New Jersey Department of Banking and Insurance

A consumer guide

to Homeowners,

Renters and

Insuring

Your Home

New Jersey Department of

BANKING AND INSURANCE

Phil Murphy

Governor

Tahesha Way

Lt. Governor

Justin Zimmerman

Acting Commissioner

A consumer guide to

Homeowners,

Renters and

Condominium

Insurance

The New Jersey Department of Banking and Insurance (NJDOBI) prepared this Guide to help you

understand the sometimes complex world of Homeowners, Renters and Condominium Insurance.

If you are like most people, your home and the things inside it make up one of the biggest financial

investments you have. This can be just as true for renters as homeowners. All those clothes,

furniture, appliances, tools, toys, and electronics can really add up. If your home and its contents

are not protected by any insurance, where will you get the money to replace your possessions if

disaster strikes? Could you afford to protect yourself if someone fell on your property and decided

to sue you for injuries?

enerally if you own a home, your homeowner’s policy covers your home and its contents as well as

personal liability, (the amount you are legally responsible to pay for injuries or damages to others),

medical payments to others, and additional living expenses in the event you cannot stay in your

home (called loss of use). If you rent, a renter’s policy (also sometimes called tenants insurance)

covers your personal belongings, personal liability, medical payments to others, and additional

living expenses. A condominium policy provides protection for your personal property,

improvements, additions and items that are not covered by the condominium association’s master

policy, personal liability, medical payments to others, and additional living expenses. These

coverages are explained in greater detail in this guide.

ith the help of this Guide you can:

• Identify the kind of coverages homeowner policies offer so you can buy what you really need.

• Learn the information you need to shop for coverage in order to find the best values.

• Understand how homeowners insurance works, and how NJDOBI can help you.

lease take a few moments to review this Guide. The answers to many questions can be found

here, or on our website at www.dobi.nj.gov. If you have questions, please don’t hesitate to contact

our Consumer Inquiry and Response Center (CIRC) at 609-292-7272 or 800-446-7467.

Homeowner Insurance Basic

Coverages

Homeowner insurance policies provide

protection for several different things all

in one policy. The coverage parts of a

homeowner policy are listed below. Keep

in mind that your policy may provide

more or less coverage depending on your

needs and the type of policy you purchase.

For example, a renter’s policy will not

provide Coverage A – Dwelling, since you

do not own the property where you live.

Your insurance agent or insurance

company can help you determine which

coverage and homeowner policy form is

right for you.

• Coverage A – Dwelling

This coverage protects you for insured

damages to your home, including

plumbing, wiring and permanently

installed heating and cooling systems as

well as attached structures.

• Coverage B – Other Structures

This coverage provides protection for

unattached structures like sheds or

fences. Usually, coverage is limited to 10

percent of the amount of your Coverage A

limits; however it may be possible to

purchase additional coverage.

• Coverage C – Personal

Property

This coverage offers protection for the

contents of your home and items

belonging to other family members

residing with you. The personal

property coverage limit is typically 50

percent of the dwelling limit (Coverage

A), but you may be able to purchase

more coverage. Generally, Personal

Property coverage pays the Actual

Cash Value (ACV) of the damaged

item unless you have purchased a

replacement cost coverage

endorsement. Actual Cash Value

means the value of the item as it is

now, considering its age and condition.

• Coverage D – Loss of Use

If a covered peril, such as a fire, forces

you to live elsewhere temporarily, this

coverage provides assistance for

additional living costs beyond what

you would normally pay, including

reasonable hotel costs and additional

expenses for meals or laundry. It is

important that you maintain receipts

and documentation of the additional

expenses for your insurance company

to review. Loss of Use coverage is

usually limited to 20 percent of

Coverage A –Dwelling.

• Coverage E –Personal Liability

This coverage provides protection if

you or a family member residing in

your household is legally responsible

for injuries sustained by someone who

visits your home. Coverage is provided

for legal defense as well as liability.

There are certain exclusions to this

coverage and the policy has a limited

dollar value for liability, such as

$100,000 or $500,000.

• Coverage F –Medical Payments

to Others

This coverage provides limited

amounts for payment of medical bills

for others if they are hurt on your

property and in some circumstances,

sustain an injury caused by you away

from your home. It does not cover you

or any relative living with you.

Coverage is generally limited to

$1,000 per person but additional

limits may be purchased.

Additional Coverages

Your homeowners policy provides

additional coverages including:

• Credit Card Coverage Personal

property coverage extends to credit

cards. Most policies will pay up to

$500 to cover the unauthorized use

of your credit cards.

• Debris Removal The policy

covers the expense of having debris

left as a result of a covered loss

removed from the premises. For

example, the policy would pay for

the removal of burned materials

after a fire. The limit for this

coverage is part of the overall

property damage limit.

• Trees, Plants and Shrubs For

damages as a result of fire,

lightning, explosion, vandalism,

riot, and falling aircraft; trees,

plants and shrubs around the

house are usually covered for up to

5 percent of the insurance on the

house, up to $500 per item.

However, in the event of damage to

your trees as a result of a

windstorm or hurricane, coverage

is provided for removal of damaged

trees up to $1,000 per event with

no more than $500 for any one tree

or shrub.

You may also wish to consider buying

additional protection through coverage

endorsements. Endorsements make

changes to the original terms of your

policy. Here are some common

endorsements that may be beneficial:

• Personal Property Replacement

Cost: This endorsement extends

replacement cost coverage rather

than Actual Cash Value for

personal possessions. An example

of how this can benefit you is

explained in the section “Actual

Cash Value and Replacement

Cost.”

• Scheduled Personal Property

Endorsement: Your policy

generally only provides limited

coverage for furs, jewelry, silver,

and certain other valuables. You

can usually purchase additional

coverage, or schedule these items,

for added premium. Your

insurance company may require

recent appraisals of the items you

wish to schedule individually on

your policy.

• Sewer Backup or Sump Pump

Overflow – Some limited coverage

may be available separately as an

additional endorsement. Ask your

agent or company if they provide

this coverage, which is usually

limited to $5,000. This is an

important endorsement to consider

since downed power lines in a

storm may cause sump pumps to

stop working, resulting in damage.

Common Exclusions

All homeowners policies include a list of

exclusions, or things the policy will not

cover. It is important to be familiar with

the exclusions itemized in your policy.

Homeowners policies exclude water

damage caused by flood

. The National

Flood Insurance Program (NFIP) provides

flood coverage to residents of designated

communities that comply with the federal

guidelines for flood prevention. You do

not have to live in a flood zone to obtain

flood insurance, but you do have to live in

a community that participates in the

National Flood Insurance Program. Your

agent or insurance company can help you

in applying for flood insurance. For more

information about the federal flood

insurance program, call 888-379-9531 or

visit www.floodsmart.gov

Most homeowner’s policies also do NOT

provide coverage for:

• Damage caused by normal wear

and tear.

• Loss of animals, birds or fish.

• Damage from Sewer Backup or

Sump Pump Overflow. Limited

coverage may be available

separately as an endorsement

which is usually limited to $5,000.

• Damages resulting from war,

nuclear hazard, neglect, earth

movement (earthquake), or power

failure from an off premise source,

such as a downed power line.

• Additional cost of repairs due to

changes in building codes or local

laws enacted since the home was

built. Some coverage may be

available as an added

endorsement.

• Home based business. Most

homeowner policies only provide

limited coverage for business

related property and do not

provide liability coverage for a

home based business or business

interruption coverage.

• Watercraft. If you own a boat, you

should ask your agent or insurer if

it is covered. Some policies will

cover small motorboats and

sailboats, but not larger ones.

• Oil tank liability. Coverage may

not be provided to clean up fuel oil

or other pollutants from your

property (1

party coverage) or

from neighboring property (3

party coverage). Some policies

provide the option to purchase 1

party or 3

party coverage, or

both. If you have an active or even

inactive fuel tank on your

property, you may want this

coverage.

Shopping for Homeowners Insurance

Not all insurance companies offer the

same products and different companies

charge different rates or offer different

levels of customer service. So it pays to

shop around to find the best company for

your needs.

Some companies sell insurance directly to

applicants. These companies are called

direct writers. You can contact them by

phone or often via the internet to apply

for coverage. Other companies offer

insurance through insurance agents, also

called insurance producers. Exclusive

agents write for only one company while

independent agents may represent

several different insurance companies.

You can obtain information on companies

that currently write homeowner

insurance in the Consumer section of the

Department’s website www.dobi.nj.gov

by calling the Department at 609-292-

7272 or 800-446-7467. You can also check

to be sure the agent or company you are

contacting is currently licensed with us by

calling or visiting our website.

In order to compare your choices, it is

important to ask for the same coverages,

policy limits and deductibles and to check

to see if you are eligible for any policy

discounts. To give you an accurate quote,

the agent or insurance company will

usually request information including: a

description of your house; how it was

constructed (brick, wood, etc); its age;

size; distance to the nearest fire

department and fire hydrant; any

security devices; the policy limits; and the

deductibles you want. Ask for

information in writing so you can compare

your options.

Underwriting Guidelines/Rules

Insurance companies have underwriting

guidelines or rules to determine the types

of risks they will accept. Things such as

prior claim history, the condition and

location of your home and property,

whether you own any pets that might

cause an increased liability risk, whether

you have an in home business, and the

presence of a swimming pool or an oil

tank can have an impact on whether a

company will insure you or will renew

your policy. The New Jersey Department

of Banking and Insurance’s regulations

state that underwriting guidelines cannot

be arbitrary, capricious or unfairly

discriminatory. Ask your agent or

insurance company to review with you the

underwriting guidelines of any policy you

may be considering so that you

understand its limitations.

Surplus Lines Insurance

In some cases, insurance companies

licensed and regulated in New Jersey

(also known as the admitted market) will

not write certain risks. Perhaps a home

has a very high value or is unoccupied, or

is located right on the beach and no

insurer will provide coverage. In such

situations, New Jersey law allows some

non-admitted insurance companies, called

eligible surplus lines insurers, to provide

coverage for the risk.

Surplus lines insurers are not regulated

to the same degree as admitted insurance

companies and many insurance laws and

regulations do not apply to these

companies. Surplus lines policies may

offer different coverages and policy limits

than found in voluntary policies and rates

will usually be higher.

If you wish to check whether an insurance

company is eligible as a surplus lines

insurer, you can view the list of eligible

surplus lines insurers online at

www.state.nj.us/dobi/division_insurance/s

leo.htm or call the Department at 609-

292-7272.

FAIR Plan

If you have been unsuccessful at obtaining

coverage for your property in either the

admitted or the surplus lines market, you

may be able to obtain coverage through

the New Jersey Insurance Underwriting

Association, known as the FAIR Plan. A

property owner may apply to the FAIR

Plan directly or through any licensed

agent/producer. The plan insures homes,

mobile homes, rental units, most

commercial buildings and business

property. The FAIR Plan provides basic

property coverage, such as fire, lightning,

wind and smoke, but the basic policy does

not provide theft or personal liability

coverage. Optional theft coverage is

available as an endorsement.

Consider the FAIR Plan only if you cannot

obtain insurance from any other source.

For more information about the FAIR

Plan, contact:

New Jersey Insurance

Underwriting Association

744 Broad Street

PO Box 32609

Newark, NJ 07102

Telephone: 973- 622-3838

Web site: www.njiua.org

Factors that Affect the Cost of Your

Homeowner Policy

Insurance companies consider several

factors when determining the cost of

homeowners coverage. These factors

include:

• The location of your home –

Some areas such as coastal

locations may be more prone to

wind or storm damage. Some

areas tend to experience higher

crime rates and some homes are

far from a fire department or fire

hydrant so they pose more of a fire

threat.

• The cost to rebuild your home

– This is not necessarily the same

as the amount you paid when you

bought your home or the current

price you would get on the market.

It is important to insure your home

to its replacement cost. Most

policies contain a provision if you

are underinsured and suffer a loss,

where a co-insurance penalty will

apply. This means that even for a

minor loss, you may incur

additional out of pocket expenses.

• The type of construction –

Homes made of brick can

withstand wind and fire better

than those made of wood, so

construction type can impact

premium.

• The age and condition of your

home – Premiums are often

higher for older homes or homes in

need of updating. New homes may

qualify for discounts.

• Your claim history – If you have

filed homeowner claims in the past

it could impact your rates or your

insurability.

• The coverages you choose-

Added endorsements like

replacement cost coverage for

personal property or itemized

coverage for jewelry or art increase

premiums.

• The deductible you select – A

higher deductible, the portion of

each covered claim you are

responsible for paying, will result

in lower premiums.

• Insuring your home and cars

with one company – Some

companies offer discounts for

having both policies with them.

Actual Cash Value and Replacement

Cost

Before buying a policy, it is important to

understand the difference between

replacement cost and actual cash value.

Typically, homeowner policies provide

replacement cost coverage for the

dwelling and Actual Cash Value on

personal property.

Actual Cash Value (ACV) means the value

of the item as it is now, considering its

age and condition. Replacement cost is

the amount it would take to repair or

replace with materials of like kind and

quality at today’s prices.

Many insurers offer an option to purchase

an endorsement for replacement cost

coverage on personal property. Although

this coverage will result in some increase

in your premium, you may wish to

consider this option. For example, a three

year old computer damaged by lightning

could have an actual cash value of only

$650 today, but it would cost $1,100 to

replace it. With a replacement cost

endorsement, the insurer will pay you the

current replacement cost once you have

purchased a similar new computer.

Windstorm or Hail Deductibles

An optional separate deductible can be

selected for the perils of windstorm or

hail. This deductible is separate from the

policy all peril deductible and reduces

your premium. The windstorm or hail

deductible can be selected for a fixed

dollar amount or a percentage of the

Coverage A limits up to 10 percent. If you

would like to have the optional windstorm

or hail deductible, contact your agent.

Hurricane Deductibles

Many policies also have hurricane loss

deductibles that apply only to losses that

occur during a hurricane, which is an

event that is designated as a hurricane by

the National Weather Service, and only if

sustained wind speeds of 74 mph have

been measured anywhere in New Jersey.

There are several types of hurricane

deductibles available in the market, but a

common type is determined as a

percentage of the policy’s Coverage A

amount. These percentages can be 1

percent, 2 percent, 5 percent, or even 10

percent of the Coverage A amount. For

example, a $200,000 home with a 2

percent hurricane deductible would have

a $4,000 deductible; a $500,000 home

with a 5 percent deductible would have a

$25,000 deductible.

Because of variations in the hurricane

deductible programs, be sure you

understand how any deductible on your

policy would apply in your situation. Ask

questions and shop carefully. If you are

subject to a hurricane deductible, discuss

with your agent or insurance company if

you can reduce or eliminate the deductible

by making changes that make your

property less susceptible to hurricane

damage, such as adding hurricane

shutters.

Important: Generally, it is not possible

to purchase new homeowners insurance,

or to request upgrades to an existing

policy, within a specific time period of an

approaching hurricane.

Credit Information

An insurer may request consumer credit

reports when writing new or renewal

policies. Some companies use credit

information as an indicator of the

frequency and severity of future claims.

The federal Fair Credit Reporting Act

gives consumers certain rights. If adverse

action is taken (such as rejecting your

application for insurance) because of

information in your credit report, you

have the right to review the report at no

charge. You must request a copy of the

report directly from the credit agency.

Your insurance company will provide you

with the credit agency’s name, address,

and telephone number.

Reducing the Cost of Insurance

Homeowner insurers offer discounts to

attract particular customers. Typical

discounts you may wish to ask about

when purchasing a policy include:

• Multiple policy discounts - For

example, the company will offer a

discount if you insurer both your

home and auto with them.

• Credits for protection devices -

This may include smoke detectors,

alarm systems and sprinkler

systems.

• Nonsmoker discounts if all family

members in the home do not

smoke.

• Long-time policyholders - If you

have maintained coverage with the

same insurer for several years, you

may qualify for special discounts.

In addition to discounts, you may want to

consider increasing the policy deductible.

Higher deductibles lower the premium. It

is important to consider, however,

whether you can afford to cover the

deductible in the event of a loss.

Price and Service

While the price you pay is important,

buying the cheapest policy may not

always be the best choice. An insurance

policy that sounds too good to be true

probably is just that. Consider the

following when you choose an insurance

company and a policy:

• Premium cost

• Benefits including exclusions and

limits

• Service - How do I make a claim?

How easy is it to make changes to

my policy or to reach customer

service?

• Renewability - How can I be

cancelled or nonrenewed?

• Financial strength and reliability

of the company - Will the

insurance company be around in

the future if I have a loss?

Lender Requirements

If you have a mortgage on your home,

your lender will require you to have

homeowner insurance and to name the

lending institution as a loss payee (they

will be listed as a co-payee along with you

on any checks the insurer writes to pay

for damage to the dwelling). You are not

required to buy insurance from any

company that may be recommended by

your lender.

If you fail to keep your homeowner policy

in force, the lender may purchase

coverage on your property and you will be

responsible for paying the premiums.

This is called “lender placed” insurance

and it is generally more expensive than a

regular homeowner policy and only

protects the interest of the lender.

Loss Prevention and Other Helpful

Tips

Taking steps to prevent losses is just as

important as buying insurance to cover

them.

• Install smoke, heat and carbon

monoxide detectors in your home

and especially near sleeping areas.

• Keep your house or apartment

clear of accumulated trash, oily

rags and combustible materials.

• Check lamps, cords, and light

switches, making sure there is no

faulty wiring.

• Practice home fire and emergency

drills, making sure that everyone,

especially children, knows what to

do in case of a fire or other

emergency.

• Keep matches away from children;

make sure smokers do not smoke

in bed.

• Install adequate locks and take

precautions, such as not letting

papers or mail accumulate when

you go away.

• If you use candles in your home,

never leave them unattended.

Other tips:

• A homeowner’s insurance policy is

a legal contract. When you

purchase homeowner’s insurance,

you will receive a policy contract.

Read the policy carefully, and

make sure that you understand it.

If you have any questions, contact

your agent or insurance company

for clarification.

• Keep your policy in a safe place

and know the name of your

insurance company and agent.

• Make sure you pay your premiums

on time so your coverage does not

cancel. If you have an escrow

account and your lender pays the

insurance, make sure your insurer

receives payment.

• Keep all your insurance related

paperwork together and in a safe

place. Maintain contact

information for your insurance

company and agent so you have it

in the event of a loss.

• Make a home inventory. Go

through every room and list your

possessions. Take pictures or

videos of everything. Store your

inventory in a safe place

somewhere else, like work or a

relative’s home or saved on a

portable device or in a safe deposit

box. Review the inventory every

year and update it whenever you

acquire new items. The National

Association of Insurance

Commissioners (NAIC) has a home

inventory application for certain

smart phones. The myHOME

Scr.APP.book app lets users

capture images, descriptions, bar

codes and serial numbers of

personal possessions. The app

organizes information by room and

creates a back-up file for email

sharing. To download the free app,

go to the iTunes® or Android®

Market app stores and search

"NAIC." The NAIC also offers a

downloadable home inventory

checklist and tips for effectively

cataloguing your possessions. Both

are available online at

http://home.insureuonline.org

Filing a Homeowner Insurance Claim

Call your agent or insurance company as

soon as possible to report your loss.

Have your policy number ready along

with any information that may be

relevant, and have paper and pen to

record the claim number, contact

information for the assigned claim

representative and any important

information about your claim. Ask your

agent or insurance company what

documentation you will be need to provide

to them. If you have any questions, your

agent or insurance company will assist

you.

If your property has been damaged, it is

important to make any necessary

temporary repairs to protect the property

from further loss or damage. For

example, if windows are broken, have

them boarded up to protect against

vandalism or weather. Be sure to save all

receipts or bills to submit for your claim.

Your insurance company will assign a

claim adjuster to inspect the damages and

determine coverage. You should cooperate

with the adjuster and keep written notes

about conversations regarding your claim.

The company should provide you with a

copy of the damage estimate and if you

request it, give you the name of a

contractor who will do the work at the

price estimated. You are not required to

use the company’s recommended

contractor. If all or part of the loss is not

covered, the company must explain how

coverage is excluded under your policy.

If you and the insurance company do not

agree, first try to resolve your issues with

the company. Sometimes it helps to have

your contractor speak directly with the

claim adjustor.

If you cannot resolve the dispute with

your insurance company, you have several

options:

• Contact the New Jersey

Department of Banking and

Insurance at 609-292-7272 or

800-446-7467, or file a complaint

online at

www.state.nj.us/dobi/consumer.htm

• Request that the company’s

Internal Appeals Panel review

your claim. The company generally

will ask you to submit your dispute

in writing, including any

documentation you have to support

your position. If you are

dissatisfied with the decision of the

company’s Internal Appeals Panel,

you can appeal to the Office of the

Insurance Claims Ombudsman at

the New Jersey Department of

Banking and Insurance.

• You can request to have

independent appraisers evaluate

your loss. See the appraisal clause

of your policy to learn how this

process works.

• You can hire an attorney to

represent your interests.

Policy Cancellations and

Nonrenewals

When a new policy first takes effect, the

insurer has a right to cancel coverage any

time within the first 60 days for any

reason not otherwise prohibited by law.

The cancellation is not effective until at

least 10 days after the insurance company

sends you written notice.

A mid-term cancellation is the

termination of a policy before the policy

expiration or renewal date. An insurer

can cancel coverage if you do not pay

premiums or for other reasons stated in

your policy. There is no grace period for

paying for your insurance, so it is

important to pay the premium due on

time. All mid-term cancellations require

a written notice before the termination

date of the policy.

Non-renewal of a policy refers to the

termination of a policy at its expiration

date without an offer by the insurer to

continue or renew coverage. If the

insurance company decides that it does

not want to renew your policy, it must

provide you with written notice explaining

the reason for nonrenewal at least 30 days

before the expiration date of your policy.

If your policy is going to be cancelled or

nonrenewed, your agent may be able to

help you obtain replacement coverage. It

is important to act quickly so you do not

face a lapse in coverage.

How We Can Help

The Consumer Assistance Unit of the

Division of Insurance wants to help you

with your insurance questions and

complaints. If you have a question, we

will do our best to provide you with

guidance. If you have a complaint, we

cannot act as a substitute for a court or

making determinations on questions of

fact, but we can contact the insurance

company or agent and determine if they

are acting in accordance with the terms of

your policy as well as New Jersey

insurance laws and regulations. You can

reach us by phone at 609-292-7272 or 800

-446-7467.

If you wish to file a complaint, you can do

so online at

www.state.nj.us/dobi/consumer.htm

or write to us at:

New Jersey Department of

Banking and Insurance

Consumer Assistance

PO Box 329

Trenton, NJ 08625-0329

Make sure you include details about your

problem, the name of your insurance

company and/or agent, policy number and

claim number where appropriate, and any

documents that may assist us.

For more information visit our website