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Protection Is In Details of Homeowner’s Insurance

Gelman, Rosenberg & Freedman CPAs is a member of CPAmerica International, an association of CPA and consulting firms that provides industry knowledge including insightful articles, to help member firms serve clients and other individuals and organizations.

Most homeowners’ eyes glaze over when the subject of insurance comes up. In fact, they may spend more time picking out their paint colors than they do their insurance provider or policy.

insurance document

Yet, a home is the single largest investment most of us will ever make. And homeowner’s insurance is the single best way to protect that investment.

The culprit preventing us from making decisions about insurance is often the prevalence of industry jargon in most policies – as well as the sheer number and variety of policies available.

Understanding the basics

To demystify shopping for homeowner’s insurance, and to reduce that overwhelmed feeling, it helps to understand the items a basic homeowner’s insurance policy covers. Standard policies include:

Broad, whole-house coverage, which protects the insured for damage to the house and other permanent structures on the property. Certain causes of damage may be specifically excluded from a policy based on the likelihood of such damage occurring. For instance, flood insurance may be excluded from policies for homes in flood plains.

Personal property coverage for damage or complete loss of items such as furniture. Business items used in a home business may not be covered. Check the policy to be certain.

Limited coverage for items such as stolen jewelry, coins and other valuables. These coverage amounts will vary depending on the state of residence.

Additional coverage for valuable items by way of endorsements, also called riders, to a policy. Homeowners often add these to a policy when the limited coverage amount is not sufficient to replace one or more items of value in the home. For instance, items with historic significance, collectibles, rare artwork, etc., may warrant separate riders to protect the policyholder from monetary loss due to theft or damage.

Liability coverage on a limited basis as part of most homeowners’ policies. For instance, if a visitor to your home trips on your property and is injured, the policy will pay for the visitor’s medical expenses and losses, up to a certain limit.

The typical consumer will first become aware of homeowner’s insurance when obtaining a mortgage to purchase a first home. The lender will require the borrower to purchase hazard insurance to protect the lender’s investment in the home in the event of certain types of disaster (e.g., fire, flood and earthquake). However, hazard insurance is usually geared toward property damage rather than owner liability for accidents on the premises. Therefore, comprehensive home insurance should cover both personal liability and physical damages.

Selecting a policy

Many factors contribute to the type of policy appropriate for a given home and situation. These include the age and condition of the home; number and type of valuables; location of home, including proximity to fire and rescue services; and the home’s history of claims.

To determine a home’s history of claims, check the CLUE (Comprehensive Loss Underwriting Exchange) report. These reports contain the insurance claim history of a property and help insurers and homeowners judge some of the problems a house may have had.

Only the owner of a home or an insurance company may order a particular home’s CLUE report. However, prospective buyers of a home may request that the homeowner furnish a CLUE report prior to writing an offer on the home.

The CLUE report can help determine the home’s eligibility for insurance and the affordability of the insurance. A property with a lot of claims, for instance, would be harder and more expensive to insure.

A homeowner may obtain a free copy of the CLUE report for a home from CLUE Inc. Consumer Disclosure Center, P.O. Box 105295, Atlanta, GA 30348-5295, or call toll free 1-866-312-8076.

Selecting an insurance provider

Insurance is regulated at the state level. To find out which agency regulates insurance providers in a state and how to contact an agency, visit the National Association of Insurance Commissioners (NAIC) at www.naic.org/state_web_map.htm. The NAIC is the national standard-setting and regulatory support organization for insurance regulators from all 50 states, the District of Columbia, and five U.S. territories.

Saving money on insurance

Ways to save money when purchasing a policy include raising the deductible; taking safety and security measures (e.g., earthquake strapping or a security alarm); grouping insurance types, such as homeowner’s insurance and auto insurance, with the same carrier; and taking care not to over-insure. For instance, if the standard policy already covers a specific hazard insurance, purchasing a hazard rider for the same coverage would be an unnecessary expense.

Once a policy is in place, you should review annually the policy’s limits and the value of any possessions covered so that you can make appropriate changes. As one insurance company’s slogan states, “It’s your castle. Make sure it’s covered.”


We have been very happy working with Jackie Cardello. She is very responsive and supportive, and totally understands our needs and the issues we face.

Steve Brice |  Vice President and Chief Financial Officer
National Industries for the Blind