What You Need to Know About Your Homeowners Insurance

We sat down with Peter Lanza, Vice President of Personal Lines Insurance at Rye Brook’s BNC Agency to learn what we don’t know—but should—about homeowners insurance policies.

Q: What are the most important things to look for in a policy?

PL: When insuring your home, it’s essential to understand the difference between replacement cost and dwelling coverage. You want to be sure to carry enough dwelling coverage to rebuild your home to pre-claim status. Given last year’s decades-high inflation rate, insurance carriers are adjusting upward the per square foot costs they use to account for increases in materials and labor. But we still see many people underinsuring.

Q: How can I be sure my insurance will cover the full cost of a rebuild?

PL: You will want a policy that includes GRC, guaranteed replacement cost. This endorsement will ensure the carrier will rebuild the house even if the dwelling limit is exhausted.

Q: How do I know if I need additional personal liability coverage?

PL: I refer my clients to their financial advisor but anyone who owns a home should have at least a $1 million personal umbrella liability policy over their auto/ property policies. The total umbrella limit would depend on the individual client's net worth and risk, with a higher limit suggested for high-net-worth individuals. Factors such as a swimming pool, a trampoline, the presence of a dog(s) in the home and having a teenage driver(s) should all influence the amount of coverage.

Q: How do I evaluate the personal property coverage in my policy?

PL: Typical homeowners policies include coverage for personal property—usually a percentage of the dwelling limit, which varies from carrier to carrier. This coverage is for general personal property such as furniture, clothing, electronics, etc.

It’s very important to have replacement cost coverage on the contents of your home, as compared to actual cash value since replacement cost coverage will avoid depreciation on these items.

Additionally, your jewelry, fine art, collectibles, and other such items need to be scheduled or blanketed separately on your policy.

Q: Do I need water backup coverage?

PL: If your home has a sump pump and/or a finished basement, I recommend increased limits for water backup in the event of a sump pump failure.

Q: Do I need flood insurance?

PL: Every property has the potential to flood, as we have seen here in Westchester. And flood insurance is not a part of your regular homeowners policy. It needs to be purchased separately.

NFIP, the National Flood Insurance Program, is administered through FEMA. Underwriting and claims are handled by the National Flood Service. The maximum coverage available is $250,000 for the building. You can purchase an additional $100,000 for contents but there is no coverage for items in your basement; coverage is for the mechanicals and the cost of sheetrock—you will not be covered for the cost of installing or painting the sheetrock.

Private flood coverage can be quoted by private flood carriers and coverage limits vary based on risk, location/elevation, and flood zone.

Excess flood coverage can be purchased on top of a NFIP policy when need is more than the $250K/100K limit.

Q: Does my homeowners insurance cover hurricanes?

PL: Typical homeowners policies include coverage for hurricane damage. Some carriers, depending on property location, will include a separate hurricane deductible, which is often much higher than your regular deductible.

Q: How do I know if my insurance carrier is a good one?

PL: Carriers are rated on AM Best (https://ratings.ambest.com). I recommend using a carrier rated A- or better when possible. I also recommend using a trusted agent to handle your coverage. Direct writers and online carriers do not have options and (in most cases) will offer the same product to all clients. Independent agents represent multiple carriers and can customize a program for your specific needs.

Q: What is the customary cost of insurance for a home like mine?

PL: There is no standard cost—you need to factor in the coverage limit, your location, the year your home was built, the deductible, and your prior loss experience.

Prior losses follow you from one company to another, and from property to property, as this information is shared by insurance carriers.

Q: How can I safeguard my home to minimize catastrophic loss?

PL: There are a number of preventative steps you can take to protect your home, starting with a central alarm system to alert a fire or burglary.

Low temperature monitoring will protect against heating system failure and possible burst pipes. A water shut-off device, In the event of a burst pipe, will shut off the water main and notify the alarm company.

In the event of a power outage, a back-up generator will keep your heat, sump pumps and other important systems running.

Q: How can I avoid an increase or non-renewal of my policy?

PL: I recommend using home insurance for catastrophic losses and offsetting the premium with higher deductibles. Carriers also look at frequency of claims. We’re seeing increases in premiums across the board because of inflation—which is significantly increasing the replacement cost of homes, as well as higher re-insurance costs to the insurance companies.

Q: How to do I maximize savings on my insurance?

PL: The best way to keep your insurance costs down is to combine your home, auto, umbrella and variable articles with the same carrier. And make sure all credits are applied (for an alarm system, etc.). n n n

You can connect with Peter F. Lanza, Vice President, Personal Lines Insurance BNC Agency (www.bncagency. com), located at 90 South Ridge Street in Rye Brook, NY 10573, by calling him at 914-295-5124 or 914-937-1230, or by emailing him at planza@bncagency.com