Frequently Asked Questions

What is homeowners insurance?

Homeowners insurance is a contractual agreement between an insurance company and an insured, which, in exchange for premium, provides financial protection for risks associated with owning or renting a residence and its contents.

What is the policy?

The insurance contract is called a policy and includes three distinct parts. First, the Declaration Page lists what coverages are in effect, the limit of coverage and the dollar amount of coverage. Second, the Text of the contract tells you who and what is covered and not covered. Third, the Endorsements section of the contract changes, limits or modifies the text.

What does the homeowners policy cover?

The homeowners policy is a package policy designed for a single family home. Most packages include liability, dwelling property, personal property, medical payments and additional living expense coverage. Policies do vary, however, in what events (perils) you are protected against. There are two general approaches: a named peril basis, which insures against a list of perils, and an open peril basis, which insures against all perils except those specifically excluded.

What are the named perils?

Basic coverage perils: Fire, lightning, windstorm, hail, explosion, riot or civil commotion, aircraft, vehicles, smoke, vandalism and malicious mischief, theft and breakage of glass.

Broad coverage perils: All of the above basic coverage perils and volcanic eruption, falling objects, weight of ice, snow or sleet, collapse of building, accidental discharge of water or steam, sudden or accidental tearing apart, cracking, burning or bulging, freezing, or sudden or accidental damage from artificially generated electrical current.

What is not covered by a homeowners policy?

The basic and broad coverage peril-based policies cover only the items listed. Therefore, if it is not listed, it is not covered. The special and comprehensive policies are based on all perils being covered unless specifically excluded. The kinds of exclusions are: water damage from flood, sewer backup or seepage, earthquake, war, nuclear accident, neglect, intentional loss, mold, wear and tear, pollution, settling and more. Always read your policy to see what is excluded.

What types of property are covered by a homeowners policy?

On your residence premises, the real property will be covered. This includes the dwelling and any unattached structures, including fences. Personal property is also covered. This includes the contents of your dwelling, clothing, furniture, appliances and all other normal personal belongings.

Note: some items of personal property like jewelry, guns, furs, golf equipment, etc., may have a limit on the amount of coverage. It may be necessary to put additional coverage on these items by scheduling them to the policy. Automobiles are not covered.

We have a large amount of jewelry. How should I cover it?

The homeowners policy provides a set theft sub-limit for jewelry and covers it only on a named peril basis. To get the broadest coverage possible on a replacement cost basis for the jewelry, including mysterious loss and flood, it is best to have the jewelry listed on a schedule and added to the policy. The Scheduled Property Endorsement is used to provide coverage wherever you go. You will need to provide the company with appraisals of the jewelry and pay an additional premium based upon the value of the jewelry being insured.

How much coverage should I carry on my home?

The amount of coverage you should carry can vary depending upon the type of policy you take, whether the coverage is provided on a replacement cost basis or an actual cash value basis, and what your bank may require. It is important to know that under the homeowners policy (HO-3 or HO-5), in order to receive full payment for a partial loss or damage, you must insure your dwelling for at least 80 percent of its replacement value.

Insuring your property to value (replacement cost value) might cost more, but could help you avoid being underinsured should you experience a serious loss. Most insurance companies have estimating programs available to help you in calculating the replacement cost of your home in your area.

What are deductibles?

A deductible is the amount of the claim for property loss or damage that you agree to pay, or the part that is deducted from your claim check. The basic policy deductible varies from company to company but the most common is $500 per loss. If you chose a higher deductible (your share), for example, $1,000 or $2,000, you would pay a lower premium for your policy.

Can a company cancel my contract?

Once a homeowner policy has been in force for 60 days, the insurance company may only cancel the policy for the following reasons:

In addition to the reasons above, there are some special circumstances which, if met, permit the cancellation of policy with only five days notice.

These are in law and range from a situation where damages have occurred and the insured does not intend to repair the property, to failing to pay property taxes for more than one year.

What is the difference between a cancellation and a non-renewal?

A cancellation happens in the middle of the policy period. A non-renewal takes place at the anniversary or renewal date of the contract. Unlike cancellation, a company may non-renew a contract based upon underwriting criteria. Underwriting criteria are those specific requirements written into the company's program. Claims frequency is an example of underwriting criterion used by companies when deciding whether to renew or non-renew a policy. A company must give 45 days notice for a non-renewal. Both cancellation or non-renewal result in termination of a contract.

What if I don't pay my premium by the due date?

Property and casualty policies, including homeowners policies, are not required to have a grace period that would allow for late payment of premium. The premium must be in the hands of the company on the date identified on the billing. If the premium is not received by that date, the policy automatically terminates. Most companies do not permit a grace period.

What is the difference between a County Mutual Insurance Company and any other mutual company such as NODAK Mutual or Farmers Union Mutual?

County Mutuals have been around since the late 1800’s and are treated differently by state statute and insurance regulation. A county mutual, however, is restricted to where and what it can insure. For instance, a county mutual cannot sell homeowners' insurance in more than 30 counties in North Dakota. A county mutual is usually “local” in territory but some have gone on to become statewide companies.

Are County Mutual Insurance Companies financially safe?

Yes. All county mutual insurance companies are required by state law to carry “reinsurance”. Reinsurance means that in any given year, the Mutual company can only lose a certain amount of their reserves before the reinsurance company takes over paying the claims. However, a county mutual can find itself in financial trouble just like any Company through a series of bad losses over successive years.

My rates have gone up in the last several years more than once and I have not filed any claims. Why would they go up?

Unfortunately, even though you have not filed claims recently, many of your neighbors have gone through a series of catastrophic weather related storms and individual home fires. Since the early 1990’s, property companies in North Dakota have consistently paid $1.10 in claims and other costs, for every $1.00 they have collected. In year 2001, ten companies left our state due to failure to earn a profit over an extended period of time. Further, the stock market over the last three plus years has not produced the investment income most of the companies in our state had anticipated. Accordingly, increasing premiums has been the only way to keep companies from going broke. Again, unfortunately, people who do not file claims are expected to help pay for those that do. In essence, that is the concept of insurance.

What factors go into determining my homeowners insurance premium?

Homeowner insurance premiums can vary from company to company depending upon a variety of reasons but predominantly the company's loss experience. Other factors affecting the premium are:

How does the homeowners policy pay for damage to covered personal property?

The special homeowners policy pays for loss or damage to personal property on an actual cash value basis. This is determined by taking the replacement cost value and subtracting depreciation based on age and obsolescence. If you want coverage for personal property on a replacement cost basis, you can purchase a HO-5 type policy or add a Personal Property Replacement Cost endorsement.

How does the homeowner policy pay for damage to a roof?

Generally, the roof, which is part of the dwelling, is covered on a replacement cost basis (less your deductible). However, homes with a very old roof or a previously damaged roof may have restrictions limiting coverage to actual cash value instead. In addition, some companies have policies that change the coverage from replacement cost to actual cash value after a roof gets to be a certain age (i.e. 10-15 years). Check with your agent to be sure what level of coverage you have on your roof.

Can the agent settle the claim?

A few insurance companies give the agent the authority to settle small claims. However, most companies limit the agent's involvement in the claims process to that of helping the insured complete the loss report and forwarding it to the company claims department for processing. In most cases, the agent does not have the authority to make claims settlement offers on behalf of the insurance company.

How can I help my claim get processed as quickly as possible?

When there is a loss to property due to burglary, fire or natural disaster, there are several steps you can take to ensure your claim is properly filed and processed as quickly as possible:

How does the insurance company handle prior damage when processing a new claim?

The insurance company does not owe for damage that occurred prior to the effective date of your policy. Your insurance policy provides coverage based on an occurrence that takes place while the policy is in force. Therefore, each different occurrence is handled separately. For example, if you have hail damage from a prior occurrence, the company will deduct the cost of the prior damage from your current claim settlement.

Why does the company make the check for repairs out to me and my mortgage company?

The mortgage company you have listed on your policy has an insurable interest in the property. Because of this the company is bound by contract to include them on major repair payments. It is up to you and your mortgage company to work out how the settlement proceeds will be released to you for repairs.

I have hail damage but the adjuster will only pay for two sides of my home to be resided. Can they do this?

Most insurance policies stipulate that your insurance company is only obligated to pay for the direct damage sustained in a loss. In determining direct damage, obsolescence of a product is not included. Payment for additional costs due to problems with matching colors and/or materials, whether it is roofing or siding, are not covered by most policies.

My neighbor got paid for his entire roof after a storm but his roof does not look to me as if it were damaged. He has not fixed it in three years. What was the basis for totaling the roof?

Sometimes damage may not be easily visible. Sometimes, the roof may have suffered insignificant damage but was subject to liberal adjusters. Often, it may be a combination of both. Insurance payments for losses turned and paid should be repaired. Your neighbor will not receive additional pay if additional storms come through your neighborhood.