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What's Really Covered By Your Home Insurance?: An Interview with Kelson Herman of Irene Herman Insurance Services

By Kelson Herman

Please tell us a little bit about your company and the services you offer.

After more than 20 years in the insurance industry, Irene Herman started Irene Herman Insurance Services in 1998. We consider ourselves financial protectors, who provide clients with choices and opportunities to get the best value for their dollar. We offer personal and commercial insurance. We strive to educate our customers, so that they understand the coverage that they are being offered. We offer Medicare supplements, health, life, and disability as well. We also provide notary services.

Can you briefly describe what an example of bare minimum home insurance coverage would be like in Northern California?

Bare minimum coverage would be insuring a home for 100% of its rebuilding cost and getting at least $100,000 in liability coverage. The homeowners policy HO1 is as bare bones a policy as you can get in CA, but not many companies will offer this type of coverage and it is not recommended. It mainly covers fire, lightning, wind, smoke, and theft.

Other than the home, the most important coverage that a homeowners policy provides is liability coverage. Most people don't realize that they're covered worldwide for their liability of accidental injury to another person.

What are some important things that would not be covered in that example?

Personal Property with replacement cost or the coverage of the items that are inside the home. Most standard HO3 homeowners policies will cover personal property for 50%-75% of the building coverage.
Extended replacement cost is an important coverage to have, since most homeowners will upgrade or remodel the home and forget to update their insurance policy. Amounts of extended replacement range from 25%-100% more than the rebuilding cost of the home.
Medical Payments cover physical injuries to guests on your property.
Equipment Breakdown covers larger appliances against breaking down and usually has a separate deductible.
Personal injury which protects the homeowner against allegations of wrongful eviction, libel, and slander.
These are just a few examples.

What is replacement cost coverage and how does it potentially help homeowners?

Replacement cost coverage is the actual cost to replace the item "of like kind and quality" at today's prices. If you don't have replacement cost, then you will be covered for ACV or actual cash value. ACV is replacement cost minus the depreciation. For example: Let's say a homeowner bought a dining room table 5 years ago that cost $500 new. The homeowner had a fire and the table was burned. With replacement cost you would get a new table, without replacement cost you would get the price of a 5 year old depreciated table which could be less than $100.

In the case of an entire home being burned down and having to be reconstructed, no one can predict at the time of loss what the contractor's labor and material cost will be. It is important to have one's home insured to value to ensure that the replacement cost and the replacement cost extension is in place.

Can you talk about any other replacement cost specifics?

It's always best to create an inventory of what you own, so that after a loss it will be easier to know what to replace. If someone breaks into your home and steals a bunch of items, most people will be in shock and won't remember all the things that might have gone missing. Remember to let your agent know when you have remodeled or upgraded your home so it is insured properly.

How is the deductible typically calculated with replacement cost? What about in the case of a flood, using flood insurance?

The deductible is usually a flat amount. If a client can afford a higher deductible, then the premium is much less. With the higher deductible, a customer is accepting a lower premium and taking a greater financial responsibility up to the deductible amount.

Regarding Flood insurance the maximum coverage one can obtain on the standard policy is $250,000 and rates are regulated by the federal government. One can purchase excess coverage if requested or required. Deductibles are a flat amount and can be as high as $5,000. Usually mortgage companies set limits for their customers on what deductible is allowed and is based on the flood maps.

Do you have any tips for homeowners who may have a limited budget for homeowners insurance?

Honestly, I would say shop around. Bundling your home and auto policies usually provides discounts for both.

What's the best way for people to contact your company?

We can be reached by phone at 415-447-4212, by email at, or on our website

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