliance and every item. Include art on your walls, lamps, curtains or blinds on the windows, dishes and silverware, even the number of CDs, DVDs and videos you own. For clothes, count the number of shirts, pants, dresses, pairs of shoes, etc. Cover your attic and/or basement. Make sure to include the tools, equipment and other items in a garage or shed. For as many items as possible, list model names, serial numbers, purchase dates and prices. For the purpose of determining if you have adequate insurance coverage, you may want to figure out what it would cost to replace your possessions, at least for furniture, appliances and other items. You want your inventory to be as complete as possible - imagine how might you spend replace all these items without being reimbursed by your insurance. 

A form for making your inventory is available in printable PDF format here or in Microsoft Word so you can download it and fill it out on your own computer here. 

2. Take video or photos. Videotape or take photos of all the rooms in your house in order to document what you have. Record each room from different angles. Videotape or photograph the contents of closets, drawers and cabinets as well. Put the date on the videotape label or on the backs of the photos if it's not automatically recorded. 

3. Safeguard your inventory. Place your list and your video or photos in a safe deposit box at a bank, in a fireproof and waterproof container in your home, or have a family member or friend hold on to them. 

4. Update once a year. It's important that your list be kept up to date. Once you make an initial list, it won't be hard to update.

Shop around. A list of the major companies offering home insurance in Delaware is available here, or check the yellow pages of the phone book. 

Make your home safer. Adding safety items like deadbolts, smoke detectors, fire extinguishers, burglar alarm or a security system could lower your rates, but you should ask your agent or company. There may also be discounts available for improving your home structurally, with shatter-resistant glass, storm shutters or different roofing. Again, ask your agent or company. 

Raise your deductible. A deductible is the amount of money you have to pay toward a loss before your insurance company starts to pay a claim. The higher your deductible, the lower your premium. The difference between a deductible of $250 and $1,000 may be a savings of up to 25 percent on your premium. But, should you make a claim for damage or theft, you will have to pay more out of your pocket. 

Consider the cost when you choose your home. In our area, brick homes are less costly to insure than wood frame home. Newer homes and those closer to fire stations also have lower premiums. 

Make sure you are insuring the house and possessions based on replacement cost, not land or market value. 

Ask whether there are discounts offered for:

Home, auto and other insurance with same company
Senior citizens
Staying with same company for three years, six years, etc.
Updating plumbing or electrical systems
No smokers in a home.

Renters insurance carries the same coverage for your possessions and the same liability as a homeowners policy. With renters insurance, you will have coverage if your possessions are stolen, damaged or destroyed; if something happens to your camera or luggage on vacation; or if something in your apartment causes damage to the building. A renters policy may also provide you with living expenses if your apartment is destroyed or damaged and you cannot stay there. 

Renters insurance is very affordable and you and any roommates can share a policy, making it even cheaper. The best way to determine how much coverage you need is to perform a home inventory (see “Inventory” in this guide).

Questions about insurance or complaints about an insurance company or insurance agent can be made to the Commissioner's Consumer Services division by phone, by fax, by letter, by email or with an online complaint form:

Call 1-800-282-8611 toll-free in Delaware or (302) 674-7310

Fax a complaint to (302) 739-6278

Mail to 841 Silver Lake Blvd. Dover, DE 19904

Email to consumer@state.de.us

Use the online complaint form

If complaints to the Insurance Commissioner's Office do not provide a suitable solution, you may take part in a formal process called "arbitration." In arbitration, you file a formal complaint against a company, somewhat like a lawsuit, but instead of a judge and jury, the case is decided by a three-person panel made up of an attorney and two insurance adjusters who have nothing to do with the case.

Arbitration is available only after several attempts to resolve the matter informally have failed and will require a $30 filing fee for home insurance matters. Arbitration is not available to contest denials based on medical necessity. To get more information about the arbitration process, call the Insurance Commissioner's Office at (302) 674-7310 or click here.

Insurance companies are no longer allowed to not renew your insurance because you have made a few small claims. If you think your company has acted improperly, contact the Insurance Commissioner's Office. 

Insurance companies must now provide an annual notice of "gaps" in your insurance - telling you about situations in which you may not have enough coverage or might not be covered at all. 

How much to rebuild? Talk to a builder or your insurance agent about what it would cost to rebuild your house at today’s construction material and labor rates. If your policy limit isn’t that high, either ask your agent to increase it or decide that you would be willing to build a smaller house should disaster strike (see Replacement Cost in this guide). 

What are your possessions worth? Make an inventory of all you own (see Inventory in this guide) and figure what it would cost to replace it. Compare this against your policy limit and decide whether you need to increase your coverage. Also, make sure you don't need an endorsement policy to cover valuable items like jewelry, collections and other items that exceed standard limits (see What's Not in this guide). 

Do you need flood insurance? Flood damage is not covered by standard homeowners insurance - it must be purchased separately, usually from the federal government. Assess your home's risk of flooding at www.floodsmart.gov.

The following are the top 10 companies that provide homeowners insurance in Delaware. Together they account for 80 percent of the homeowners insurance sold in the state. They are listed with the name and market share in Delaware. You can find local agents for these companies in the yellow pages of your phone book. 

How should I insure my condo or co-op property?

Your condominium association should purchase a policy that covers the building, including any common walls and grounds, including liability associated with common properties. To protect your contents and interior walls, you may purchase an individual unit-owner's policy. This policy is similar to home insurance and renters insurance. 

Condominium Unit-Owner's Form (HO-6), will cover a unit owner who wishes to insure his or her property or to cover any items not insured by the association’s policy. A unit-owner policy will also pay for property damage to personal belongings, wall, floor, and ceiling coverings, and any accessories not originally installed in the unit. It also provides personal liability protection. 

Be sure to check with your condominium association to confirm your policy covers your property and that there is not a gap between your own and the condo’s policy. 

What should I know about flood insurance?

Standard homeowners insurance policies and standard business insurance policies do not provide protection against floods. It is a hard lesson that has been learned by some in Delaware in the past. And it is an unfortunate reality that many people don't find out until it’s too late.

While some private companies offer flood insurance, most flood insurance in the U.S. is backed by the federal government under the National Flood Insurance Program. It is available to home and business owners through local insurance agents. Under the NFIP, home coverage is available up to $250,000 and up to $100,000 of coverage is available for personal possessions.

Premiums for flood insurance are based on risk of flooding as well as the age and construction of a home, but nationally, the average premium is $438 a year.

An important thing to know about flood insurance is that, once purchased, it does not take effect for 30 days. So don't wait until a storm is approaching to buy flood insurance.

A website at www.floodsmart.gov will assess the flood risk for any address as well as provide a list of insurance agents in the area that offer NFIP-backed insurance.

Flood insurance can and - for some people - will be the difference between recovery and financial ruin. The people of Delaware should be aware of the need and advisability of flood insurance for themselves, and Delaware's insurance agents and local governments can be a part of the solution as well.

For insurance agents, the Insurance Commissioner's Office has added a course of flood insurance to the continuing education that is required for insurance agents who sell homeowners insurance to maintain their license.

For local governments, the Commissioner's Office has provided information to each town, city and county government in Delaware on the Community Rating System of the federal flood insurance program. Residents in communities that undertake specific flood preparation and prevention activities can get discounts on their flood insurance between 5 and 45 percent.

The activities range from public awareness and data collection, to preserving undeveloped floodplain land, to maintaining an updated flood response plan, to relocating floodprone buildings. Some activities governments are already doing may qualify them for CRS credit, and the more activities a government performs, the higher the premium discount is for its citizens.

Information for local governments about CRS is online at www.fema.gov/nfip/crs.shtm or call the Insurance Commissioner’s Office at (302) 674-7300.

What are the different types of homeowners policies available?

How can I make my house safer? 

The following items may help lower your homeowners insurance premiums. Check with your agent to make sure. 

Deadbolt locks on all exterior doors
Photoelectric or motion detector security lights
Window locks on every window
Home security system (check with your agent to balance the cost of installing and maintaining such a system compared to any reduction in your insurance premiums)
Smoke detectors
Carbon monoxide detectors
Fire extinguishers .