What is Homeowners Insurance?

What is Homeowners Insurance?

Homeowner’s insurance provides financial protection against disasters. A standard policy insures the home itself and the things you keep in it. 

Note: Always contact your insurance agent to ensure this and other homeowner's insurance information is correct and up-to-date.

Homeowners insurance is a package policy. This means that it 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. This includes damage caused by household pets. Damage caused by most disasters is covered but there are exceptions. The most significant are damage caused by floods, earthquakes and poor maintenance. You must buy two separate policies for flood and earthquake coverage. Maintenance-related problems are the homeowners' responsibility. Bozeman Home Owner's Insurance Information

What is in a standard homeowner’s insurance policy?

A standard homeowner’s insurance policy includes four essential types of coverage. They include:
Coverage for the structure of your home.
Coverage for your personal belongings.
Liability protection.
Additional living expenses in the event you are temporarily unable to live in your home because of a fire or other insured disaster.

1. The structure of your house - This part of your policy pays to repair or rebuild your home if it is damaged or destroyed by fire, hurricane, hail, lightning or other disaster listed in your policy. It will not pay for damage caused by a flood, earthquake or routine wear and tear. When purchasing coverage for the structure of your home, it is important to buy enough to rebuild your home.Most standard policies also cover structures that are detached from your home such as a garage, tool shed or gazebo. Generally, these structures are covered for about 10% of the amount of insurance you have on the structure of your home. If you need more coverage, talk to your insurance agent about purchasing more insurance.

2. Your personal belongings - Your furniture, clothes, sports equipment and other personal items are covered if they are stolen or destroyed by fire, hurricane or other insured disaster. Most companies provide coverage for 50% to 70% of the amount of insurance you have on the structure of your home. So if you have $100,000 worth of insurance on the structure of your home, you would have between $50,000 to $70,000 worth of coverage for your belongings. The best way to determine if this is enough coverage is to conduct a home inventory.This part of your policy includes off-premises coverage. This means that your belongings are covered anywhere in the world, unless you have decided against off-premises coverage. Some companies limit the amount to 10% of the amount of insurance you have for your possessions. You have up to $500 of coverage for unauthorized use of your credit cards.Expensive items like jewelry, furs and silverware are covered, but there are usually dollar limits if they are stolen. Generally, you are covered for between $1,000 to $2,000 for all of your jewelry and furs. To insure these items to their full value, purchase a special personal property endorsement or floater and insure the item for it's appraised value. Coverage includes “accidental disappearance,” meaning coverage if you simply lose that item. And there is no deductible. Trees, plants and shrubs are also covered under standard homeowners insurance. Generally you are covered for 5% of the insurance on the house—up to about $500 per item. Perils covered are theft, fire, lightning, explosion, vandalism, riot and even falling aircraft. They are not covered for damage by wind or disease.

3. Liability Protection - Liability covers you against lawsuits for bodily injury or property damage that you or family members cause to other people. It also pays for damage caused by your pets. So, if your son, daughter or dog accidentally ruins your neighbor’s expensive rug, you are covered. However, if they destroy your rug, you are not covered.The liability portion of your policy pays for both the cost of defending you in court and any court awards—up to the limit of your policy. You are also covered not just in your home, but anywhere in the world.Liability limits generally start at about $100,000. However, experts recommend that you purchase at least $300,000 worth of protection. Some people feel more comfortable with even more coverage. You can purchase an umbrella or excess liability policy which provides broader coverage, including claims against you for libel and slander, as well as higher liability limits. Generally, umbrella policies cost from $200 to $350 for $1 million of additional liability protection.Your policy also provides no-fault medical coverage. In the event a friend or neighbor is injured in your home, he or she can simply submit medical bills to your insurance company. This way, expenses are paid without a liability claim being filed against you. You can generally get $1,000 to $5,000 worth of this coverage. It does not, however, pay the medical bills for your family or your pet.

4. Additional Living Expenses - This pays the additional costs of living away from home if you can't live there due to damage from a fire, storm or other insured disaster. It covers hotel bills, restaurant meals and other living expenses incurred while your home is being rebuilt. Coverage for additional living expenses differs from company to company. Many policies provide coverage for about 20% of the insurance on your house. You can increase this coverage, however, for an additional premium. Some companies sell a policy that provides an unlimited amount of loss-of-use coverage, but 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.

Are there different types of policies?

Yes. A person who owns his or her home would have a different policy from someone who rents. Policies also differ on the amount of insurance coverage provided.The different types of homeowners policies are fairly standard throughout the country. However, individual states and companies may offer policies that are slightly different or go by other names such as “standard” or “deluxe”.

If you own your homeIf you own the home you live in, you have several policies to choose from. The most popular policy is the HO-3, which provides the broadest coverage. Owners of multi-family homes generally purchase an HO-3 with an endorsement to cover the risks associated with having renters live in their homes. HO-1: Limited coverage policy This “bare bones” policy covers you against the first 10 disasters. It's no longer available in most states. HO-2: Basic policyA basic policy provides protection against all 16 disasters. There is a version of HO-2 designed for mobile homes. HO-3: The most popular policy This “special” policy protects your home from all perils except those specifically excluded.

HO-8: Older home Designed for older homes, this policy usually reimburses you for damage on an actual cash value basis which means replacement cost less depreciation. Full replacement cost policies may not be available for some older homes.

If you rent your home: HO4-Renter Created specifically for those who rent the home they live in, this policy protects your possessions and any parts of the apartment that you own, such as new kitchen cabinets you install, against all 16 disasters.

If you own a co-op or a condo H0-6: condo/co-opA policy for those who own a condo or co-op, it provides coverage for your belongings and the structural parts of the building that you own. It protects you against all 16 disasters.

Your level of coverage: Regardless of whether you are an owner or renter, you have the following three options:

Actual cash value. This type of policy pays to replace your home or possessions minus a deduction for depreciation.

Replacement cost.The policy pays the cost of rebuilding/repairing your home or replacing your possessions without a deduction for depreciation.

Guaranteed or extended replacement cost.This policy offers the highest level of protection. A guaranteed replacement cost policy pays whatever it costs to rebuild your home as it was before the fire or other disaster–even if it exceeds the policy limit. This gives you protection against sudden increases in construction costs due to a shortage of building materials after a widespread disaster or other unexpected situations. It generally won't cover the cost of upgrading the house to comply with current building codes. You can, however, get an endorsement (or an addition to) your policy called 

Ordinance or Law to help pay for these additional costs. A guaranteed replacement cost policy may not be available if you own an older home.Some insurance companies offer an extended, rather than a guaranteed replacement cost policy. An extended policy pays a certain percentage over the limit to rebuild your home. Generally, it is 20 to 25 percent more than the limit of the policy. For example, if you took out a policy for $100,000, you could get up to an extra $20,000 or $25,000 of coverage. 

Even though a guaranteed/extended replacement cost policy may be a bit more expensive, it offers the best financial protection against disasters for your home. These coverages, however, may not be available in all states or from all companies.

Information provided by Insurance Information Institute

The Role of the Realtor®

The Critical Role of the Realtor® in the Bozeman Real Estate Transaction

Why Was This List Prepared?

Surveys show that many homeowners and homebuyers are not aware of the true value a REALTOR® provides during the course of a real estate transaction.

At the same time, regrettably, REALTORS® have generally assumed that the expertise, professional knowledge and just plain hard work that go into bringing about a successful transaction were understood and appreciated.

Many of the most important services and steps are performed behind the scenes by either the REALTOR® or the brokerage staff and traditionally have been viewed simply as part of their professional responsibilities to the client. But, without them, the transaction could be placed in jeopardy. This publication seeks to close that gap.

Listed on the following pages are nearly 200 typical actions, research steps, processes and review stages necessary for a successful residential real estate transaction and normally provided by a full service real estate brokerage and for which they are entitled to fair compensation.

Comprehensiveness: The list is by no means an attempt to set forth a complete list of services as these may vary within each brokerage and each market. Many REALTORS® routinely provide a wide variety of additional services that are as varied as the nature of each transaction.

By the same token, some transactions may not require some of these steps to be equally successful. However, most would agree that given the unexpected complications that can arise, it’s far better to know about a step and make an intelligent, informed decision to skip it, than to not know the possibility even existed.

The REALTOR® Commitment

Through it all, the personal and professional commitment of the REALTOR® is to ensure that a seller and buyer are brought together in an agreement that provides each with a “win” that is fair and equitable.

The motivation is easy to understand. For most full-service brokerages, they receive no compensation unless and until the sale closes. By contrast, there are firms that offer “limited services” in exchange for an up-front flat fee, or perhaps offer a menu of pay-as-you-go or “a la’ carte” options.

Some even offer a sliding scale ranging from limited to full service. In these cases, the compensation of the REALTOR® is based on these reduced service levels with the seller bearing full responsibility for all the other steps and procedures in the selling process. In short, the marketplace truism is that “you get what you pay for.”

A Variety of Choices

The variety of brokerage business models in today’s real estate industry affords the homeowner a greater range of options than ever before. But no matter which option is chosen, before signing a Listing Agreement or otherwise engaging the services of a REALTOR® and agreeing to compensate them, homeowners should understand exactly what services will, or will not, be provided.

Why Use A REALTOR®? Not every real estate agent or broker is a REALTOR®. That term and the familiar Block “R” logo are trademarked by the National Association of REALTORS® and can only be used by those are REALTOR® members through their local association of REALTORS®.

While all REALTORS® are state-issued licensees as agents or brokers, the major difference between a “real estate licensee” and a REALTOR® is that REALTORS® have taken an oath to subscribe to a stringent, enforceable Code of Ethics with Standards of Practice that promote the fair, ethical and honest treatment of all parties in a transaction. Non-member licensees have taken no such oath and are not morally bound to the ethical practices and principles set for in the REALTOR® Code.

For that extra measure of peace of mind, ensure the individual seeking to represent you is both a real estate licensee and a REALTOR®.

The Critical Role of the REALTOR®

Listed here are nearly 200 typical actions, research steps, procedures, processes and review stages in a successful residential real estate transaction that are normally provided by full service real estate brokerages in return for their sales commission. Depending on the transaction, some may take minutes, hours, or even days to complete, while some may not be needed.

More importantly, they reflect the level of skill, knowledge and attention to detail required in today’s real estate transaction, underscoring the importance of having help and guidance from someone who fully understands the process – a REALTOR®.

And never forget that REALTORS® are pledged to uphold the stringent, enforceable tenets of the REALTOR® Code of Ethics in their professional dealings with the public. Not every real estate licensee holds REALTOR® membership. Make sure yours does!

Pre-Listing Activities

1 Make appointment with seller for listing presentation
2 Send seller a written or e-mail confirmation of listing appointment and call to confirm
3 Review pre-appointment questions
4 Research all comparable currently listed properties
5 Research sales activity for past 18 months from MLS and public records databases
6 Research "Average Days on Market" for this property of this type, price range and location
7 Download and review property tax roll information
8 Prepare "Comparable Market Analysis" (CMA) to establish fair market value
9 Obtain copy of subdivision plat/complex lay-out
10 Research property's ownership & deed type
11 Research property's public record information for lot size & dimensions
12 Research and verify legal description
13 Research property's land use coding and deed restrictions
14 Research property's current use and zoning
15 Verify legal names of owner(s) in county's public property records
16 Prepare listing presentation package with above materials
17 Perform exterior "Curb Appeal Assessment" of subject property
18 Compile and assemble formal file on property
19 Confirm current public schools and explain impact of schools on market value
20 Review listing appointment checklist to ensure all steps and actions have been completed

Listing Appointment Presentation

21 Give seller an overview of current market conditions and projections
22 Review agent's and company's credentials and accomplishments in the market
23 Present company's profile and position or "niche" in the marketplace
24 Present CMA Results To Seller, including Comparables, Solds, Current Listings & Expireds
25 Offer pricing strategy based on professional judgment and interpretation of current market conditions
26 Discuss Goals With Seller To Market Effectively
27 Explain market power and benefits of Multiple Listing Service
28 Explain market power of web marketing, IDX and REALTOR.com
29 Explain the work the brokerage and agent do "behind the scenes" and agent's availability on
weekends
30 Explain agent's role in taking calls to screen for qualified buyers and protect seller from curiosity seekers
31 Present and discuss strategic master marketing plan
32 Explain different agency relationships and determine seller's preference
33 Review and explain all clauses in Listing Contract & Addendum and obtain seller's signature

Once Property is Under Listing Agreement

34 Review current title information
35 Measure overall and heated square footage
36 Measure interior room sizes
37 Confirm lot size via owner's copy of certified survey, if available
38 Note any and all unrecorded property lines, agreements, easements
39 Obtain house plans, if applicable and available
40 Review house plans and make copy
41 Order plat map for retention in property's listing file
42 Prepare showing instructions for buyers' agents and agree on showing time window with seller
43 Obtain current mortgage loan(s) information: companies and & loan account numbers
44 Verify current loan information with lender(s)
45 Check assumability of loan(s) and any special requirements
46 Discuss possible buyer financing alternatives and options with seller
47 Review current appraisal if available
48 Identify Home Owner Association manager if applicable
49 Verify Home Owner Association Fees with manager - mandatory or optional and current annual fee
50 Order copy of Homeowner Association bylaws, if applicable
51 Research electricity availability and supplier's name and phone number
52 Calculate average utility usage from last 12 months of bills
53 Research and verify city sewer/septic tank system
54 Water System: Calculate average water fees or rates from last 12 months of bills )
55 Well Water: Confirm well status, depth and output from Well Report
56 Natural Gas: Research/verify availability and supplier's name and phone number
57 Verify security system, current term of service and whether owned or leased
58 Verify if seller has transferable Termite Bond
59 Ascertain need for lead-based paint disclosure
60 Prepare detailed list of property amenities and assess market impact
61 Prepare detailed list of property's "Inclusions & Conveyances with Sale"
62 Compile list of completed repairs and maintenance items
63 Send "Vacancy Checklist" to seller if property is vacant
64 Explain benefits of Home Owner Warranty to seller
65 Assist sellers with completion and submission of Home Owner Warranty Application
66 When received, place Home Owner Warranty in property file for conveyance at time of sale
67 Have extra key made for lockbox
68 Verify if property has rental units involved. And if so:
69 􀂃 Make copies of all leases for retention in listing file
70 􀂃 Verify all rents & deposits
71 􀂃 Inform tenants of listing and discuss how showings will be handled
72 Arrange for installation of yard sign
73 Assist seller with completion of Seller's Disclosure form
74 "New Listing Checklist" Completed
75 Review results of Curb Appeal Assessment with seller and provide suggestions to improve salability
76 Review results of Interior Décor Assessment and suggest changes to shorten time on market
77 Load listing into transaction management software program
Entering Property in Multiple Listing Service Database
78 Prepare MLS Profile Sheet -- Agents is responsible for "quality control" and accuracy of listing data
79 Enter property data from Profile Sheet into MLS Listing Database
80 Proofread MLS database listing for accuracy - including proper placement in mapping function
81 Add property to company's Active Listings list
82 Provide seller with signed copies of Listing Agreement and MLS Profile Sheet Data Form within 48 hours
83 Take additional photos for upload into MLS and use in flyers. Discuss efficacy of panoramic
photography

Marketing The Listing

84 Create print and Internet ads with seller's input
85 Coordinate showings with owners, tenants, and other Realtors®. Return all calls - weekends
included
86 Install electronic lock box if authorized by owner. Program with agreed-upon showing time windows
87 Prepare mailing and contact list
88 Generate mail-merge letters to contact list
89 Order “Just Listed” labels & reports
90 Prepare flyers & feedback faxes
91 Review comparable MLS listings regularly to ensure property remains competitive in price, terms, conditions and availability
92 Prepare property marketing brochure for seller's review
93 Arrange for printing or copying of supply of marketing brochures or fliers
94 Place marketing brochures in all company agent mail boxes
95 Upload listing to company and agent Internet site, if applicable
96 Mail Out "Just Listed" notice to all neighborhood residents
97 Advise Network Referral Program of listing
98 Provide marketing data to buyers coming through international relocation networks
99 Provide marketing data to buyers coming from referral network
100 Provide "Special Feature" cards for marketing, if applicable
101 Submit ads to company's participating Internet real estate sites
102 Price changes conveyed promptly to all Internet groups
103 Reprint/supply brochures promptly as needed
104 Loan information reviewed and updated in MLS as required
105 Feedback e-mails/faxes sent to buyers' agents after showings
106 Review weekly Market Study
107 Discuss feedback from showing agents with seller to determine if changes will accelerate the sale
108 Place regular weekly update calls to seller to discuss marketing & pricing
109 Promptly enter price changes in MLS listing database

The Offer and Contract

109 Receive and review all Offer to Purchase contracts submitted by buyers or buyers' agents.
110 Evaluate offer(s) and prepare a "net sheet" on each for the owner for comparison purposes
111 Counsel seller on offers. Explain merits and weakness of each component of each offer
112 Contact buyers' agents to review buyer's qualifications and discuss offer
113 Fax/deliver Seller's Disclosure to buyer's agent or buyer upon request and prior to offer if possible
114 Confirm buyer is pre-qualified by calling Loan Officer
115 Obtain pre-qualification letter on buyer from Loan Officer
116 Negotiate all offers on seller's behalf, setting time limit for loan approval and closing date
117 Prepare and convey any counteroffers, acceptance or amendments to buyer's agent
118 Fax copies of contract and all addendums to closing attorney or title company
119 When Offer to Purchase Contract is accepted and signed by seller, deliver to buyer's agent
120 Record and promptly deposit buyer's earnest money in escrow account.
121 Disseminate "Under-Contract Showing Restrictions" as seller requests
122 Deliver copies of fully signed Offer to Purchase contract to seller
123 Fax/deliver copies of Offer to Purchase contract to Selling Agent
133 Fax copies of Offer to Purchase contract to lender
124 Provide copies of signed Offer to Purchase contract for office file
125 Advise seller in handling additional offers to purchase submitted between contract and closing
126 Change status in MLS to "Sale Pending"
127 Update transaction management program to show "Sale Pending"
128 Review buyer's credit report results -- Advise seller of worst and best case scenarios
129 Provide credit report information to seller if property will be seller-financed
130 Assist buyer with obtaining financing, if applicable and follow-up as necessary
131 Coordinate with lender on Discount Points being locked in with dates
132 Deliver unrecorded property information to buyer
133 Order septic system inspection, if applicable
134 Receive and review septic system report and assess any possible impact on sale
135 Deliver copy of septic system inspection report lender & buyer
136 Deliver Well Flow Test Report copies to lender & buyer and property listing file
137 Verify termite inspection ordered
138 Verify mold inspection ordered, if required

Tracking the Loan Process

139 Confirm Verifications Of Deposit & Buyer's Employment Have Been Returned
140 Follow Loan Processing Through To The Underwriter
141 Add lender and other vendors to transaction management program so agents, buyer and seller can track progress of sale
142 Contact lender weekly to ensure processing is on track
143 Relay final approval of buyer's loan application to seller

Home Inspection

144 Coordinate buyer's professional home inspection with seller
145 Review home inspector's report
146 Enter completion into transaction management tracking software program
147 Explain seller's responsibilities with respect to loan limits and interpret any clauses in the contract
148 Ensure seller's compliance with Home Inspection Clause requirements
149 Recommend or assist seller with identifying and negotiating with trustworthy contractors to perform
any required repairs
150 Negotiate payment and oversee completion of all required repairs on seller's behalf, if needed

The Appraisal

151 Schedule Appraisal
154 Provide comparable sales used in market pricing to Appraiser
152 Follow-Up On Appraisal
151 Enter completion into transaction management program
153 Assist seller in questioning appraisal report if it seems too low

Closing Preparations and Duties

154 Contract Is Signed By All Parties
155 Coordinate closing process with buyer's agent and lender
156 Update closing forms & files
157 Ensure all parties have all forms and information needed to close the sale
158 Select location where closing will be held
159 Confirm closing date and time and notify all parties
160 Assist in solving any title problems (boundary disputes, easements, etc) or in obtaining Death Certificates
161 Work with buyer's agent in scheduling and conducting buyer's Final Walk-Thru prior to closing
172 Research all tax, HOA, utility and other applicable prorations
162 Request final closing figures from closing agent (attorney or title company)
163 Receive & carefully review closing figures to ensure accuracy of preparation
164 Forward verified closing figures to buyer's agent
165 Request copy of closing documents from closing agent
166 Confirm buyer and buyer's agent have received title insurance commitment
167 Provide "Home Owners Warranty" for availability at closing
168 Review all closing documents carefully for errors
169 Forward closing documents to absentee seller as requested
170 Review documents with closing agent (attorney)
171 Provide earnest money deposit check from escrow account to closing agent
173 Coordinate this closing with seller's next purchase and resolve any timing problems
174 Have a "no surprises" closing so that seller receives a net proceeds check at closing
175 Refer sellers to one of the best agents at their destination, if applicable
176 Change MLS status to Sold. Enter sale date, price, selling broker and agent's ID numbers, etc.
177 Close out listing in transaction management program

Follow Up After Closing

178 Answer questions about filing claims with Home Owner Warranty company if requested
179 Attempt to clarify and resolve any conflicts about repairs if buyer is not satisfied
180 Respond to any follow-on calls and provide any additional information required from office files.

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Bozeman Real Estate Montana  -- 406.579.9683

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