Possehl Agency
Possehl Agency
Homeowners
Protect Your Home
Your home is most likely your most valuable asset. Insurance can protect your financial well-being in case of an unpredictable event such as a burglary, fire, or natural disaster.
Review your policy annually to determine if it still fits your needs. You don't want to be under-insured in the event of a disaster, but you also don't want to pay for more coverage than you need.
Possehl Agency will reevaluate your coverage needs every couple of years through our preferred group of carriers.
If you don't own a home, consider renter's insurance.
Depending on your needs, there are also other types of insurance such as flood or vacation property insurance that can protect your assets.
Home Insurance Basics
This section is designed to help you understand home insurance policies—what they typically cover and don’t cover, what affects their rates, and how and under what circumstance they can be cancelled or not renewed.
Common gaps in homeowner’s insurance
Homeowners policies vary by company and homeowners can mistakenly assume common items and features are covered. When purchasing insurance coverage, we can assist you in determining what types of coverage fits your specific needs.
- Sump pumps
- Sheds and unattached enclosures
- Trampolines and pools
- Jewelry artwork, antiques (Depending on the value, you might want to consider adding an additional personal articles policy.)
- Home office or business (You will need an additional policy to protect your assets if a client is injured on your property or if merchandise is damaged or stolen.)
It pays to be proactive
When reviewing your policy options, considering the following factors can help guide you to the appropriate amount of coverage for your needs.
Determining adequate coverage
Creating a home inventory can help determine if you have enough coverage. If you have any special items like art, jewelry, consider if you need additional coverage. You also need to factor in coverage for a shed or pool. Those items might not be covered under your policy or might raise your liability.
Actual Cash Value vs. Replacement Costs
If your policy provides “Actual Cash Value” the insurance company will pay you an amount equivalent to the current value of the property. Keep in mind, that you might be reimbursed for less than what you originally paid for the item.
With “Replacement Cost” the insurance company will pay you the “Actual cash value” upfront, then provide further reimbursement if the cost of replacement is more than the actual cash value.
In cases where there is a disagreement between you and the insurance company over the amount of the loss, Minnesota statute provides for resolving the dispute through an appraisal process.
Raising your deductible to lower premium costs
Ask your insurance agent whether there are discounts you qualify for and review if you could raise your deductible to decrease your premium costs.
Assessing your risks
Floods and earthquakes are often not covered by a standard homeowners or renters policy. Determine your risk for these types of disasters and ask about available options. Visit www.floodsmart.gov for details on flood insurance.
Determining your liability coverage
Coverage for $250,000 might sound like it would go a long way to protect your property, but once you factor in retirement accounts, savings, and your home's value you might need coverage beyond that amount. An umbrella policy can extend your liability coverage above the amount that you might find in a basic homeowner's policy.
Review your coverage annually
Insurance companies may change policy terms at renewal, but they must notify you first. Read all notices and information sent from your insurance company.
Prepare a home inventory
A home inventory can help in case you need to file an insurance claim after your belonging are damaged or stolen. Not only will an accurate and detailed inventory make the claims process easier, it can help ensure that you are adequately compensated. These tips can help you put together a comprehensive home inventory:
- Document each item as completely as possible, including brand, serial number, and model number. Taking pictures can help.
- Keep receipts to prove what you paid for each item.
- Review your insurance policy to know what is covered and whether your possessions are insured for actual cash value or replacement cost.
- For rare or valuable items such as jewelry, antiques, or art, you may want to consider adding additional insurance -- a rider -- to your policy.
- Update the list annually and keep it in a safe, fire-proof box, or store in online.
What's Covered?
Homeowner policies
Often termed HO by the insurance industry—come in a number of standard packages that are pretty much the same no matter where you live in the United States. The most common homeowner policies consist of two parts: the first is property coverage, which includes coverage of your dwelling, other structures on the property, and personal property. “Other structures” include the garage, as well as guest house, tool shed, or similar type buildings. Not included are buildings used for business or rented or leased to others. Personal property includes all household furnishings and your own personal belongings, including clothes. Among personal property usually excluded from coverage are your car or other motorized vehicle, pet dog or cat or other animal, computers or other equipment that are part of a small business run from your home.
The second part of your policy provides personal liability coverage, which pays damages if someone brings a claim or suit against you for bodily injury or damage to his or her property.
Property coverage
Three types of HO policies are commonly offered. The first two, usually termed HO-1 and HO-2, insure the dwelling, other structures, and personal property against a list of named “perils,” or causes of loss, such as fire, lightning, etc. HO-1, a basic policy, commonly covers some 11 perils. HO-2 is broader, covering some five or six additional perils. A third policy, usually termed HO-3, includes an “all risk” clause that covers nearly all perils or causes of loss, with specified exceptions. The exceptions almost always include flood, earthquake, war, and nuclear hazard.
Liability
The liability portion of the homeowner policy protects against a claim or lawsuit brought by someone who is injured on your property or by something you do. The claim can also be for damage to that person’s property, if it is caused by something you do or for which you are responsible. The liability portion of your homeowner’s policy pays for damages when you are liable for the injury, pays the medical expenses if the person is injured, and provides legal expenses to defend you even in cases where the suit is not thought to be justified.
Other Types of HO Policies
Variations of these common homeowner policies are available for other types of dwellings. They include:
Renter’s or tenant’s policy
The standard renter’s policy insures your personal property against the expanded list of perils named in the HO-2 policy, and also includes liability coverage; it does not, of course, cover the actual building or other structures, which are the responsibility of the owner.
Mobile home policy
This provides basically the same type of cover- age as the common HO policies described above. Premiums are usually higher because of the greater susceptibility of mobile homes to wind damage.
Condominium owner’s policy
The condominium association buys insurance covering the building and other structures. The owner of the condominium unit, therefore, usually buys a policy similar to the renter’s policy in that it principally provides personal property and liability coverage. You should check with the condominium association, however, to determine the extent of its cover- age. Typically, the association’s insurance covers only the exterior walls, and damage to such items as bathroom fixtures, kitchen cabinets, and carpet would need to be covered by your policy.
Actual Cash Value coverage
Often termed HO-8 is similar to HO-1 in providing both property and liability coverage for some 11 named perils, but it differs from most HO policies sold today in that it covers repairs or reimburses based on Actual Cash Value—not replacement or rebuilding costs. This type of cover- age is often sold to cover older homes that have some architectural or other features that make their replacement cost significantly higher than their market value. It also is commonly sold to those who cannot afford or qualify for the more comprehensive HO policies described above.
Property Coverage
Coverage for the property portion of the homeowners’ policy includes three parts that are often distinguished by the letters A, B, and C: Coverage A for the dwelling, Coverage B for the other structures, and Coverage C for personal property. A fourth type of coverage—sometimes termed Coverage D—compensates you in case you are forced to live elsewhere while your home is being repaired or rebuilt. All property coverage includes deductibles— the amount that you must pay before the insurance company pays the balance. A common deductible is $250.
Coverage A
Because of inflation, increases in construction costs, and other changes that cause the value of your property to go up, you may consider including an inflation guard clause in your policy. This automatically adjusts the amount of your coverage to reflect an increase in value. Not all companies offer this option.
Coverage B
The other structures on the property, is determined by the amount of Coverage A. The standard coverage limit is 10 per- cent of Coverage A, although this can be increased at your request. In the case of the example used above, the standard coverage would be limited to $9,600.
Coverage C
Personal property, compensates you for damage to or loss of your personal property, and is usually subject to a limit of 50 percent of Coverage A. In the example used, this limit would be $48,000. Many homeowners increase this coverage limit to 70 or 75 percent, but most policies set individual limits on certain types of property such as money, securities, jewelry, and watercraft. Check these limits; if you have some highly valuable possessions that would not be adequately covered under these limits, you might want to consider buying a special personal property endorsement or “floater” that would insure these items separately.
As noted in the opening paragraph of this guide, providing replacement cost coverage for personal property is an important feature, since policies that compensate based on Actual Cash Value are likely to prove inadequate. If the company’s policy does not provide for replacement cost of personal property, Minnesota law requires the company to state this on the policy declarations page.
Minnesota law stipulates that if an insurance company limits Coverage B and C to a percentage of the dwelling (Coverage A) limit, it must also offer an option allowing policyholders to purchase lower or higher percentage limits; the company must also provide a rate credit for lower-than-standard limits.
Coverage D
Loss of dwelling use pays additional living expenses if you are forced to live elsewhere while your home is being repaired or until you can move into a new dwelling. The amount of coverage is based on actual living expenses required to maintain your normal standard of living, or on the fair rental value of your dwelling, less any expenses that do not continue while the home is repaired. Payment is for the time it takes for the home to be repaired or for you to relocate.
Liability coverage
The second major part of your home insurance policy. The standard amount of liability coverage is $100,000, but this periodically increases. If you have a lot of assets to protect, you may want to buy a personal liability umbrella policy.
Umbrella policy
This type of policy provides additional liability coverage and is applied after the liability coverage on your homeowner policy runs out. Besides providing additional monetary coverage, it also expands coverage to include personal injury.
The standard homeowner policy covers bodily injury and property damage, with personal injury offered as an option. (Personal injury includes such actions as false arrest, defamation, and invasion of privacy.)
What Affects Rates?
Homeowner policy rates depend first of all, of course, on the extent and dollar amount of coverage: a policy with an “all risk” clause will cost more than a policy that covers damage resulting from a limited number of named perils; a policy that provides replacement cost coverage for a $300,000 home will cost more than for a $100,000 home; liability coverage of $300,000 will cost more than coverage of $100,000.
Ways to Reduce Rates
Lower Coverage B and C. In Minnesota, homeowners may reduce their rates by reducing the dollar limits of coverage for structures other than the dwelling (Coverage B) and for personal property (Coverage C). State law requires insurance companies to offer lower than standard limits for these types of property and to reduce the premium accordingly. If you choose to have lower limits, take care that you are not running the risk of being underinsured. Many people underestimate the replacement value of their personal property.
Higher deductibles
You can also lower the premium by raising your deductible—the amount of money you pay before your insurance company starts to pay for a loss. Doubling your deductible from the standard $250 can often reduce your rates about 12 percent; increasing the deductible to $2,500 can often save about 30 percent.
Safety and security systems
Some companies offer discounts for sprinkler systems, fire and burglar alarms, and similar systems. In the case of mobile homes, tie-downs or ground anchors, which reduce the risk of wind-caused damage, can lower rates.
Discounts and group rates
These are sometimes available to seniors, or members of a professional or business organization. Some companies also offer a discount if you have another policy with them— such as auto insurance—or if you have stayed with the same company for several years. If a company offers these packaged discounts to homeowners, it must also offer them to individuals having a renter’s or a condominium owner’s policy with the company.
Renovation
If a company offers a lower rate for a new home, it most also offers a rate reduction for renovated homes. As an example, a company may give credit for one or more of the following: renovated electrical, heating or cooling, and plumbing systems, as well as roof or other part of the structure.
Nonsmokers receive reduced rates from some companies, since smoking accounts for a large number of residential fires each year.
What Cannot Affect Rates
- Minnesota law prohibits insurance companies from adjusting rates based solely on:
- The geographic location of a town in which the home is located.
- The age of the home construction (unless identical credit is also offered for one or more renovated systems as noted above).
- Different zip code areas in the same town.
- The fact that the homeowner may have previously been denied coverage for the property unless it was for reasons stated in Minnesota Statute §65A.01.
- The fact that the property has previously been insured under the Minnesota FAIR Plan.
Annual Insurance Check-Up
When reviewing your policy, first find the answers to these three questions:
What type of coverage do I have?
Homeowners or Renter's
A homeowners insurance policy covers the structure, belongings and legal obligations if someone is injured at your home. A renter's policy does not insure the structure, but otherwise provides similar coverage. To review a list of coverage that is in a typical homeowners or renter's policy, go to InsureUonline, and select the appropriate life situation on the right.
Replacement Values
Check the type of replacement value provided in the policy. Actual cash value (ACV) is the amount it would take to repair damage to a home or to replace its contents after allowing for depreciation. Replacement cost is the amount it would take to rebuild or replace a home and its contents with similar quality materials or goods, without deducting for depreciation.
Liability Limit
Liability insurance protects you from legal obligations arising from accidents involving visiting non-residents. With a few exceptions, such as auto or boating accidents, all-purpose liability coverage follows wherever you go. An umbrella policy can extend the liability limits of a homeowners or renter's policy if the policy limit is insufficient.
Medical payments
Homeowner's and renter's policies typically include limited medical expense payments for injuries occurring on your premises to visiting non-residents. It may also cover medical expenses of another individual injured by you, a member of your family, or a family pet while away from the home.
How much coverage do I need?
Make a home inventory
A home inventory is the best way to determine the appropriate level of coverage needed for contents. It is also a useful tool to have in case of a loss. When doing the home inventory, make sure to include as much detail as possible about the items.
Do not over insure
Homeowners do not need to insure the value of the land a home sits on, but coverage should include any outdoor structures on the property. For both homeowners and renters, concentrate on an accurate list of belongings and be sure liability limits are at a proper level.
What are my deductibles and discounts?
Save money on homeowners or renter's insurance. Deductibles and discounts are generally the easiest places to save money on this type of policy. Most companies offer discounts for people who have more than one type of insurance policy with them, and for people who have had few claims or are long-term customers. When it comes to the deductible, -- which is the amount you have to pay if there is a loss, -- usually the higher it is, the lower the premium. It's normal to consider raising a deductible to save on premium, but remember, the bill will be that much more following a claim.
After reviewing the policy, call your agent or insurance company and ask these 5 questions:
- Is the coverage on my home and its contents adequate? Is it too much?
- The home inventory will help this. If you have any special items like art, jewelry, memorabilia or collections (such as stamps or coins), mention that, too. These items may require special coverage. And, running a small business at home will affect the premium, so mention that.
- Is my premium as low as I can expect it to be? Are there additional discounts available? Can /should I raise my deductible? What about mitigating against damage from local threats?
- Mitigation or taking steps to reduce a potential loss before it happens can help limit your home's exposure to certain local risks. Ask if there are risk mitigation programs and discounts available.
- Are there any losses like flood or earthquake I need to worry about that are not covered in my current policy?
- Neither floods nor earthquakes are covered by a standard homeowners or renter's policy. There are optional insurance policies for both disasters.
- Would my long-term financial health benefit from an umbrella policy?
- An umbrella policy provides excess liability limits and possibly other additional coverage above a homeowner's or renter's policy. For example, an umbrella policy can extend the liability to $1 million or more above the $250,000 limit of liability that might be in a basic homeowner's policy. As your asset portfolio grows, your insurance company or agent may suggest an umbrella policy for better protection.
- Has anything changed in my coverage in the last year?
- Insurers may change policy terms at renewal, but they must notify you first. Read all notices and information sent from the insurance company. When talking with the agent, ask if there are any anticipated changes when the policy renews.
More Information
Contact Possehl Agency for an Insurance Policy Checkup and make sure you are properly covered
Rules & Regulations
On what grounds can a company refuse to insure a property, or cancel or not renew a home insurance policy? A large portion of the consumer calls received by the Minnesota Department of Commerce concern these questions.
Reasons for denial
Just as an insurance company cannot offer different rates based on any of the reasons cited above, neither can it refuse to offer or renew a policy for these reasons. In the case of the age of the house, a company can refuse to insure a property constructed before a certain date, but only if the electrical or other specified systems have not been renovated since that date. In other words, the age of the system or systems determine whether a company can refuse to insure a dwelling.
The property must also meet reasonable under writing standards; these include consideration of the property’s proximity to an extraordinary hazard; access to fire protection; physical condition, including state of the heating and wiring; present use, such as vacancy or overcrowding; and other characteristics such as storage of rubbish or flammable materials that increase risk.
Grounds for cancellation
Once a policy has been in effect for at least 60 days, or has been renewed, it can be canceled (that is, terminated during the period in which the policy is in effect) only for the following reasons:
- Nonpayment of the premium.
- A false statement or misrepresentation by the insured in applying for the policy or in presenting a claim.
- An increase in risk from what was originally accepted for coverage; the increase can be due to something the insured does or omitted to reveal in the application.
- If a physical change occurs that increases risk to the property after the policy is in effect, and the change has not been corrected within a reasonable time.
- Nonpayment of dues to an organization in which membership is required for the particular insurance policy.
Grounds for non-renewal
No insurance company can refuse to renew a policy at the end of its period except for the reasons for cancellation, cited above, and for the following reasons:
- Using the property for an illegal activity.
- Cancellation by the insurance company of its contract with an agent, unless the company assigns another agent to the policy. (The company must also transfer the policy to another agent if the insured requests it in writing before the non-renewal date; see notification required, below.)
- Violation of laws that increase the possibility of loss.
- Refusal of the insured to eliminate conditions which increase risk after being notified by the insurance company that the conditions must be removed.
- A change in the quality or availability of fire protection services.
- Two or more losses by the insured within the past three years, unless the losses were caused by lightning or other storm-related phenomenon, or they did not result in any payment by the insurance company, or 80 percent of the costs were recovered through another party.
- The company stops writing homeowners’ insurance in Minnesota.
- The insured homeowner fails to provide information relating to the insurability of the property when requested by the company.
- Failure to pay property taxes on the insured property for two or more years.
- The homeowner no longer owns that particular property or no longer lives there.
Notification requirements
If a policy is canceled during the first 59 days it is in effect, the company must notify the insured in writing at least 20 days before the cancellation date. Once a policy has been in effect for 60 days, or if it is a renewal policy, the company must give a written notice at least 30 days before the date on which the policy will be canceled. The exception to this rule is when the premium has not been paid: in this case, the company may cancel at any time with 20 days’ notice.
In some cases, two notices are required. If the nonrenewal is based on known conditions that increase risk, the company must send two notices notifying the homeowner that the policy will not be renewed unless the conditions are removed. If the company needs information about the property before it will renew the policy, it must send two written requests for the information and state why the information is needed. The second notice must inform the homeowner that the policy will not be renewed if the information is not received.
In all cases, a reason for the cancellation or nonrenewal must be stated in the notice and the homeowner advised of his or her right to send a letter of complaint to the Commissioner of Commerce. The homeowner must also be notified of the right to apply to the Minnesota FAIR Plan for coverage.
Opportunity for coverage through the FAIR Plan. A homeowner who has been denied insurance or had a policy canceled or nonrenewed can apply for coverage through the FAIR Plan, or Minnesota Property Insurance Placement Facility.
The Minnesota FAIR Plan Act was passed to assure access to property and liability coverage for those who cannot obtain insurance through normal insurance markets. Anyone who has been rejected for coverage can apply for coverage through the FAIR Plan. All insurance companies authorized to sell property or liability insurance in the state must participate. If the Plan sustains an operating loss in any one year, the companies are assessed a dollar amount based on their share of the market. The FAIR Plan is administered by a board whose members include representatives elected by the insurers and members appointed by the Commissioner of the Department of Commerce.
FAIR Plan homeowner policies provide the coverage described under Actual Cash Value coverage (HO-8) on page 3. Applicants for the FAIR Plan must meet reasonable under writing standards, which means that the condition of the property must not expose it to a high fire risk or other type of loss. The neighborhood or area in which the property is located, or any environmental hazard beyond the control of the owner, cannot be a factor in declining coverage.
Rules & Regulations
On what grounds can a company refuse to insure a property, or cancel or not renew a home insurance policy? A large portion of the consumer calls received by the Minnesota Department of Commerce concern these questions.
Reasons for denial
Just as an insurance company cannot offer different rates based on any of the reasons cited above, neither can it refuse to offer or renew a policy for these reasons. In the case of the age of the house, a company can refuse to insure a property constructed before a certain date, but only if the electrical or other specified systems have not been renovated since that date. In other words, the age of the system or systems determine whether a company can refuse to insure a dwelling.
The property must also meet reasonable under writing standards; these include consideration of the property’s proximity to an extraordinary hazard; access to fire protection; physical condition, including state of the heating and wiring; present use, such as vacancy or overcrowding; and other characteristics such as storage of rubbish or flammable materials that increase risk.
Grounds for cancellation
Once a policy has been in effect for at least 60 days, or has been renewed, it can be canceled (that is, terminated during the period in which the policy is in effect) only for the following reasons:
- Nonpayment of the premium.
- A false statement or misrepresentation by the insured in applying for the policy or in presenting a claim.
- An increase in risk from what was originally accepted for coverage; the increase can be due to something the insured does or omitted to reveal in the application.
- If a physical change occurs that increases risk to the property after the policy is in effect, and the change has not been corrected within a reasonable time.
- Nonpayment of dues to an organization in which membership is required for the particular insurance policy.
Grounds for non-renewal
No insurance company can refuse to renew a policy at the end of its period except for the reasons for cancellation, cited above, and for the following reasons:
- Using the property for an illegal activity.
- Cancellation by the insurance company of its contract with an agent, unless the company assigns another agent to the policy. (The company must also transfer the policy to another agent if the insured requests it in writing before the non-renewal date; see notification required, below.)
- Violation of laws that increase the possibility of loss.
- Refusal of the insured to eliminate conditions which increase risk after being notified by the insurance company that the conditions must be removed.
- A change in the quality or availability of fire protection services.
- Two or more losses by the insured within the past three years, unless the losses were caused by lightning or other storm-related phenomenon, or they did not result in any payment by the insurance company, or 80 percent of the costs were recovered through another party.
- The company stops writing homeowners’ insurance in Minnesota.
- The insured homeowner fails to provide information relating to the insurability of the property when requested by the company.
- Failure to pay property taxes on the insured property for two or more years.
- The homeowner no longer owns that particular property or no longer lives there.
Notification requirements
If a policy is canceled during the first 59 days it is in effect, the company must notify the insured in writing at least 20 days before the cancellation date. Once a policy has been in effect for 60 days, or if it is a renewal policy, the company must give a written notice at least 30 days before the date on which the policy will be canceled. The exception to this rule is when the premium has not been paid: in this case, the company may cancel at any time with 20 days’ notice.
In some cases, two notices are required. If the nonrenewal is based on known conditions that increase risk, the company must send two notices notifying the homeowner that the policy will not be renewed unless the conditions are removed. If the company needs information about the property before it will renew the policy, it must send two written requests for the information and state why the information is needed. The second notice must inform the homeowner that the policy will not be renewed if the information is not received.
In all cases, a reason for the cancellation or nonrenewal must be stated in the notice and the homeowner advised of his or her right to send a letter of complaint to the Commissioner of Commerce. The homeowner must also be notified of the right to apply to the Minnesota FAIR Plan for coverage.
Opportunity for coverage through the FAIR Plan. A homeowner who has been denied insurance or had a policy canceled or nonrenewed can apply for coverage through the FAIR Plan, or Minnesota Property Insurance Placement Facility.
The Minnesota FAIR Plan Act was passed to assure access to property and liability coverage for those who cannot obtain insurance through normal insurance markets. Anyone who has been rejected for coverage can apply for coverage through the FAIR Plan. All insurance companies authorized to sell property or liability insurance in the state must participate. If the Plan sustains an operating loss in any one year, the companies are assessed a dollar amount based on their share of the market. The FAIR Plan is administered by a board whose members include representatives elected by the insurers and members appointed by the Commissioner of the Department of Commerce.
FAIR Plan homeowner policies provide the coverage described under Actual Cash Value coverage (HO-8) on page 3. Applicants for the FAIR Plan must meet reasonable under writing standards, which means that the condition of the property must not expose it to a high fire risk or other type of loss. The neighborhood or area in which the property is located, or any environmental hazard beyond the control of the owner, cannot be a factor in declining coverage.
We do not offer every plan available in your area. Any information we provide is limited to those plans we do offer in your area. Please contact Medicare.gov or 1-800-MEDICARE to get information on all of your options.
