Your home is most likely the largest investment you will ever make. Even a small amount of damage can have substantial, unexpected financial implications. Homeowners insurance is the smartest way to adequately protect yourself and your home.

What is Homeowner’s Insurance?

Homeowners insurance protects your home and possessions in case of damage or destruction. In addition, it provides liability coverage should someone other than a family member be injured on your property.

Protection for your home. Protection for your home and any other detached structures on your property is the primary reason for a homeowner’s policy. Homeowners insurance gives you peace of mind, knowing that you are protected in case the unexpected occurs. The typical Penn National Insurance homeowners policy will cover damage resulting from the following.

• Fire and lightning
• Freezing of plumbing
• Accidental discharge of water from plumbing
• Explosions
• Wind and hail
• Falling objects
• Heating systems

This is not a comprehensive list; however, there are some specific items that are excluded from coverage in a typical homeowners policy, including damage from:

• Floods
• Earthquakes
• Intentional damage
• Regular wear and tear on a home

Ask your Penn National Insurance agent for a listing of specific coverages and exclusions covered in your policy. If you are interested in coverage for an exclusion, additional coverage is likely available to address your concerns.

Your homeowners policy also includes coverage, at set amounts, for additional living expenses that may be necessary while your home is being repaired or rebuilt.

Protecting your possessions

As a homeowner, you also realize the importance of insuring the contents of your home. A standard Penn National Insurance policy will cover your home’s possessions for up to 50 percent of the value of the structure coverage. For example, if you have your home insured for $100,000, your property is covered for losses up to $50,000. If you find the value of your personal belongings to be in excess of the basic coverage, talk to your Penn National Insurance agent about purchasing increased coverage. Personal property covered under your homeowners policy is also protected while you are off premises or traveling.

Because it would be virtually impossible for any of us to remember each item in our home (along with purchase date and price), it’s best to methodically conduct an inventory of your home’s contents. You can make a written list, or use a camera or videocamera to tape each room of your home. Be sure to include furniture, appliances, jewelry, artwork, window treatments, contents of your closets and cabinets, and your children’s toys. Record when each item was purchased, the purchase price, and serial numbers. When you make significant large purchases, be sure to add them to your inventory, and check with your Penn National Insurance agent to be sure you have adequate insurance protection.

Once you have completed your inventory, keep copies of it off of your premises—not in a shoebox tucked away on the top shelf of the guest room closet. A bank safety deposit box or with your insurance agent are two alternative storage solutions.

If you have extraordinarily valuable items in your home—antiques, oriental rugs, jewelry and the like—you should obtain an endorsement to your homeowners policy that specifically covers these items. Your Penn National Insurance agent can guide you in obtaining adequate protection for these valuables.

Liability Protection

The liability component of your homeowners policy is critical, and can protect you from financial devastation if someone files a lawsuit and the courts find you responsible for damages to others or their property. Liability insurance provides coverage for:

1. your personal liability;
2. damage to the property of others; and
3. medical expenses for injury to others.

Liability protection is for non-auto and non-business-related damages that occur as a result of actions by you or a family member residing in the home.

Liability coverage will also protect you from damage caused by your pet to another person or another person’s property. However, if your new puppy rips your Oriental rug to shreds, your homeowners policy will not protect you.

The medical payment coverage in your homeowners policy pays medical expenses for anyone injured on your property by a family member or pet, regardless of who is at fault. It does not pay for the medical expenses of you or family members who are injured on your property. Check your personal health and medical insurance to assure yourself of adequate medical coverage for you and family members.

How do I determine how much homeowners insurance I need?

When deciding how much homeowners coverage to buy, three cost factors come into play: market value, replacement cost, and actual cash value. Your agent will consult with you and suggest what you should do.

• Market value is the amount of money a buyer on the open market would pay to purchase your home today.
• Replacement cost is what it would cost to rebuild your home if it were totally destroyed. When applied to personal property, replacement cost is the amount of money you would need to replace an item if you were to buy it today.
• Actual cash valueis the replacement cost of an item less an allowance for depreciation.

Structural Coverage. When purchasing structural coverage, it is best to purchase protection to cover the replacement cost of your home. If you purchase insurance based on the market value of the home, you could find yourself underinsured. For example, if the market value of your home was $100,000 but it would cost you $125,000 to rebuild, you could face a $25,000 deficit if you only purchased insurance equal to market value.

Ideally, you should purchase coverage for 100 percent of the replacement value of your home. The minimum coverage you should purchase should be for at least 80 percent of the replacement value of your home. Most losses are within 80 percent of the replacement value of your home. Additionally, Penn National Insurance requires policyholders to have this level of structural coverage in order to be eligible to recoup the full replacement value of personal property that is stolen or damaged.

Do not assume that just because you carry enough homeowners insurance to satisfy your mortgage lender that you are adequately insured. A lender only requires you to cover its investment in your home. As you begin to pay down the mortgage, its interest in the home will decrease, while your interest will increase. While the lender’s requirements may be a good place to start, calculate coverage based on your particular needs.

Personal Property. A basic homeowners policy covers personal property at actual cash value. You can purchase additional coverage to insure your property for replacement cost. While coverage for replacement cost may cost 5 to 15 percent more than actual cash value, you will be glad for the coverage in case of a loss. Here’s an example.

In 1998, you purchased a gorgeous cherry dining room set for $8,000. In January 2001, a fire broke out in your home and the set was destroyed. A new set will cost you $12,000. If you are insured for the actual cash value of the furniture, you will only receive an amount equal to $12,000 less a calculation for 3 years of depreciation and use. If you had upgraded your coverage to replacement cost coverage, you would receive what it actually would cost you to replace the set--$12,000.

Liability Coverage. The standard amount of liability coverage in a Penn National Insurance homeowners policy is $100,000. You should purchase enough coverage to protect your assets. If your property and investments are worth more than the liability limits of your policy, talk to your Penn National Insurance agent about increasing your limits or purchasing an umbrella policy.

Your Homeowners Insurance Premium

Many of the factors used in the calculation of your homeowner’s premium depend directly on the levels of coverage you select for your house and its contents.

In addition to the value of your home and its possessions, several basic factors come into play when calculating your homeowners premium.

Type of construction: Frame houses generally cost more to insure than homes with a brick or stone exterior.

Age of house: Brand new homes or very old homes may cost more to insure. Homes of a historical nature may require special policies.

Fire protection: Your home’s proximity to a fire hydrant and/or fire station will affect your premium. The closer you are, the better.

The level of deductible you choose can also affect your premium. A deductible is the amount you are responsible for paying toward each claim on your policy, before Penn National Insurance remits any payment. The typical deductible on a homeowners policy is $250. If you choose to raise your deductible, your premium will decrease. Ask your Penn National Insurance agent about the difference in premium for various deductible amounts to determine if raising your deductible is the right choice for you.

If you insure both your home and your auto(s) with Penn National Insurance, you will receive a multi-policy discount. Ask your Penn National Insurance agent for more information.