Most mortgage lenders require that you purchase coverage before closing or entering into escrow on a property.

Some lenders, however, don’t demand insurance on condominiums. But the condo association may require you to insure the interior of your unit (including your possessions), while the condo association is required by state law to insure the exterior of the building and all common areas.

State insurance laws vary on coverage and limits, so ask an experienced insurance agent in your state about specific laws. It’s wise to get a feel for insurance rates in areas with above-normal incidences of natural disasters, including earthquakes and tornadoes. In some areas, coverage may not be available at affordable rates, if at all, or only through a state fund, which offers only limited coverage.

What’s covered: Types of policies vary

Basic coverage

Includes vandalism, theft, explosions, fire, lightning, wind-storms, hail, window, glass breakage and damage from vehicles, aircraft and smoke.

Broad coverage

Includes damage from ice, snow, sleet or falling objects; bursting or freezing of pipes; heating or air-conditioning systems and appliances; electrical malfunction to electrical systems and appliances; and structural collapse.

Liability coverage

Coverage for a loss sustained inside a condo unit or on a single-family home property -- for example, a guest slipping and falling in a bathtub and someone falling on an icy sidewalk.

Replacement costs insurance

Covers the cost of replacing a structure but not the land. Look for a guarantee of 80 percent of full replacement costs.

Deductible

The amount of loss expenses you must pay before insurance payments kick in.

Actual cash value

Replacement costs minus depreciation.

Flood insurance

Do you live in a flood plain? Then you’d better have insurance. Most federally sponsored home loans require you to obtain flood insurance if you’re purchasing property in a flood plain. Your mortgage lender will receive a flood certification on your property during the application process, and if it’s discovered that your home is ina flood plain, you will need to purchase insurance.

The Federal Emergency Management Agency operates the National Flood Insurance Program, which offers coverage to homeowners in participating communities. FEMA categorizes flood zones according to how likely they are to experience flooding. Areas rated an “A” are at the highest risk, and all mortgage lenders offering a loan in an A flood zone will re- quire the borrower to obtain flood insurance. Locales labeled B, C, D, V and X carry lower risks and the possibility that mandatory insurance may not be needed.

Keep in mind, however, that lower risk doesn’t mean that an area won’t experience severe flooding. Evolving weather patterns can affect areas that historically haven’t had predictable flood patterns; these areas may also lack an extensive flood-control infrastructure. Your home can also flood from backed-up sewer systems that are overwhelmed by severe storms.

Rates for insurance policies vary from $200 to $700 a year, based on your flood-risk level. Policies restrict coverage amounts to $250,000 for structures and $100,000 in personal property.

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In Chinese astrology, the year 2012 was the Year of the Dragon, a symbol of unpredictability and uncertainty. The dragon represents mystery because its head and tail cannot be seen at the same time, according to Chinese tradition.

So was the Year of the Dragon marked by mystery for the U.S. property/casualty insurance industry? Perhaps no more than any other year for an industry that is affected by both the weather and politics.  The past year had its share of surprises, political as well as meteorological. But in terms of insurance markets and the economy in 2012, there was no great surprise, although there was frustration. By year’s end it was clear the dragon’s tail was a lot like the head —not what people had hoped for.

Every year has its ins and outs and ups and downs. Here is a recap of the insurance ins and outs and ups and downs of the Year of the Dragon 2012:

1. Roberts Rules

In what many thought a surprise, the Supreme Court said that Obamacare and the individual mandate were in keeping with the Constitution, which left employers trying to figure out what to do next and states having to decide whether to be in charge of their own health exchanges. A majority of states opted out, leaving the job up to the federal government. While health exchanges – and in some circles, Chief Justice Roberts– wentout of favor, accountable care organizations came into vogue and interest in consumer-driven health plans shot up.

2. Super Losses

The year started out with a lot of inclement weather in the Midwest and the South but then settled down. Then Hurricane Isaac’s downpour hit Louisiana and the Gulf states and Superstorm Sandy tore up the Atlantic seaboard. By the time 2012 was up, it was in the record books as one of the deadliest and costliest storm seasons. Sandy was downgraded from a hurricane, leading to a bit of an uproar over deductibles. Fortunately, private insurers and reinsurers were in a financial position to handle the losses without going out of business.

3. Hard-to-Define Market

Expectations for a traditional hard market were out. Many price-sensitive commercial insurance buyers were down as insurers drove up commercial insurance rates over the course of the year. Interest rates and investment income remained down so tighter underwriting was in favor.

4. Wet ‘n Dry

The flood insurance program was in and out before it was downsized and reformed. Then Sandy threatened to take it down to its last dollar. Meanwhile it was a year of record drought that threatened to wipe out crop insurers’ profits. Up and down the coasts, worries over property exposures continued to keep many up at night.

5. Day at the Breach

The risk of data breaches and cyber crimes continued to go up. Small business owners played down the need for cyber insurance. But risk professionals appeared to be more ontop of the issue.

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