Home insurance is also commonly referred to as house insurance or homeowner’s insurance. On the surface it seems simple—home insurance covers my home. In truth, your homeowner’s insurance policy covers so much more than just your home. Knowing what home insurance covers can be valuable information when it comes to protecting two of your biggest assets: your home and your family.
A home insurance policy is broken into two major sections, property insurance and liability coverage. Each of these sections is then broken down into various coverage parts that – when written out in an actual homeowner’s insurance policy – could confuse and bore even the most interested person in the world. This post is aimed to help the average homeowner understand their homeowner’s insurance policy by providing relevant examples and leaving all the legal jargon on the doorstep (pun intended).
The best place to start breaking down your house insurance policy is to start with your actual house. Listed on your policy as either “Coverage A” or “Dwelling Coverage” you will find the estimated replacement cost of your house; this includes the actual structure and anything attached to your house. The replacement cost of your house is NOT the sale price or market value of your house. This common misunderstanding with many homeowners can lead to over insuring your house and paying too much for your homeowner’s insurance. Your location plays a major factor in the market price of your house, especially when considering the DMV area, but your insurance will never need to replace the land you live on, the school district you are in or the wonderful neighborhood surrounding you. Should the need arise, your house insurance is designed to get you and your family back to the state you were in prior to the loss.
Well, how do you come up with an estimated replacement cost? Almost every insurance company will use a third party, with Marshall & Switft Boeckh LLC is the most commonly used by insurance companies and home appraisers alike. These systems take many factors into consideration, such as year built, square footage, number of bathrooms, kitchen upgrades, finished basement, flooring, wall coverings, decks, and more. Once you have completed one of these surveys with your Bridge First Insurance agent you can rest assure that you have a reliable number for your estimated replacement cost. To help protect against any unexpected costs that might show up during a total loss, insurance companies will usually add an extra percentage on top of the dwelling coverage. Make sure you talk to your Bridge First Insurance agent if you have any questions or concerns about this coverage and the value of your dwelling coverage.
Other Structures Coverage
The second section of your property insurance is called “Coverage B” or “Other Structures Coverage”. This coverage is designed to protect the other structures on your property like a shed, the fence around your yard or the nice gazebo you put in last spring. This coverage is usually set at 20% of your dwelling coverage and while it cannot be reduced it can be raised. If you have questions about your policy and whether or not something is an “other structure” or not, give Bridge First Insurance a call.
Personal Property Coverage
“Coverage C” or “Personal Property Coverage” is the section that protects all of your belongings. One of the easiest way to categorize what is considered “personal property” is to imagine taking the roof off your house and turning it upside down. Everything that falls out is personal property and everything that stayed in and is attached is covered under the dwelling section. Coming up with a number for your personal property can be a daunting task so most insurance companies will automatically set this limit at 75% of the dwelling amount. This number can be adjusted up or down depending on your needs. One thing that most people don’t realize is that your personal property is covered by your home insurance anywhere in the world. So whether your carpet is ruined from a busted frozen pipe or someone breaks into your rental car in Canada and steals your golf clubs, your personal property is covered. If you are not a homeowner and don’t have a homeowner’s insurance policy protecting your belongings, be sure to get a renter’s insurance policy. A renter’s insurance policy has all the same features as a home insurance policy without needing to cover structures.
Loss of Use
The last section of the property insurance is called “Loss of use” and is easily the least discussed portion of a home insurance policy. However, it will be your best friend if you ever find yourself dealing with a major homeowner’s insurance claim. “Loss of use” coverage is the insurance company’s promise to keep your life as normal as possible in the event of a major claim or total loss. This coverage provides money for a hotel room, immediate clothing, as well as food and other miscellaneous items if you are ever not able to live in your house due to a claim. There is often no dollar limit set for this coverage, as it is usually limited to the time frame of a year.
The other major section of your home insurance policy that I mentioned earlier is the liability section, which is often a side note when it comes to making a decision on your home insurance. Most homeowner’s insurance policies I see and sell have a limit of $300,000 dollars for your personal liability. To most people that sounds like enough, but what does home insurance cover when it comes to liability and what does that even mean? It covers any damages to which you, the insured, could be held legally liable. One-third of these claims are dog bites but this could also include injuring someone with a bad golf shot or even your teenage kid burning down the press box at the local high school baseball field.
Liability coverage coupled with “medical payments” coverage will also protect you if someone is injured on your property while you are entertaining guests. If you are concerned about your liability exposure, please consult with your Bridge First Insurance agent and look into buying an umbrella policy that can add a $1,000,000 dollars of liability coverage to your homeowner’s insurance and auto insurance for pennies on the dollar.
Lastly, one of the most crucial parts of your home insurance policy is your deductible, or the amount of money you pay for a claim before the insurance company steps in. You should set your deductible at something you feel comfortable with $500 or $1,000 dollars among the most common deductibles.
While there are also dozens of additional coverage options that can be added to help protect your house and belongings, we are just covering the basics today. However, there are a few coverage’s that you should always discuss with your Bridge First Insurance agent. If you have expensive jewelry (generally over $2,500 per piece) then make sure you are “scheduling” these on your home insurance policy. Also discuss “sewer and drain back up” and ask your Bridge First Insurance agent about adding identity theft coverage to your policy (about $20 a year).
What you are NOT covered for
We have discussed what home insurance covers but we have not discussed what it does not cover. Here are a few short tips to help you better understand your homeowner’s insurance. Your homeowner’s insurance policy is not a warranty on the things in your house. If something breaks or stops working due to normal wear and tear it is not covered. For example, say your hot water heater breaks and floods your basement. Your home insurance will pay to have all the water cleaned up and repair the damage from the water but it will not replace your actual hot water heater. Also, not generally included in home insurance is coverage for earthquakes (evaluate your location for necessity) or floods (flood insurance is a separate policy controlled by FEMA). If you have any questions or concerns make sure you contact your Bridge First Insurance agent.
Dave has accumulated extensive knowledge of commercial insurance and the skill set that it takes to succeed. In 2013, he and co-founder Jack Cordes, joined forces to establish Bridge First Insurance. Through Bridge First Insurance, Dave utilizes his knowledge and unique expertise to offer clients the best care in insurance.