Making the decision as to what coverage you need, will first require you to identify and evaluate what property you own that you want to protect. If you own or are buying your home, you will want to protect yourself from financial disaster, should the home sustain a severe fire or other property loss. When you purchase a home you are undertaking a huge financial investment that can be at risk for natural disasters such as hurricanes, floods, tornados and earthquakes. Should a major storm blow down a large tree causing it to fall on your home and damage the roof, it would be an unexpected expense for you as the owner of the home to remove the tree and make the repairs.
Along with the homes that we purchase, we have all of our personal furnishings inside of the home, such as furniture, clothing, linens, kitchen utensils, pictures, books, etc. If we have to replace all of the property that we own that is inside of our homes because it was destroyed by a fire or other type of damage, we probably would not even be able to identify everything we had in the home, prior to the loss.
Your need for coverage is best described as how much can you afford to lose!
Do you own and live in a Townhouse?
As owner of the townhouse are you also a member of the townhouse association? Do you pay a fee to the association as your participation in the maintenance of the common areas of the community? If so that the townhouse is your primary residence, you should purchase the Homeowners 3 or 5 which provides coverage for the building, any other buildings on the property such as storage sheds, garages etc, as well as your personal furnishings and other property that is located inside of the home or other buildings.
If you don't own the home or building you live in, you will have property that you should cover.
If you do not own the home you live in and rent it from the owner, you should purchase a Homeowners 4 sometimes known as Renters Insurance which provides coverage for all of your personal furnishings in the home, but there is no coverage for the building itself, which it not your risk.
If you live in an apartment that you rent from the owner of the building, a Homeowners 4 or Renters Insurance provides coverage for all of your personal furnishings in the home. The building may also be managed by a property management firm, and in this case, the Homeowners 4 is still the correct form for you to purchase
If you own your home and it is your primary residence, you should purchase the Homeowners 3 or 5 which provides coverage for the building, any other buildings on the property such as storage sheds, garages etc, as well as your personal furnishings and other property that is located inside of the home or other buildings.
Selecting the correct coverage form is not a difficult choice to make. It is important that you provide to your agent, the exact specifics about who owns the premises you want to cover under the Policy and what property you own and have at risk.
Coverage for your Personal Property (Contents)
Even if you do not own a home, you more than likely still own personal property that you would like to protect. Everyone lives somewhere and for those individuals who do not own the home or building that they live in, they still probably own some personal property, i.e. furniture, stereo, VCR, Clothing, Kitchen Utensils, Linens, Books, etc. If your personal property was destroyed by a fire or other type of peril, would you be able to go out and buy everything again to replace it?
When evaluating your property, you need to determine what would be the dollar amount that would be needed to replace your property. The Replacement Cost of property that was purchased several years ago may be different today than when you originally purchased it. The Actual Cash Value is the replacement value with depreciation deducted.
You should start with the Replacement Cost first to determine what it would actually take to replace the property if it is destroyed. Once you have determined what it would take to actually replace your property, you can then determine if you want to have coverage that will completely replace the property or allow for depreciation which is provided at a lower premium rate than Actual Cash Value
Most Homeowners policies will provide coverage on the home itself on a Replacement Cost basis since buildings rarely depreciate. This is not true however of personal property. Since it depreciates as soon as we have purchased it, most personal property is covered on an Actual Cash Value basis, which allows for depreciation. You can purchase the Replacement Cost coverage for your personal property, but it will come with a higher premium than the Actual Cash Value
Determining how much coverage you need, depends on how well you evaluate your property including its values. With regards to personal property you should check in the local shopping malls to learn what the prices are in today's dollars to replace the personal property you purchased 5 to 10 years ago.
Homeowners 3 or 5 policies automatically provide the following:
Property and Theft Coverage
Coverage to protect you when you cause injuries or damages to others - Liability
In addition most of the homeowner policies provide coverage for Liability and Medical Payments for damages incurred by other than the insured for which the insured is liable.
It does not however provide coverage for members of the household.
The Homeowner policies including the Renters Policies also provide coverage for liability should a guest be visiting you and be injured. For example, if you had a dog and it bit a visitor to your apartment you would be liable for the medical treatment and injury caused by your dog. The Homeowners Forms all include this coverage to protect and defend the insured should it be determined that they are legally liable for injuries or damages to property of others.
The coverage included in these policies provide Medical Payments for injuries to others that the injured may or may not be legally liable for. The coverage provides:
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