Home Insurance: Protecting Your Most Important South Carolina Investment

One of the most important parts of the proverbial "American dream" is also the dream’s very cornerstone: home ownership. The concept is so strong that the rights of private property owners were built into English common law, which is the basis for many of those same rights in South Carolina law. To secure the dream represented by your largest investment, homeowners insurance provides financial protection against disasters. A standard home insurance policy insures both your house and your personal household possessions. Homeowners insurance is a package policy. This means that a South Carolina home insurance policy covers both damage to your property and your liability or legal responsibility for any injuries and property damage you or members of your family cause to other people. Here we’ll look at how best to determine how much home insurance you’ll need and how to purchase home insurance.

Home insurance ISO ratings

Since 1971, the Insurance Services Office (ISO) has offered information about risk to home mortgage lenders. ISO supplies data, analytics, and decision-support services for the purposes of predictive modeling. ISO also provides ratings for South Carolina fire stations by analyzing relevant data and then assigning a Public Protection Classification from 1 to 10. Class 1 is exemplary public protection while Class 10 represents an inadequacy of a fire department to meet minimum ISO criteria.

There are three primary types of situations that enable a homeowner to be eligible for coverage under the ISO homeowners (Insurance Services Office) program:

Owner-occupants of private homes: Individuals and families who own the South Carolina home in which they reside.
Tenants of residential premises: People who rent or lease the premises where they reside.
Owners and owner-occupants of residential condominium units: Individuals and families who own private condominium units used for residential purposes.

Home insurance policies can also provide limited property coverage for incidental occupancy (this is the use of the residential premises for other than residential purposes, such as a home office or studio) as long as two legal requirements are met. These are the primary occupation of the residence as a private dwelling and that the home is not used for any business purpose other than incidental occupancy.

Home insurance basic policies

Each home insurance policy sold in South Carolina provides a combination of personal property and liability coverage plus protection involving the loss of use from damage. There are several basic types of home insurance policies:

HO-1: Basic home insurance policy that covers your house and possessions against 11 different perils.
HO-2: Broad home insurance policy that covers house and contents against 17 perils. Premiums run about 5-10 percent more than an HO-1 policy.
HO-3: Special home insurance policy that covers all perils except those specifically excluded by the policy. Premiums run about 10-15 percent more than an HO-1 policy.
HO-4: Renters’ insurance policy covers 17 named perils and liability coverage. It does not insure the dwelling itself.
HO-5: Extensive home insurance policy that covers damage from everything except earthquakes, wars and floods.
HO-6: Home insurance for owners of co-ops or condominiums that provides personal property, liability and specific coverage of improvements to the owner’s unit. In this case the owner’s association’s insurance policy actually covers most of the structure.
HO-8: Home insurance policy for older homes that covers the same perils as HO-1 but pays only for repair costs or an actual cash value. In lieu of providing house replacements costs since this would make the policy prohibitively costly. This kind of home insurance works well for older homes whose value is considerably less than the cost to rebuild.

Home insurance policy sections

Every home insurance policy sold in South Carolina has three preliminary sections. These are the declarations, general agreement and definitions pages. In addition, there are two sections that spell out the home insurance policy’s specific areas of coverage. The declarations page states the policy number, period of coverage, insured’s name and address, agent’s name, limits that apply to the coverage, additional insureds (if any), and the monthly premium amount.

The general agreement page states that the insurer’s coverage and obligations to the South Carolina homeowner and policy holder is dependent on the insured’s ability to pay the premiums and comply with the policy’s guidelines.

The definitions page of a South Carolina home insurance policy does exactly what the name implies: defines the pertinent words that are used in the policy. These definitions include the fact that the words "you" and "your" refers to the policy holder and references to "we," "us" and "our" refer to the home insurance policy issuer or underwriter.

In the coverage portion of a South Carolina home insurance policy, any additional coverage (optional) that can expand the types of losses covered with the given home insurance policy is spelled out. Unless otherwise mentioned, all home insurance policies provide for the following additional coverage:

debris removal
reasonable repairs
trees, shrubs, and other plants
fire department service charge
property removal
credit card, fund transfer card, forgery, and counterfeit money
loss assessment
glass or safety glazing material
landlord’s furnishings
collapse
building additions and alterations
ordinance or law coverage

Home insurance policies use both named perils and open perils to describe covered causes of loss. Named perils include fire, lightening, aircraft, explosion, hail, theft, vehicles and smoke to name a few. Open perils cover homes for physical loss risks of physical loss that are not specifically excluded by the home insurance policy. These can include falling objects, weight of ice/snow/sleet, sudden cracking/burning/bulging and freezing among others.

Determining your home insurance needs

Before you start the process of purchasing a home insurance policy for your South Carolina home, you need to determine your needs. You need enough home insurance to cover the following:

The actual structure itself.
Your personal possessions in the house
Additional living expenses in the event you have to live elsewhere following damage or repairs to your home.
Your liability to others should they be injured on your property.

Since most basic home insurance policies cover the replacement cost for damage to your house, you’ll want a replacement cost home insurance policy that pays for the repair or replacement of damaged property with materials of similar kind and quality. Beyond that you’ll first want to determine how much it will cost to replace your home at current construction prices. The cost of the land on which your house sits should not be factored in when determining the cost of home replacement. For a quick estimate of the amount of insurance you need, multiply the total square footage of your home by local building costs per square foot. A South Carolina insurance agent or realtor can help you with the formula you need to determine how much rebuilding your home would cost. This final amount is how much coverage you will need in an adequate home insurance policy.

Many South Carolina banks and credit unions will require you to buy home insurance before they lend the necessary funds to cover the amount of your mortgage. Make sure your home insurance policy covers the cost of rebuilding your home if the limit of that police is based on your mortgage. South Carolina mortgage experts also recommend not canceling your home insurance policy once your mortgage is paid off since home insurance protects your investment.

Additional coverage for rebuilding your home includes a guaranteed or extended replacement cost home insurance coverage. This will pay you approximately 20 percent or more above your home insurance policy limit for house replacement costs in the event of a major natural disaster, after which building materials and construction workers are usually in great demand. Similar additional coverage extends for building code updates that make the cost of rebuilding your house more expensive and an inflation guard to reflect current construction costs in your area of South Carolina.

Home insurance coverage for personal possessions

As with the cost of house replacement, South Carolina homeowners must make a personal possessions inventory to determine how much in home insurance protection they will need. This is a detailed list of everything you own and information related to the cost of replacement. Most home insurance policies provide coverage for your personal possessions for approximately 50 percent to 70 percent of the amount of insurance you have on your home.

You can either insure your belongings for their actual cash value, which pays to replace your home or possessions minus a deduction for depreciation up to the limit of your policy. Or you can opt for replacement cost, which pays the actual cost of replacing your home or possessions up to the limit of your home insurance policy. Replacement cost coverage is approximately 10 percent more than actual cash value replacement in a home insurance policy. If you feel that the standard coverage limit in a home insurance policy is too low (especially to cover items such as jewelry, computers, silver service, etc.) consider purchasing additional coverage with personal property floater or endorsement.

Home insurance coverage for additional living expenses

This part of a standard home insurance policy pays the additional costs of temporarily living away from your home in the event of a fire, severe storm or other insured disaster. Additional living expenses coverage of a home insurance policy covers hotel bills, restaurant meals and other living expenses incurred while your home is being rebuilt.

Coverage for additional living expenses differs between South Carolina home insurance companies. Many policies provide coverage for about 20% of the insurance on your house. Some companies will even sell you a policy that provides you with an unlimited amount of loss of use coverage, for a limited amount of time. If you rent out part of your house, this coverage also reimburses you for the rent that you would have collected from your tenant if your home had not been destroyed.

You should talk to your South Carolina home insurance agent or company to make sure you know exactly how much coverage you have and how long the coverage will be in effect.

Home insurance coverage for liability to others

This part of your home insurance policy covers you against lawsuits for bodily injury or property damage caused to other people by you, your family or pets. Liability coverage of a home insurance policy pays for both the cost of defending you in court and for any damages a court rules you must pay.

The general amount of liability coverage in a standard home insurance policy is $100,000. However, many South Carolina home insurance experts agree that homeowners should consider purchasing at least $300,000 to $500,000 worth of coverage of liability protection. Additional liability coverage can be had by purchasing umbrella or excess liability that begins to pay after the standard liability coverage in your home insurance policy runs out. However, if you own other property or have investments and savings in excess of the standard liability limits of your home insurance policy this can be a wise purchase, especially since the umbrella or excess liability will also cover your for slander, libel and invasion of property.

Shopping for a home insurance policy

The best way to begin your search of South Carolina insurance companies that offer all kinds of insurance coverage—car, home, boat, etc.—is to log onto www.insurances.sc. This website also has calculators that will help you compare insurance policy costs and extent of insurance coverage for you particular area.

Tips on choosing a good insurance company to underwrite your South Carolina insurance coverage include:

Checking out the complaint ratios (complaints per 1,000 policies written) on the South Carolina Department of Insurance website.
Getting recommendations from companies that deal with the area in which you are seeking coverage (body shops for car insurance, hospitals for health insurance, etc.).
Consider working with an independent insurance agent who has no vested interest in selling you a policy from any given insurance company.
Check out the financial strength ratings of any insurance company with financial ratings services (A.M. Best, Standard & Poor’s or others). This also includes auto insurance ratings from J.D. Power & Associates.
Don’t assume insurance group packages will save you money (which usually offer insurance premium price breaks—for example, a major car manufacturer has an agreement worked out with an insurance company to provide a special rate for South Carolina owners of that particular manufacturer’s vehicles).

Before you sign any insurance policy, also read the insurance policy carefully to be sure your right to sue. This will give you the leverage if you need to negotiate with the insurance company. In addition, make sure to keep insurance coverage limits the same—either monthly or annually—so you make the proper "apples to apples" comparisons when shopping for insurance policies. Your final selection should turn on two crucial points: The reliability of the South Carolina insurance company writing the insurance policy and the price of the insurance policy quote.

Saving on home insurance policies

Virtually all South Carolina financial lending institutions require you to have home insurance. However, just because home insurance is required does not mean all policies cost the same. Here are some tips to save money on your home insurance.

Most homeowner’s insurance deductibles start at $250. But by raising that amount to $1,000 could save you as much as 25 percent on your home insurance premiums. Make certain you can pay this amount out of pocket in the event you need to make a home insurance claim.
Where you live affects how much home insurance you will need. If you live near a fire station, your rates will be lower. Likewise if you do not live in a flood plain. South Carolina is divided into three primary geographical territories based on exposure to windstorm damage: inland, seacoast, and beach. The inland territories may be further subdivided based on overall or total loss experience. Obviously, the lowest rates are for the inland territory and the highest rates are in the beach area where exposure to windstorm damage is highest. Be sure you don’t pay for home insurance coverage you don’t require.
Most South Carolina insurance companies will offer you discounts on your homeowner’s insurance if you purchase other insurance policies with them.
Other home insurance discounts are available for: senior citizens, safety and security measures (double locks, alarm systems, fire alarms, etc.), newer homes and other factors.

Research and prior effort on your part will give you the information you need to purchase a South Carolina home insurance policy that will give you adequate coverage, thereby protecting your single largest investment.