Home Insurance 101 - Part 2
Coverage for a typical Homeowners Insurance policy will be listed like this:
A. Coverage for the structure or main dwelling.
B. Coverage for other or separate structures.
C. Coverage for personal property or belongings.
D. Coverage for additional living expenses.
E. Coverage for Premises and Personal Liability
F. Coverage for Medical Payments to others
Here’s How It all Works:
A. Dwelling or Structure
This portion of your policy pays up to the policy limits to repair or rebuild the home in the event it is damaged or completely destroyed by a fire, hurricane, water damage or other covered loss listed in the policy. Most standard Home Insurance policies include an endorsement called an Extended Replacement Cost endorsement that will pay for an amount or percentage above the specified policy limit to ensure full replacement of the home in the event that it is completely destroyed. This will be discussed in more detail in the 201 course.
B. Other or Detached Structures
This part of your Home Owners Insurance policy provides coverage for any structure not attached to the main dwelling and can include such items as: a fence, pool or spa, outdoor kitchen, detached garage, guest house, tool shed, gazebo, palapa, pergola etc. Usually all of these structures are covered up to 10% of the coverage listed under the Dwelling portion of the policy. If you have several of these items you may require more coverage. Talk to your independent insurance agent or broker about increasing this coverage.
C. Personal Property
The personal property portion of your policy includes coverage for your personal belongings such as: Furniture, clothing, most appliances, electronics, sporting goods, toys, etc. (Personal property used for business is generally excluded unless otherwise added as an endorsement.) Think about anything that you would move with you if you sold the home and chances are those items would be covered under the personal property section. (With the exception of any vehicles) A standard policy will cover up to 50% of the dwelling coverage for personal property where as a preferred policy will cover up to 75% of the dwelling coverage. Most policies provide coverage for off premises or worldwide coverage as well. This means that if you have some items stolen out of your vehicle of if they lose your luggage on the airline there’s a good chance it will be covered. More expensive items such as jewelry, watches, furs, and fine arts are also covered however there is usually a limit of $1,000 to $2,500 for these items under a standard policy. You can make sure these items are covered for their full value by purchasing a Personal Articles Floater and insure the items for their full appraised value.
D. Additional Living Expenses / Loss of Use
If the home becomes uninhabitable (Meaning that the damage is severe enough to render the home unfit to live in) due to a covered loss, this section of your Home Owners Insurance policy provides coverage for additional living expenses you will incur as a result of living away from the home after it has been damaged or destroyed. For example if there is a major pipe leak or significant damage from a fire it may be several weeks or months before the insurance company can repair the damage or rebuild the home. Meanwhile you will likely be staying in a hotel or alternate housing situation until the damage is repaired or the home is rebuilt. The Home Owners Insurance policy will pay up to the policy limits for these additional costs. Additional meals and transportation costs are also generally covered. Keep in mind that if you have a mortgage on your home you will still be obligated to make your regularly scheduled mortgage payments in the meantime. Having enough of this very important coverage is often overlooked by consumers when purchasing Homeowners Insurance. More about this in 201.
E. Medical Payments to Others
Your Homeowners Insurance policy also provides no-fault medical coverage. In the event a friend, relative not living with you or neighbor is injured in your home or on the residence premises, he or she can simply submit medical bills to your insurance company. This way, expenses are paid without a liability claim being filed against you. You can generally get $1,000 to $5,000 worth of this coverage. Household residents as well as family members residing in the home or pets are not covered.
F. Personal Liability
The Personal Liability section of your Homeowners Insurance protects you against lawsuits for bodily injury or property damage that you or family members cause to other people. It also pays for damage caused by your pets. (Liability issues arising from business related pursuits are excluded) So if a neighbor trips and falls in your entryway or you slice a ball on the golf course and cause injury to another golfer, you are covered not just in your home, but anywhere in the world. The liability portion of your policy pays for both the cost of defending you in court and any court awards up to the limit of your policy. Most basic Homeowners Insurance policies generally provide $100,000 of coverage. However coverage increments of $300,000 and $500,000 are also available for a few dollars more. If you still need more coverage you can purchase an umbrella or excess liability policy which provides broader coverage plus defense costs are generally unlimited. Umbrella policies cost an average of $200 to $350 for $1 million of additional liability protection. To make sure that you have enough liability coverage a general rule of thumb is to have slightly more liability coverage than the sum of your net worth.
Congratulations! You now know more about Homeowners Insurance than 99% percent of the population. But don’t stop here check out Home Insurance 201 to become an expert shopper for Insurance for your home. Your Diploma awaits!
Go to Home Insurance 201