Homeowners Insurance is one of those things almost everyone has, but most people don’t actually know what is included on their policy. Or better yet, what SHOULD be included on their policy. Do you know there are certain situations where you need something other than the standard homeowners policies? And did you know not every company writes every policy type or occupancy situation? If you own a long-term rental, short-term rental, secondary home, or condo these are all situations you should make your agent aware of, so they are better prepared to make sure you have the right policy.
Homeowners Policy Coverages
There are multiple parts to homeowners insurance policies that all work together to make sure you are properly covered.
Coverage A: Dwelling Coverage
Dwelling coverage provides coverage for your home and attached features, such as a wood deck or attached garage. Your dwelling coverage is not based on market or tax value. Instead, it is determine by the total cost to rebuild your home from the ground up, including the cost of labor and materials. This is what we call replacement cost.
Coverage B: Other Structures Coverage
Other structures coverage is for detached structures, such as a storage building or detached garage. On a standard homeowners policy, the other structures coverage is 10% of your dwelling coverage and can be increased if needed.
Coverage C: Personal Property Coverage
Personal Property Coverage is what protects your belongings. This includes your furniture, clothes, pots and pans, etc. On a standard homeowners policy, coverage C is usually 50% of the dwelling coverage, but some companies do allow it to be increased up to 70%, if needed.
Coverage D: Loss of Use Coverage
Loss of use coverage is typically 20% of the dwelling coverage and is used to help with the extra cost of living if you are suddenly unable to stay in your home due to a covered loss. For rental properties, loss of use is typically replaced with a loss of rents coverage to provide you with lost rental income, if you are unable to rent the home due to a covered loss.
Coverage E: Liability Coverage
Liability coverages protect you and your family against bodily injury and property damages you are legally responsible for. It also provides coverages for damages caused by your pets. Liability coverage starts at $100,000, but it is a good idea to choose and increased coverage amount and, if you qualify, to purchase an umbrella insurance policy for additional liability coverage.
Coverage F: Medical Payments
Medical payments coverage provides protection for small medical claims without the need to establish you are legally liable for the injury
Recommended Optional Endorsements
Replacement Cost For Your Personal Property and Dwelling
Standard homeowners insurance policies do not automatically include replacement cost coverage for your personal property and dwelling. This is why we always add both the replacement cost endorsement to protect our client’s personal property and home. Without these endorsements, claims would be settled at a depreciated value, similar to how auto insurance claims are settled.
Water/Sewer Backup Coverage
Most homeowners policies exclude damages caused by water/sewer backup from toilets, sump pumps, and sump pump equipment. These damages can be costly to repair, so we recommend adding the water/sewer backup endorsement. The amount of coverage provided by this coverage varies among companies, but usually range from $5,000 to $25,000.
Inland Flood Coverage
Flood is excluded on homeowners insurance policies and not all companies offer inland flood coverage as an option to add to your homeowners policy. If it is available, it’s something we highly recommend you add and it is typically very affordable as long as you’re not in a high risk flood zone. The specifics for this coverage will vary between coverages, but your agent can help you understand if your company has this coverage available and what the available limits are.
Equipment Breakdown Coverage
Equipment breakdown coverage provides coverage for the mechanical systems (HVAC, Water Heater, Pool Pump, etc.) in your home and helps with the costs to repair or replace these systems due to sudden mechanical or electrical breakdown. Equipment breakdown coverage isn’t available with every company, but it is typically similar to and more comprehensive than a home warranty.
The above list is not meant to be an absolute recommendation for everyone. We highly recommend having a discussion regarding your family’s needs with your agent to make sure your policy covers all of your needs.