A consumer's guide to homeowner insurance

www.insurance.wa.gov

A consumer’s guide to:

Homeowner

Insurance

Choosing and using your homeowner insurance coverage

Washington State Office of the Insurance Commissioner

A message from the Insurance Commissioner:

Your home and personal

belongings are among

the most expensive items

you will purchase in your

lifetime. Make sure you

take the necessary steps to

protect your investment.

As a property owner, you

should prepare for the

possibility of property

loss from fire, lightning,

weather, burglary, theft, or even lawsuits due to

your negligence that cause property damage or

injury to others. Whether your home is a house,

condominium, manufactured home or duplex -- even

if you’re a renter -- it is essential you are properly

protected and insured.

There are many factors to consider when you select

an insurer and decide on coverage. This guide can

help you determine what coverage meets your needs.

It includes general information on what homeowner

policies cover, the coverage limits, and tips on filing

a claim.

Please take the time to read through this guide before

you buy a policy.

If you still have questions after reviewing this

information, please call our Insurance Consumer

Hotline at 1-800-562-6900.

Sincerely,

Mike Kreidler

Insurance Commissioner

Table of contents

Understanding your homeowner insurance policy Page 1

The declarations page

The policy

Types of coverage Page 2

Dwelling coverage

Coverage for other structures

Personal property coverage

Coverage for loss of use or additional living expenses

Medical payments coverage

Personal liability coverage

Additional coverages

Optional coverage Page 4

Earthquake

Flood

Home daycare

Home business

Sewer backup endorsement

Umbrella liability policies

Secondary residence premises endorsement

Watercraft endorsement

Credit card forgery and depositor’s forgery coverage endorsement

Other types of policies Page 5

Renters policy

Condominium owner policy

Mobile homeowner policy

Farm or ranch policy

Shopping for coverage Page 5

How to determine how much coverage you need

Factors that affect underwriting

The cost of homeowner insurance

Reducing your rates

Prepare ahead to ease the claims process

If you experience a loss Page 8

Additional homeowner insurance information Page 9

Washington State Office of the Insurance Commissioner

Understanding your homeowner

insurance policy

The policy

The second part of your insurance contract is the

policy itself. This includes:

• Insuring agreements

• Definitions

• Conditions

Section one of your policy describes your property

coverages and the losses it covers.

Section two typically includes:

• Liability coverage (protection against claims

someone else makes against you)

• Premises medical coverage or accidental

injury coverage (pays the medical expenses

of others accidentally injured on your

property)

Each section includes coverages, limitations,

exclusions, definitions, and conditions that apply

only to that section.

Your insurance policy is a contract between you and your insurance company. It spells

out exactly what the company agrees to do in exchange for the premium you pay. It also

describes your responsibilities and the general terms of coverage. The contract is divided

into two basic sections: a declarations page and the policy itself.

The declarations page

This section of the contract includes basic details of

the agreement. It’s important you review this page

to ensure that all the information is correct and the

coverages you requested are listed. The declarations

page includes:

• Name of the insurance company

• Name(s) of the person(s) insured

• Location of the insured residence

• The policy number

• Policy period

• Property covered

• Coverages purchased

• Limits of liability for each coverage

• Applicable deductibles

• Your premium

Make sure you review your declarations page

to verify your policy includes the types and

amounts of coverage you requested.

Washington State Office of the Insurance Commissioner

Types of coverage

occupy, or buildings you use for business. If you

have an unusually large detached garage or several

outbuildings on your property, you may need to buy

additional coverage.

Personal property coverage

This coverage provides for repair or replacement

of your furnishings and personal items, such as

your TV, stereo, clothing, dishes, etc. The coverage

is usually 70 percent of the dwelling coverage for

replacement costs, depending on your insurance

company. Your replacement coverage is based on the

used value until you actually replace the item. This

means your insurance company will initially pay you

for the used value of your item. After you buy the

replacement item, your insurance company will pay

you the difference between the used value and the

actual replacement cost.

This coverage extends worldwide, but usually

provides only up to 10 percent of the personal

property coverage limit for property you keep at

another location. You may be able to buy increased

limits on personal property for an additional cost.

Insurance companies usually offer personal property

coverage on a named peril basis. This means that

the policy will specify and list the perils that trigger

coverage. Commonly covered perils include fire,

lightning, windstorm, hail, explosion, riot or civil

commotion, aircraft, vehicles, smoke, vandalism

and malicious mischief, theft, and damage caused by

falling objects.

Your policy may provide specific coverage limits

for specified property and perils, such as jewelry,

cameras, furs, art, silver, stamp collections, etc. Ask

your agent or insurer if you need to raise those limits.

Homeowner policies do have exclusions. For

example, they do not cover a roommate’s or renter’s

property, autos, and/or damage caused intentionally.

A homeowner policy is a protection package that

provides coverage for your home, personal property,

medical payments for others, and protection against

claims someone else makes against you. This type

of policy is available for primary residence homes

occupied by the owners. It’s often referred to as a

“package” policy.

There are a wide variety of homeowner policies

available, so be sure to read your policy to find out

what coverage your insurance company provides.

Following are some of the coverages that may be

included in your policy.

Dwelling coverage

This coverage provides for the repair or replacement

of your damaged or destroyed home and attached

structures, such as a garage or deck. Most

homeowner policies provide replacement coverage.

This coverage pays the actual cost to replace your

home up to the limit of your policy.

Some policies offer guaranteed replacement cost.

Under this policy, the company will pay the full

cost to replace your home, even if it is above the

policy limit.

Before you have a loss, discuss with your agent

or company how replacement costs work and the

conditions of the policy limit for your specific

coverage.

Coverage for other structures

This coverage provides for the repair or replacement

of other permanent, separate, unattached structures

on your property. The limit is typically 10 percent of

the dwelling coverage. This coverage protects against

a loss to a detached garage, personal workshop or

detached fence. It usually will not provide coverage

for other buildings on your property that renters

Washington State Office of the Insurance Commissioner

Coverage for loss of use or additional

living expenses

This coverage pays for your additional living

expenses if your house is deemed unlivable. For

example, if you can’t stay in your home due to a

broken pipe that floods your home or a fire burns

down your house. However, your normal cost-of-

living expenses, such as your house payment or

utility bills, are not covered. Your policy usually will

include the loss of use or additional living expense

coverage at 20 percent of your dwelling coverage

limit without additional premium. Your policy may

include restrictions on this coverage, so check with

your agent or insurance company.

Medical payments coverage

This coverage pays the medical expenses of others

when they are accidentally injured on your property.

Most policies include at least $1,000 of coverage,

but higher limits may be available. Generally, this

coverage is limited to any non-resident on your

property with your permission. The insurance

company does not need to determine negligence

to pay the injured person or their provider. This

coverage also is called “good neighbor” coverage.

Personal liability coverage

This coverage pays expenses for bodily injury and

property damage sustained by others when you are

legally liable. For example, if you knew you had a

loose deck railing and someone leaned on it, and

fell off your deck and was hurt, you would be liable.

Most policies include at least $100,000 of coverage,

but higher limits may be available. When deciding

how much coverage to buy, think about the value of

your total assets, and how much you might lose if

someone successfully sued you for damages.

Personal liability coverage extends beyond your

property location. The coverage goes with you

wherever you go.

Additional coverages

This type of coverage generally provides for debris

removal, damage to trees, plants and shrubs.

Additional coverages also may include credit card

coverage. This protects you if someone steals your

credit card and makes unauthorized charges.

Your policy may cap the amount of coverage in this

category, and it may limit the coverage to specific

perils. Check with your agent or insurer to see what

additional coverages are available.

Washington State Office of the Insurance Commissioner

Optional coverage

Home business

Your insurance company may offer home business

coverage. Each insurance company defines the

type of home business it is willing to cover on a

homeowner policy.

Umbrella liability policies

These policies extend your coverage above the limits

of the liability coverage you already have through

your homeowner and auto policies. They provide

you with an extra layer of protection. Normally, these

policies pay after you exhaust the liability limit of

your homeowner and auto policies.

Secondary residence premises

endorsement

This coverage provides protection for a secondary

residence, such as a summer home.

Watercraft endorsement

This endorsement provides coverage for small

sailboats and outboard motor boats. It broadens

personal liability and medical payments coverage.

There are size limitations to watercraft and engine

horsepower, so discuss this with your agent before a

loss occurs.

Credit card forgery and depositor’s

forgery coverage endorsement

This coverage provides protection against loss, theft,

or unauthorized use of credit cards. It also covers

the forgery of any check, draft, or promissory note.

No deductible applies to this endorsement. However,

check with your agent to see if this coverage has

any exceptions.

The following optional coverages or endorsements

(a written form attached to your insurance policy

that alters your policy’s coverage, terms, or

conditions) will apply to your policy only if they are

listed separately on the declarations page. Generally,

they require an additional premium.

Earthquake

This coverage provides for repair or replacement

of your home following an earthquake. Not all

companies offer this coverage. For those that do,

you may have to meet specific requirements to

qualify. For example, the insurance company may

require you to retrofit your home for earthquakes,

or require you to strap your hot water tank to a

wall. The amount of this coverage will match your

dwelling coverage, but you will have a separate

deductible, usually 10 to 20 percent of the coverage

amount. Your insurance company may offer higher

deductibles. Your policy will define what constitutes

an earthquake, and list any limitations that

may apply.

Flood

Your homeowner policy will not cover flooding.

You must buy flood insurance separately. It provides

coverage due to physical losses caused by flood,

flood-related erosion, and abnormal tidal surges

and mudslides. If your property is located in an

area with a high chance of flooding, your lender

may require you to obtain this coverage. Flood

insurance is available through the National Flood

Insurance Program (NFIP). For more information,

contact your insurance agent, or the NFIP at 1-888

FLOOD29 (1-888-356-6329), or at www.floodsmart.

gov.

Home daycare

Home daycare insurance provides liability coverage

for daycare operations you conduct in your home

when you care for a limited number of children.

Washington State Office of the Insurance Commissioner

Renters policy

This coverage provides protection for personal

possessions and personal liability when you rent an

apartment or house.

Condominium owner policy

If you own a condominium, this policy covers your

internal unit. It covers items, such as your cabinets,

fixtures, flooring, wall coverings, appliances, custom

features, etc. Your condominium association’s policy

covers the main portion of the building and the

common areas. You can also buy Loss Assessment

coverage. This coverage helps you pay for an

assessment the association may charge you to help

them pay for covered losses that occur to common

areas. Some condominium owner policies may

Determine how much coverage you need

Insurance companies use established formulas to

help them decide the appropriate limits of dwelling

and structure coverage. These calculations take into

consideration the same type of information used in

real estate appraisals, such as:

• Construction materials

• Type of floor plan (two-story, split level,

ranch, etc.)

• Total square footage

• Number and types of rooms

• Type of garage or carport

• Special features

Your replacement cost of your home may not be

similar to your local government’s assessed value for

tax purposes or the current market value. They use

different criteria to establish those values.

Once you establish the appropriate coverage amount

for your home, you should review this information

annually. This will ensure your coverage maintains

pace with inflation and other changes that affect the

cost to repair or replace any damage to your home.

Most policies automatically adjust your dwelling

limit at renewal, so you may want to review it to

make sure you have adequate coverage.

Whenever you make changes to your home, such

as additions or major improvements, notify your

insurance company. This is important — it can affect

the amount of coverage you will need to maintain

full replacement cost coverage should you have a

loss after renovations or improvements. Talk to

your agent before you make major improvements or

renovations.

Other types of policies

include Loss Assessment coverage in the basic policy.

Be sure to ask your agent or insurer.

Mobile homeowner policy

This is a package insurance policy written

specifically for mobile homes. It includes coverage on

the mobile home and the contents. It also includes

theft and liability protection.

Farm or ranch policy

Coverage for a farm or ranch is similar to a

homeowner policy in many ways. However, due

to the many types of structures and equipment

typically used on farms, the insurer can customize a

farm policy to cover many items and property.

Shopping for coverage

Washington State Office of the Insurance Commissioner

Factors that affect underwriting

• Credit information – Your insurance

company may ask you to provide

information about any bankruptcy,

judgments, or credit problems. They may

also obtain your credit history from one of

the national credit reporting companies.

Your insurance company may also require an

inspection of the property. Once the policy is issued,

they may require a re-inspection prior to a renewal.

The cost of homeowner insurance

State law requires insurance companies to submit

proposed rates and rate changes to our office for

review. These requests must include sufficient

financial information to justify the need for

the requested rate. If we are satisfied with the

justification, we are required by law to approve

the request.

Insurance companies base homeowner rates on a

variety of factors. Your premium consists of a “base

rate” amount the insurance company adjusts up or

down to reflect specific risk factors. While the weight

given to these risk factors will vary by company, the

major factors are fairly universal. They include:

• Territory rating – Homeowner rates may

vary according to geographical region.

Some areas are more prone to wind or water

damage. The crime rate and emergency

response time in an area also can impact

your rate.

• Construction – Wood frame construction

is at greater risk from fire and other types

of loss than homes built with concrete or

masonry. However, masonry structures are

more susceptible to earthquake damage than

wood structures.

All insurance companies set underwriting and rating

guidelines. They use these guidelines to determine

whether to offer you coverage and how much to

charge you. The factors that affect underwriting may

include, but are not limited to:

• Property information – This includes your

street address, the year your house was built,

number of living units, type of construction

material, type of foundation, living space

square footage, number of rooms, age of

the roof, roofing materials, and the age of

heating, plumbing, and electrical systems.

• Community fire protection – These factors

include the distance from your home to the

nearest fire department and fire hydrant,

and the fire department’s response time.

• Prior insurance – Insurance companies look

at your prior insurance history. For example,

if you own an uninsured property for several

years, and then decide to insure it, you will

have a more difficult time getting insurance.

Insurance companies believe this shows a

lack of responsibility by the homeowner.

• Claims and occurrence history – Your

insurance company may ask you to disclose

both claims and occurrences from the

past. A claim is a loss you reported to the

company for coverage. An occurrence is

either a loss you did not report, or if you

did report it, it did not result in an opened

or processed claim. Insurance companies

believe this represents the potential for loss,

and may ask you about such events.

• Stability – Your insurance company will ask

you for information, such as your occupation

and how long you have worked for your

current employer.

Washington State Office of the Insurance Commissioner

Reducing your rates

Every insurance company that provides homeowner

coverage uses its own package of “special” discounts

to market its products to particular types of

customers. The following list contains suggestions

on how to reduce your rates. Be sure to ask your

agent about:

• Member discount – Some insurers offer

a discount when you’re a member of an

affiliated organization.

• Long-time customers – Some insurers offer

discounts to long-time customers with no

claims history.

• Multiple policies – If you have your home,

auto, liability, and other policies with the

same company, it may offer a discount.

• Protection devices – If you have smoke

detectors, burglar alarms, or automatic

sprinkler systems, the company may offer a

discount.

In addition to the discounts listed above, you may

want to think about choosing a higher deductible to

reduce your rates. If you have a lien holder, they may

require a minimum deductible amount.

• Amount of insurance – Your premium will

vary depending on the replacement cost of

your home. Remember, the cost to actually

rebuild your home may exceed its current

market value or sales price. Talk to your

agent to find out if you have an adequate

amount of coverage.

• Credit history – Under federal law (Fair

Credit Reporting Act), insurance companies

can use credit history as one factor that

impacts your homeowner rate. They may

assign you an insurance score based on your

credit history. They use your score as one

factor to decide whether to accept or decline

your coverage, or how much to charge you.

However, the Insurance Commissioner

believes the use of credit information in

insurance is inherently unfair. The law limits

the use of certain information in credit

scoring. For more information, go to www.

insurance.wa.gov/home-insurance.

• Claims history – Some companies may

charge you more based on the number of

claims you have filed. They may even cancel

your coverage if you made several claims.

Every company is different. Talk to your

agent to find out how his or her company

handles claims history.

Washington State Office of the Insurance Commissioner

Prepare ahead to ease the claims process

Insurance is something you hope you never have to

use, but if you should ever need to file a claim after

experiencing a loss, the following suggestions can

make the process easier:

• Written inventory – Create and regularly

update a written inventory of your home’s

contents.

• Video/photographic record – Videotape or

photograph the contents of your home,

and the exterior from different viewpoints

and angles.

• Notify your agent or insurance company.

• Ask your agent or insurance company what

documents, forms, and other data you need

to get your claim processed.

If you experience a loss

• Review your policy and ask your agent or

insurance company for an explanation of

what is covered.

• Appraisals – Have someone appraise your

jewelry, antiques, stamps, coins, and other

valuable collectibles.

• Document security – Keep your insurance

policy, home inventory, appraisals, photos

and video records in a secure secondary

location (such as a safety deposit box or

cloud storage). Update your records and

documentation annually.

• Protect your property from further damage.

Save the receipts for temporary repairs, and

submit them to the insurance company

for reimbursement. You should not make

permanent repairs until after your insurance

company has inspected the damaged

property.

• If you are unable to live in your home, tell

your agent or insurance company where they

can reach you.

• Itemize your losses and include copies

of receipts for larger items, such as large

appliances, furniture, expensive cameras,

and computer and electronic equipment.

If the loss is due to a criminal act, such

as burglary or theft, notify your local law

enforcement agency.

You must prove your loss – and receipts are the

best way to do it. If you don’t have receipts, then

photos of the damaged or missing items may help

document the loss. Promotional brochures and

other information may be helpful as well. If your

insurance company requires you to submit a “proof

of loss” form, complete and submit it in a timely

and accurate manner. This will help prevent claim

processing delays. Keep complete copies for your

reference.

Additional homeowner insurance

information

For more information about homeowner insurance, check our homeowner section on the web at www.

insurance.wa.gov/your-insurance.

Washington State Office of the Insurance Commissioner

Notes

Need more help?

Call our Insurance Consumer Hotline!

1-800-562-6900

www.insurance.wa.gov

Our professional consumer advocates enforce insurance law and can investigate complaints

against insurance companies and agents on your behalf.

We also offer individual counseling and group education on health care issues in your

communities. Our highly trained volunteer Statewide Health Insurance Benefits Advisors

(SHIBA) can help you understand your rights and options about health care coverage,

prescription drugs, government programs, and more.

Washington State Office of the Insurance Commissioner

2104-OIC-Consumer Guide-Homeowners-EN-Rev. 10/18