Michael Kolb
    Realtor in Naples
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   Helping you to buy or sell your home in Southwest Florida

Q & A Homeowner Insurance

The insurance for homes and condos is in some ways different from the regulations in Europe. Below you find some questions and answers to some of these regulations.

Together with  Sheri Dorta from Heritage Insurance I have written a Q&A paper for often asked questions concerning homeowner-insurance. If you have questions concerning insurance please call her (001 239 594 0002) or send her an Email: heritageins@earthlink.net . I myself and a lot of my clients have used her office for insurance-applications and I  recommend her to all my friends and clients.

What is the meaning of Ordinance or Law coverage?

Your Homeowner insurance pays for the repair of damages to your home with materials of similar kind and quality. If the repairs are extensive, you will need a permit from the county prior to making the repairs. The repairs must then be made in compliance with current building laws and ordinances. This coverage is especially important if you have an older home, because building codes are always changing. A home built in 2008 is built according to much stricter codes than a home built in 1980. If your 1980 home is totally destroyed or needs extensive repairs due to a peril covered under your policy, compliance with the current building codes will result in added expenses that are not covered under your basic dwelling coverage. Those added expenses would fall under your “Ordinance or Law” coverage.

Your agent must offer you ordinance or law coverage, which is usually 25% or 50% of your dwelling coverage amount. If you do not wish to buy this coverage, you must sign a form stating that you reject it. Some companies automatically include 10% ordinance or law coverage in their standard policy.

Am I allowed to rent my home/Condo?

“Homeowner” insurance policies are written with the assumption that the home will be owner-occupied. If you plan to rent your home or condo at any time, even seasonally, you must inform your insurance agent. Because rentals represent a whole different insurance exposure, your policy must either be changed or re-written so that both you and your property are still covered while the home is being rented.  It is important to note that damage by renters and theft of property are generally not covered when a home is rented. If there is a loss while the home is being rented, and your insurance company has not been notified of the rental, your claim may be denied. That’s why it is important that you consult with an insurance professional prior to renting out your home.

What is the meaning of the Hurricane Deductible?

A deductible is the portion of the claim that is the policyholder’s responsibility to pay. In Florida, there is an “All Other Perils” (AOP) deductible and a “Hurricane” deductible. The standard AOP deductible is a fixed amount, which is usually $1,000. The hurricane deductible is a percentage, usually 2%, of the dwelling coverage on a single family home and 2% of the personal property coverage (or $500, whichever is more) on a condominium unit policy. Some companies offer hurricane deductibles as high as 5%, 10% or even 25%, but such high deductibles are not recommended.

Here’s an example of how the hurricane deductible works:

The dwelling coverage on your home is $300,000. A hurricane causes $20,000 in damage. 2% of $300,000 is $6,000, which is your responsibility. The insurance company will then pay the remaining $14,000.

According to Florida law, the hurricane deductible is triggered when there are windstorm losses resulting only from a hurricane declared by National Weather Service. Hurricane deductibles would apply for damage that occurs from the time a hurricane watch or warning is issued for any part of Florida, up to 72 hours after such a watch or warning ends and anytime hurricane conditions exist throughout the state. Hurricane deductibles and the events that trigger them are set by law. The hurricane deductible applies only once during a hurricane season.

Condominium Association Insurance vs. Unit-Owner’s Insurance

In most communities the Condo Assocation’s insurance is part of your monthly or quarterly assessments (condo fees). This insurance covers the exterior of the building (such as walls, roof, plumbing, electrical) up to and including the drywall in each unit, as it was originally constructed. The Unit-Owner’s policy insures everything from the wall covering inward, including all floor covering, window coverings, fixtures, cabinets, countertops, etc., as well as any additions or alterations made by the unit owner, such as dividing walls or built-in wall units. Florida law specifically addresses condo association and unit-owner insurance policies and how they are to respond in the case of a loss. For that reason every condo-owner should have a unit-owner’s policy, which not only provides coverage for physical damage, but liability as well.

Water-Damage in a Condo

There is water damage in the unit above your unit (e.g. broken water heater). The water is leaking through the floor and your carpet, drywall and personal property is damaged. In this situation, it is your unit-owner’s policy that will respond, not the person in the unit above. As always, the damage will be subject to a deductible (usually $500 to $1,000).

Situations such as this are common occurrences in condominiums and can often lead to conflict between neighbors. If you happen to be the unit-owner whose water heater caused the damage to the unit below, you may avoid some conflict by offering to cover your neighbor’s insurance deductible.

Liability insurance as part of your Homeowner-Insurance

Your homeowner insurance includes Personal Liability. In Europe the insurance only pays if someone is hurt on your property. In the US this coverage protects you against a claim or lawsuit resulting from (non-auto related) bodily injury or property damage to others. For example, if a neighbor slips and falls in your house and sues you, and a jury finds you legally liable, this coverage would pay that claim plus legal fees up to the policy limits. This coverage applies to you and all family members who live with you. It does not cover intentional damage or harm caused by you or family members who live with you. You should always check your policy for exclusions and discuss them with your agent. 

What is Medical Expenses

Medical expense coverage is for someone who is injured on your property, regardless of fault. For example, your guest trips over her own feet and cuts her forehead. You can have her medical expenses paid under this coverage, up to the limit on your policy. Medical expense coverage is only for non-residents of the household.

Loss of use

If there is damage to your home, caused by a peril that is covered by your insurance policy, you may be required to move out temporarily while the damage is repaired. Loss of Use coverage will help to cover relocation expenses, up to the policy limit.

Loss Assessment

Loss Assessment coverage is important if you are part of a homeowner’s or condominium association. Associations may assess individual owners for damages to the commonly owned areas that are not covered by the association’s policy. Your policy may provide limited coverage for a “loss assessment”, which will help to cover all or a portion of a special assessment. This does not apply to assessments made to cover deductibles.

Flood insurance   

The following is an excerpt from the National Flood Insurance Program’s website, www.Floodsmart.gov (July 2008):

Flood insurance protects you from the financial devastation caused by floods. Even a few inches of water can bring thousands of dollars in repair and restoration costs. Most homeowners insurance does not cover floods. You need flood insurance.

Flood insurance, like earthquake insurance, is “single peril” insurance, sold separately from homeowners insurance. Flood insurance protects against losses to buildings and their contents, not the land surrounding them. The coverage applies whether the flooding results from heavy or prolonged rains, coastal storm surge, snow melt, blocked storm drainage systems, levee dam failure, or other causes. To be considered a flood, the waters must cover at least two acres or affect at least two properties.

Flood insurance is available both within and outside of floodplains. Your property’s flood risk is shown on flood hazard maps. Different types of policies are available depending on your flood risk.

If you live in a high-risk area, you will need a Standard Policy. Most mortgage lenders will require that you have such a policy before they will approve your loan.

Outside of high-risk areas, flood insurance is also available, usually at lower cost. A Preferred Risk Policy covers both a home and its contents, with premiums as low as $119 per year. While you aren’t federally required to have flood insurance in a low-to-moderate risk area, that does not mean you won’t ever need it. Large floods often extend beyond the boundaries of high-risk areas and smaller floods occur outside high-risk areas as well. In fact, a quarter of all flood insurance claims come from low-to-moderate risk areas.

Flood insurance is sold and serviced by private insurers, and backed by the federal government. More than 85 companies sell flood insurance. Often the same insurance agent who wrote your homeowners insurance policy can help you obtain flood insurance. Flood insurance costs the same wherever you purchase it, because the rates are set by the National Flood Insurance Program.

Flood insurance covers both homes and businesses. With residential coverage you can get up to $250,000 of insurance to protect your home and up to $100,000 to protect its contents. If you are located in (or moving into) a high-risk area, federally regulated or insured lenders will require you to have flood insurance for the amount remaining on your mortgage, or $250,000, whichever is lower.