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What's Really Covered By Your Home Insurance?: An Interview with Brad Kamp of Housatonic Valley Insurance Agency, Inc.

By Brad Kamp

Please tell us a little bit about your company and the services you offer.

Housatonic Valley Insurance (HVI) has been in business since 1931. We are located at 6 Main Street (on the Green) in New Milford, Connecticut. We have been at our current location since 1955. We specialize in property and casualty insurance - home, auto, business, commercial auto, workers comp, etc. - but we also write life and health and bonds.

Can you briefly describe what an example of bare minimum homeowners insurance coverage would be like in Connecticut?

Most companies write a policy called an HO-3, which provides pretty broad coverage. The policy covers fire, lightning, windstorm/hail, theft, smoke damage, water damage, falling objects (like a tree), etc. The policy provides replacement cost coverage on your home and your belongings, and also provides liability coverage. Most policies today are written with a minimum of a $1,000 deductible, with higher amounts available. You can add on things like identity theft, water backup and earthquake, and also schedule valuable items such as jewelry, fine arts, silver, etc.

What are some important things that would not be covered in that example?

The biggest thing that is not covered is flood. Flood is provided through the government and is written as a separate policy. Other things that are not covered include wear and tear, settling of a foundation (including patios, driveways, floors, etc.) and maintenance of the home, etc.

What is replacement cost coverage and how does it potentially help homeowners?

Replacement cost coverage means that the company does not take depreciation into account when settling a loss. So, for example, let's say that you lose a 15-year-old couch in a fire. If you have replacement cost coverage on your policy, the company will simply replace the couch with a new one of like kind and quality. If you do not have replacement cost coverage, the company will pay you the actual cash value of the couch, which is probably very little at this point.

Can you talk about any other replacement cost specifics?

Almost every policy is written with replacement cost coverage on both the home and the contents. The home coverage works a little bit differently in that there is often a cap on how much they will pay. Some companies still offer true guaranteed replacement cost coverage, meaning that they will pay the cost to replace the home regardless of how much it exceeds the coverage. Most companies today put a cap on this amount of either 25% or 50% additional. So, for example, if the replacement cost on your policy is $100,000 and you have a total loss, most companies will pay the cost to replace the home up to either $125,000 or $150,000, depending on which endorsement you have on your policy.

Companies will inspect a home after writing the policy to confirm that there is enough coverage on the home, so limiting the amount of excess coverage available has not been an issue. Companies do this to help keep their reinsurance costs down, which in turn helps keep consumer rates down.

How is the deductible typically calculated with replacement cost? What about in the case of a flood, using flood insurance?

Companies adjust a loss for the full amount with replacement cost and just subtract out the deductible amount before providing payment to the client. If you have a fire and have damage to your home and your contents, the deductible is only applied once. The company does not use one deductible for the home, and another for your contents as it is all one loss in this case.

Flood insurance is different. There is a separate deductible for the home and the contents, so in the event of a loss to both you would have two separate deductibles.

Do you have any tips for homeowners who may have a limited budget for homeowners insurance?

With most insurance policies, buying a higher deductible will help control cost. Obviously you have to be able to afford whatever deductible you have, but I would suggest to anyone that they look at a minimum of a $1,000 deductible. Your agent should also periodically review the policy to make sure the coverage on the home is sufficient. You don't want to be underinsured, but you also don't want to be over insured. Companies typically increase the coverage on your home each year to account for inflation, cost of materials and labor, etc. As time goes on, this increase can exceed the inflation rate. This is something that can typically be reduced by your agent, as long as they can provide the company with documentation that supports the request. We are constantly reviewing this to make sure our clients are not paying for coverage they don't need.

What's the best way for people to contact your company?

We can be reached at 860-354-5551 or at hvi@hvinsurance.com. . Of course, we still like to have people stop by to talk to us - we market ourselves as a small-town agency and enjoy getting to know the people we insure. Sometimes that gets lost in today's technological world, but we still believe in the small-town model, where we know both your name and your face.

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