Imagine filing a claim for damage to your home only to find out your insurance falls short of covering your loss. This is the reality for many people who discover too late that their home insurance is not enough to meet their needs. Our goal is to help you avoid unwanted surprises and determine which types and how much home insurance is enough for you. In this post, we will examine the various types of coverage available in two of the most frequently purchased policies – the HO-3 and HO-5.
Coverage A – Dwelling
Ask anyone who has ever lost a home to a storm, fire, or another disaster, and they’ll tell you one important thing: Having adequate Dwelling coverage is essential. Without it, you risk coming up short of the money you’ll need to repair or rebuild your home. Not to mention, insurance companies can enforce the ‘Co-Insurance Rule,’ which penalizes your coverage for partial losses in case where your home is underinsured by more than an amount required by the policy.
To get an accurate estimate of your actual coverage needs, we recommend working with one of our team members. We use a Home Cost Estimator to calculate the cost to rebuild your home with same-quality materials in today’s construction costs. We exclude irrelevant factors, such as the value of your lot or the price you paid for your mortgage, but we include often overlooked expenses, such as debris clean-up.
Once you select your Dwelling coverage limits, you will select a deductible, which is the amount you are responsible for paying toward the cost of future claims. Keep in mind that a low, $500 deductible can reduce your cost burden, but a higher $2,000 deductible can significantly lower your annual premiums. Talk to an agent here at Reis Insurance for help determining which deductible is right for you.
Coverage B – Other Structures
Coverage B typically covers the additional structures on your property against the same types of hazards as Coverage A. Examples include:
- Driveways
- Fences
- Carports
- Detached garages
- Tool sheds
- Pole barns
- Swimming pools
- And more
Also, don’t forget to let an agent here at Reis Insurance know if you are making improvements to the outside of your property. Whether you are adding a pergola, extending your driveway, or finally installing the swimming pool you’ve always wanted, we recommend reviewing your Coverage B to ensure you remain adequately covered.
Coverage C – Personal Belongings
Coverage C is all about protecting the things you own, from the paper towel holder in your kitchen to the 65-inch TV in your living room. Many homeowners are surprised to discover the value of their belongings after a loss. It’s not just the big things, but the small things can add up too if you forget to claim them as a loss. That is why we recommend taking an inventory of your home to make declaring losses easier in the future. Several mobile apps are available to help you keep and update your inventory, as well as access it in a time of need.
Insurance companies typically insure home contents as a percentage of the Dwelling coverage – usually between 50 and 80 percent. However, you can schedule additional coverage for high-value possessions, as Coverage C typically imposes dollar limits on certain categories of possessions.
Coverage D – Loss of Use
If you lose your home due to a covered event, your living expenses will likely rise while you find a temporary place to live. It can take weeks or even months to make necessary repairs or to rebuild your home after a fire or other major event. During that time, Coverage D can take care of excess costs due to displacement, usually with a limit up to 20 percent of your Dwelling coverage amount.
Coverage E – Personal Liability
Liability coverage is an important part of your home insurance policy, even if it seemingly has nothing to do with protecting your home. Personal liability insurance helps pay for your financial responsibility if you are at-fault for another person’s property loss or accidental injury. This could be due to an incident occurring on your property or due to the negligence or actions of members of your household. Though the insurance pays the injured party for damages, it ultimately protects you – the homeowner – against financial loss.
In most cases, personal liability coverage follows you and the members of your household both in your home and away from it. However, there are certain exceptions for events like car and boating accidents, which are typically covered by separate insurance policies. Examples of commonly filed personal liability claims include:
- Dog-related injuries
- Slip-and-fall accidents
- And more
Coverage F – Medical Payments
If a guest is injured on your property or inside your home, don’t wait for a lawsuit to cover the medical bills. Medical payments coverage helps pay for necessary medical expenses due to third-party injuries occurring at your home. Although this coverage is not contingent upon your fault in an accident (it pays regardless of fault), it also does not absolve you of liability for injuries. However, having between $1,000 and $5,000 of medical payments coverage may be just enough to pay for a doctor’s visit or a health insurance deductible and potentially deter an injured party from filing suit.
Optional Coverage – Endorsements
If you find that the standard coverage on your home insurance still falls short of meeting your needs, talk to your agent about adding endorsements to your coverage. Insurance endorsements provide extra protection above and beyond that which is covered by the policy by default. Some endorsements are recommended for nearly everyone, such as water backup and sewer endorsements. Others may be suitable for a narrower group of people, such as a home business endorsement.
Additional examples of common home insurance endorsements include:
- Inflation guard protection for your home’s dwelling
- Scheduled coverage for high-value assets
- Replacement value coverage for personal belongings damaged due to a covered event
Beyond Home Insurances
What happens when liability damages exceed the limits of your home insurance policy – even if you chose the highest limits offered by your insurer? Though rare, these are the types of scenarios that can lead to financial ruin – unless you have supplemental liability insurance. Many homeowners choose to purchase an umbrella insurance policy that provides additional liability protection in excess of the limits of the home insurance policy. That means that if you are sued for $750,000 and only have $300,000 of available liability coverage, your umbrella policy may cover the remaining $450,000, leaving you financially unscathed.
A $1 million umbrella insurance policy often costs just $200 per year or less. For more information or to request your free umbrella insurance quote, contact our office today.
