Facts and Information About California Home Insurance
Is Home Insurance Required by California Law?
Considering that your home is the single most expensive item that you will most likely ever purchase, having a comprehensive and protective home insurance policy is truly a necessity. Without home insurance, a disaster could be more than devastating: it could wipe you and your family out financially, leaving you homeless and destitute. Without home insurance, you may have to pay medical expenses out of your own cash for someone injured on your property.
Although the state of California does not require you to purchase home insurance coverage, your mortgage company may require that you carry a certain amount of insurance on your home to protect the company’s investment in your property.
It makes good sense to purchase the right amount of home insurance to protect yourself and your property fully.
To get the best deal and the coverage you need, first
- determine the replacement value of your property, and
- list and set a reasonable value on your possessions.
Then shop around for home insurance, and
- get quotes to compare insurance costs.
Know what’s covered and what isn’t. And always read the fine print of a new policy to make sure of your coverage.
Parts of a California Home Insurance Policy
Homeowners’ policies are generally divided into parts labeled from Coverages A to F.
Coverage A: Dwelling
This is the main property coverage for the house and structures attached to the house, such as decks. It is based on the replacement value of your dwelling, which is the cost to replace the structure(s). Don’t think of it as the price you paid for your home and land or the current market value, but simply what it would cost to rebuild.
The amount of this coverage sets the basic limits for other coverages.
Coverage B: Other Structures
This covers structures that are not attached to the dwelling, such as tool sheds, detached garages, and so on. Normally, this coverage would be 10% or less of the limit of Coverage A.
Coverage C: Personal Property
This pays for loss or damage to the contents of your home and personal belongings owned by you and other family members living in your home. Coverage C is usually 50% or less than coverage A, and may be limited on certain types of valuable possessions, such as computers and other electronic equipment, jewelry, furs, art, antiques, firearms, cash, silverware, etc. These types of items may require the purchase of additional insurance; they are listed separately as a rider, an addition to the normal insurance policy document.
For your personal property, consider insurance for replacement cost rather than cash value. With cash-value coverage, you would be paid only what the item is worth today, not what you paid for it. So replacing it might be a hardship if the item has lost value with age/use. With replacement cost, the insurance would allow you to replace a damaged item with a new model.
You should review your personal property at least yearly to make sure that your insurance covers any significant new purchases; you should also consider whether the value of an insured item has decreased enough to discontinue its extra coverage.
Coverage D: Loss of Use
If your home is damaged so much that you cannot live there, loss of use coverage helps pay additional living expenses, such as housing, food, and storage of personal property. Coverage D’s limit is normally 20% of Coverage A.
Coverage E: Personal Liability
This coverage pays if you are legally, but unintentionally, responsible for the injury to another person on your property. It will usually cover legal expenses for your defense if you are sued and also pay damages, if appropriate.
Coverage F: Medical Payments to Others
Coverage F pays reasonable medical expenses for persons other than those living in your home who are injured on your property. For example, if a visitor slips on a loose paver on your walkway and is injured, your policy will most likely pay that person’s reasonable medical expenses. However, you would need business insurance to cover injuries that occurred as part of business activities.
What About California Condominium Insurance?
California state law generally requires condominium associations to purchase hazard insurance that covers the complex and liability insurance for accidents within the common areas. The law and the articles of the particular condominium association determine exactly where the association’s insurance ends and your need for insurance begins.
In general, condominium owners need insurance to cover damage to the interior of their unit and damage that a problem within their unit might cause to adjoining units, to safeguard personal property, to cover personal injury to visitors, and to provide living expenses should their unit be severely damaged. They may also want loss assessment coverage in the event that condominium buildings are severely damaged, and as a result, the condominium association assesses a deductible to be shared by all unit owners.
|