Consumer Guide to Purchasing Homeowners Insurance

Here are answers to some of the most frequently asked questions about Massachusetts homeowners insurance-from replacement cost to flood insurance-provided by the Massachusetts Division of Insurance.

(Please note: While reasonable efforts have been made to ensure that this information is accurate, it is general in nature and may not apply to your specific situation.)

• I am confused about the amount of homeowners insurance coverage I should buy for my home. How much is enough?
  Most people find that "enough" means a sufficient amount to rebuild their home. Remember that the foundation and the land are not covered under the policy and therefore will not figure into an insurance settlement. When determining the replacement cost of your home do not use the sale price, the tax assessment or the value the mortgage company calculated. All these can vary greatly from the construction costs. Also, if your home is non-standard, such as a home with unique features including ornate or hand-carved woodwork, stained glass windows, etc., make sure you bring this to your agent's attention. These are considerations that might not be addressed in a standard homeowners' policy replacement valuation, unless you bring it to your agent's attention prior to the underwriting of the policy. If you don't, you may discover you are underinsured when you have a claim. You should also evaluate your personal belongings and ask your agent about the options for covering these items. Finally, most homeowners' policies include personal liability protection. Be sure to speak with your agent concerning your liability coverage needs.
• What is the difference between actual cash value, replacement cost and modified or functional replacement cost?
  Replacement Cost is the amount to repair or replace the damaged property using materials of like kind and quality, without deduction for depreciation. Depreciation is the loss of value that develops as an item ages or wears. Actual Cash Value is the replacement cost of an item, less the amount for depreciation. A new option available to consumers is modified or functional replacement cost. At the time of a loss, modified replacement cost will restore the home to a functional condition. This may mean that unique features in your home prior to a loss will be replaced with items that serve the same function, but are not aesthetically the same.
• My homeowners policy contains coverage for specific (scheduled) items. What happens at the time of a loss?
  In most cases, insurance companies have the option to replace the item, if possible, through their vendor of choice. They do this because they generally can replace your item at less cost because of their ongoing business relationship with a specific vendor. Should you decide not to replace the item, your insurer may pay you only the amount that they would have spent to replace the item through their vendor. Fine art items are generally covered for the scheduled amount in the policy.
• My insurance company just notified me that they are not renewing my policy. Can they do this and are they required to send me a non-renewal notice by certified mail?
  Under Massachusetts law, an insurer is not required to write or renew your policy. However, if your insurer decides not to renew your policy, they must notify you of their decision at least 45 days prior to the policy's expiration date. Your insurance company does not have to send you a notice by certified mail. They are only required to use first-class mail to the address listed on your policy.
• My insurance company did not renew my policy. Where else could I purchase insurance?
  You have several options if your insurance is not renewed. First, you can check with your agent to see if he/she writes homeowners policies for other carriers. Second, you can inquire about obtaining insurance through the Massachusetts Property Insurance Underwriting Association (FAIR PLAN). It makes insurance protection available to individuals who are having difficulty getting insurance for their home. You can contact the FAIR PLAN directly. Their phone number is (617) 723-3800 or 1-800-392-6108.
• My home sustained a water loss last winter due to melting ice dams on the roof. What would be covered under my homeowners policy?
  Generally damage to both the exterior and interior of a home resulting from weight of ice and snow or ice dams is covered under a homeowners policy. However, only the area damaged in the loss will be covered. Further damage sustained due to wear and tear or neglect will not be covered.
• My home was recently broken into and I do not have sales receipts for the stolen items. What will the insurance company accept for proof of ownership?
  If the actual receipts are not available, insurance companies generally will accept photos, warranties, owners manuals, cancelled checks, credit card receipts, bills, servicing agreements, even video tapes, as proof of ownership. We suggest that you consider video taping your home before a loss.
• When can an insurance company cancel my homeowners coverage during the policy term?
  According to Massachusetts General Laws Chapter 175, Section 99 (12), your policy can be cancelled for these reasons:

  1. Non-payment of premium;
  2. Material misrepresentation/Fraud;
  3. Conviction of a crime arising out of acts increasing the hazard insured against. (For example, conviction for illegal storage of fireworks);
  4. Discovery of willful or reckless acts or omissions by the insured increasing the hazard insured against. (For example, not getting a gas leak fixed);
  5. Physical changes in the property insured which result in the property becoming uninsurable. (For example, should the home become vacant for more that 60 consecutive days, there is automatically assumed to be a greater exposure to vandalism and damage); and
  6. A determination by the Commissioner of Insurance that continuation of the policy would place the insurance company in violation of the law.
• I have specifically insured antique items listed on my homeowners policy. If I have a total loss, would the insurance company pay me their insured value?
  Your insurance company would first confirm the value of the items with one or more independent antique dealers. You should then be paid a dollar value based on the dealer(s) estimate of the worth of the antique items. If you disagree with the settlement offered by your insurer, then you can follow the dispute resolution process outlined in your policy. There is a simpler way. Get appraisals and have your agent establish the stated values in the policy. You should also keep your appraisals up-to-date.
• During a storm, a tree from my neighbor's yard fell and destroyed my fence. Does my homeowners policy pay for the damage or does my neighbor's policy?
  Generally, your own policy should cover the loss. Your insurance company may be able to recover the amount it pays you for the loss and your deductible from the homeowners insurance that your neighbor may have, in the event that the loss occurred as a result of your neighbor's negligence.
• Recent rainstorms have flooded and damaged my basement. Is there any coverage under my homeowners policy?
  Flood coverage is generally excluded on the basic homeowners policy. However, some homeowners policies provide coverage for backup of sewers and drains that cause flooding in your basement. This coverage can be purchased for a nominal premium. You should check with your agent to see if this coverage is provided and how much it costs.

  If, however, you live in a flood-prone area, you should consider and may be required by your lending institution, to purchase a flood insurance policy. Your agent should be able to inform you about the Federal Flood Insurance Plan and the exclusions and limitations of coverage in this policy.

• The food in my freezer went bad because I lost power in my home. Does my homeowners policy provide coverage for this?
  The basic homeowner policy usually does not. However, this is a popular coverage for insurance companies to offer and you may be able to buy it for a nominal additional premium. There is also the issue of where the power was lost. Some policies are limited to coverage for electricity lost in the home or where the electricity enters the home. Others will limit it to within so many yards from the home. Your agent should be able to tell you about the availability of coverage and how much it would cost.
• Insurers will not offer me coverage because I have a dog of a particular breed. Can they do this?
  Insurers may decide to non-renew your policy or decline offering a policy as long as they do not base their decision on specific criteria outlined in our insurance laws (M.G.L. Ch. 175, section 4C). The underwriting guidelines of homeowner insurers vary from company to company and, as a result, insurers may view the liability your dog and other risks on your property pose differently. Some insurers may offer you coverage, but exclude liability coverage for any claims resulting from dog bite incidents.

  As a dog owner and home owner there are ways that you can show your insurance agent or prospective insurer that you've taken steps to mitigate any liability risk your dog may pose.

  • Show the agent or prospective insurer that your dog has undergone obedience training with a certified trainer.
  • Show veterinary records that verify your dog has had all required immunizations and whether it has been spayed or neutered.
  • Show photographs as proof that your dog can be contained from contact with visitors to your property (muzzle, dog run, fence, or kennel).
  • Ask a trusted neighbor or regular visitor to your property to attest to the obedience of the dog in the presence of visitors.
  • If your dog has bitten before, always disclose the nature of the incident and the steps you took to prevent a repeat occurrence.

  Remember, taking these steps does not guarantee that you will receive coverage, but providing this information will be important to the insurer in making an underwriting decision. To save you time and frustration in your search for coverage, ask your agent or insurer to be up front about the breeds of dogs the insurer considers a high risk. Again, not every insurer views this issue the same way.

  If You Still Cannot Obtain Homeowners Insurance
  The Massachusetts Property Insurance Underwriting Association (a.k.a. The FAIR Plan) will offer homeowner insurance to consumers who have been declined coverage in the voluntary insurance market. However, The Fair Plan will exclude liability coverage for claims resulting from any dog with a bite history, but not for specific breeds. More information on obtaining homeowners insurance through The FAIR Plan is available by calling (800) 392-6108.

National Flood Insurance Program

Most homeowner policies do not provide coverage for damages resulting from flooding. If you live in a flood-prone area, you should consider and may be required by your lending institution to purchase a flood insurance policy. The National Flood Insurance Program makes federally-backed flood insurance available to property owners in more than 330 Massachusetts communities that have agreed to adopt and enforce floodplain management ordinances. If you wish to purchase flood insurance, you may do so by contacting one of our offices.

To learn more about flood insurance visit the National Flood Insurance Program.

This information was compiled to help consumers answer some of the most frequently asked questions about homeowners insurance. Additional questions or comments should be made to the Division of Insurance.

Source: Massachusetts Division of Insurance/Consumer Service