The Impact Of Home Insurance Regulations For Tennessee Residences

Homeowners insurance in the state of Tennessee is regulated by the Department of Commerce and Insurance, which is responsible for ensuring that companies act in accordance with laws created by both the state and federal governments.

In Tennessee, the amount of coverage offered by insurers is largely left up to the companies themselves, unlike some states which mandate that certain coverages be included in a policy. In fact, homes in Tennessee are not required by law to carry home insurance coverage, but any financed property will likely do so at the request of the bank or lending institution. One important thing to bear in mind about owning a home in Tennessee is that the state does have reputation for severe weather. In the first eight years of the twenty-first century, there were eleven severe storms declared in the state, nine of which resulted in significant flooding damage to property. For this reason, it is recommended that any insurance policy purchased in Tennessee cover the full replacement cost of a home, rather than its market value. Insurance companies all have different formulas for determining replacement cost, but most use factors such as the age of the home, its size, and what materials it was constructed out of. Replacement cost means that if the home is destroyed and a home insurance claim is filed, the insurer will pay the policy holder what it would cost to rebuild their home under current conditions, up to the maximum limits specified in their policy.

Despite the major damage caused by floods in the last decade, flood coverage is not standard on Tennessee insurance policies and must be purchased as an add-on. This is true even for those areas designated as "flood zones". Coverage outside of a flood zone will be extremely cost-effective and can bring peace of mind should a storm come that way. Coverage within a flood zone will not be cheap, but may prove necessary.

Homeowners policies in Tennessee are divided into basic types, the most common for homes being HO-1, HO-2 and HO-3. HO-1 covers a home from six basic perils such as fire and lightning. An HO-2 policy will cover these six and 11 more perils including electrical damage and damage from falling objects. The most popular type of insurance in the state is HO-3, which covers all 17 perils listed under HO-1 and HO-2 policies. The only items listed in the policy itself will be those things it excludes, such as war or earthquakes. HO-3 policies are often called "broad" for this reason. Home insurance regulations in Tennessee make it worthwhile for consumers to shop around and find a company that offers broad coverage at a reasonable price.

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