Homeowner's Insurance
Frequently Asked Questions
Introduction
While different insurers use different terms in naming some of the coverages they offer, we have used the terms that are most often used. These questions and answers only address issues in general and are not intended to be specific. Customers for insurance should carefully read their policies and consult with an insurance agent or producer or insurer to determine the exact coverages required.
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General Information
Why should I buy home insurance?

Owners: To protect both your house and personal property.
Tenants: To protect your furniture and personal property.
Everyone: Protection against liability for accidents that injure other people or damage their property.

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How much home insurance do I need?

Asset Protection: More coverage generally means you will have less to pay out of your own pocket if disaster strikes. You must determine the amount you can financially afford to lose. Depending upon your determination, more insurance may be the answer. You should insure your property to the value you believe your home is worth to obtain maximum protection. You need enough liability coverage to protect yourself from lawsuits resulting from your possible negligence.

Lender Requirements: Your lender may require you to cover the house for at least the amount of the mortgage. This may be too little or too much for your individual circumstances. You are not required to purchase insurance from the insurer recommended by your lender.

Policy Requirements: Insurers may impose some conditions for replacement cost protection, to include your insuring the property to value.
Where can I obtain information about insurance?

Information is available to consumers from a number of sources. These sources include any public library, the Arizona State Insurance Department, consumer groups, consumer publications, your insurance agent, or your insurance company.
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Ways to Reduce Cost
What affects home insurance prices?
Type of Construction: Frame houses usually cost more to insure than brick.
Age of House: New homes may qualify for discounts. Some insurance companies offer limited coverage or may not insure older homes.
Local Fire Protection: The number of fire hydrants and fire departments and the availability of water are just some factors which determine your area's fire protection class. If you reside in an area without fire protection, you will pay more for fire insurance.
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What deductible should I choose?

The deductible applies only to coverages on your house and personal property. It is the amount you have to pay out of your pocket on each claim. Insurance only attaches once the deductible amount is exceeded. A policy with a $100 deductible will cost more than one with a $250 deductible. Higher deductibles may be available at a reduced price, but purchasing, for example, a $250 deductible in lieu of a $100 deductible will mean you will normally pay $150 more out of your pocket at the time of a loss.
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Basic Coverages Included in Homeowner's Policies
What basic coverages are available?

The most common basic coverages are: Property damage, Additional Living Expenses, Personal Liability, and Medical Payments.
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What does "property damage" cover?

Property damage coverage helps pay for damage to your home and personal property caused by such perils as fire, lightning, windstorm or hail. The perils of flood and earthquake are not covered. If you believe you need flood insurance and your insurance company will not provide it, you may obtain coverage through the Federal government's National Flood Program ("NFP"). To learn more about the NFP you can contact an insurance agent or contact the NFP at (800) 638-6620. You should carefully read your policy before you have a loss to determine exactly what types of losses will be covered.
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What does "contents insurance" coverage include?

In general, the contents of your home and other personal belongings owned by you or family members who live with you will be covered under the policy in an amount equal to 50% of the limit of liability carried on your dwelling. However, high valued personal property such as jewelry and cameras should be scheduled on the policy so that you are adequately protected to avoid the possibility of these items not being fully covered at the time of loss.
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What does "additional living expense" or "loss of use" cover?

Most home insurance policies provide for the necessary increase in expenses you incur if your home is damaged by an insured event and you cannot live there while repairs are being made or if you are denied access to your home by government order. The coverage is generally subject to duration limits and commonly covers any expense incurred by you so that your household can maintain its normal standard of living. In some instances, this coverage may include the costs of a motel, eating in a restaurant, or storing some of your property.
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What Is "personal liability insurance" coverage?

Personal Liability Coverage protects you and all family members who live with you against a claim or lawsuit resulting from (non-auto and non-business) bodily injury or property damage to others and for which you become legally obligated to pay. Defense costs are included, but the insurance company has no duty to defend you after the limit of liability on the policy has been exhausted.
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What does "medical payments insurance" cover?

Regardless of who is at fault, this coverage pays the reasonable expenses for others accidentally injured on your premises or the areas immediately adjoining your property such as sidewalks or alleys. Medical Payments Coverage does not apply to your own injuries or those of family members living with you or injuries arising out of activities involving a business that you operate out of your home, your intentional acts, or arising out of the rental of your premises.
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Commonly Used Insurance Terms
What is "replacement cost"?

Replacement Cost is the amount necessary to replace or rebuild your home or repair damages with materials of similar kind and quality without deducting for depreciation.
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What is "depreciation"?

Depreciation is the decrease in the home's value since the time it was built because of age or wear and tear.
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What is "actual cash value"?

Actual Cash Value usually means the sum of money required at the time of the loss to repair or replace the property destroyed, less an amount for depreciation. Actual Cash Value equals the replacement cost less depreciation. Most standard home insurance policies cover the contents of your home (i.e., personal belongings) on an actual cash value basis, but it is possible to purchase replacement cost.
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What is a "peril"?

A peril is a condition which can cause a loss. Three examples are fire, windstorm, and theft.
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How Can The Insurance Department Help?
What information can the Arizona Department of Insurance provide?

Available publications include a Consumer's Guide to Homeowners Insurance, Homeowner Premium Comparison Survey and Insurer Complaint Ratios. The Insurer Complaint Ratio publication, which lists insurers against which complaints have been filed with the Arizona Department of Insurance, can give the consumer an indication of how insurers perform. This publication, when used together with the Homeowner Premium Comparison, will assist the consumer.
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What do I do if I have a complaint?

See our "How to request assistance from the Department" web page for details.
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