Homeowners Insurance Made Easy

September 30, 2019 Kevin Buechler

Dwelling Coverage

The first coverage to note deals with your specific dwelling. This policy coverage is designed to replace your existing structure with one of similar construction and building materials. And in order to come up with the recommended coverage levels, it’s important that you consult with your agent. That way, you’ll have an accurate estimate of the cost of materials and labor to rebuild your existing home from the ground up. When evaluating these numbers, you’ll want to keep in mind that the current market price of your home or what your home might sell for today in land value are not factored into this reconstruction cost.

Extended Replacement Cost

An important component included in many homeowners policies is what’s called “extended replacement”. This helps to ensure that you have enough coverage just in case the dwelling coverage amount is not enough to rebuild, due to an increased cost of labor or materials, which generally increase in cost over time and are subject to large spikes when hundreds of home have to be rebuilt at the same time, such as after a wildfire. For these reasons, extended replacement can be an important component of your policy. Many homeowners policies include extended replacement coverage totaling 125% of your dwelling coverage. However, up to 150% or more may be available, depending on your specific needs.

Other Structures Coverage

The next coverage component includes separate structures and covers structures on your property that are not attached to your home, including detached garages, sheds, pools, retaining walls, and more. Many policies include separate structures coverage of 10% of your dwelling coverage limits but this number can be increased if needed.

Personal Property Coverage

Next up is personal property coverage, which is in place to insure your belongings, including furniture, clothing, appliances, and more. You can think of this coverage as protection for items within your home, other than the structure. Most homeowners policies include coverage for personal property. Typical coverage ranges from 50% to 75% of the amount of insurance you have on the structure of your home. So, for example, if your policy includes personal property coverage of 75% and your dwelling coverage amount is $400,000, you’d have $300,000 (or 75%) of the dwelling coverage amount for your personal property.

Guaranteed Replacement Cost

When comparing homeowners policies, it’s important that you understand the difference between actual cash value and guaranteed replacement, or contents replacement coverage. This is a very important distinction. For instance, if your house burns down and the total cost to replace your personal property is $300,000 but the actual cash value, or depreciated value, is only $100,000, you’d be left with a big gap in coverage, and paying to replace your possessions out of pocket in an instance like this can be next to impossible. This is why many homeowners select a policy that includes guaranteed replacement, or contents replacement coverage, as this would provide coverage to replace the full amount of your personal property.
It’s also important to note that there are coverage limits for special items such as jewelry, firearms, antiques, and other valuable items. To protect these items, you’ll want to consider adding a floater or an endorsement to your homeowners policy.

Loss of Use Coverage

We also want to mention another important coverage included in your policy called “Loss of Use” coverage. This means if you’re displaced from your home due to a covered loss such as a fire, lightning, or smoke damage., this is coverage that can provide for the cost of a hotel or long term rental, doggy daycare, and even extra gas or food expenses.

Personal Liability Coverage

Next up is one of the most important, and often under-investigated coverage items, called personal liability. We commonly think of someone slipping and falling on our property but that’s not the only reason you need coverage. Actually, one of the largest claims culprits is animal attacks. From dog bites to cat scratches, animal claims tend to come with very large jury verdicts. Or what if you or your family member accidentally starts a fire and it spreads to your neighbors’ houses? Well, their homes, personal property, and loss of use become your personal liabilities in this instance, which is why having enough personal liability coverage is extremely important.

Medical Payments Coverage

Another important coverage which is included in most homeowners policies is “Medical Payment” coverage. This is the coverage that will help by potentially resolving small claims. If someone is injured on your property, the Medical Payments portion of your policy will reimburse the injured person’s medical expenses up to the limit on your policy. Unlike liability coverage, this coverage does not require the injured to establish that you are liable for his or her injury.

Deductibles

So now that you have a better understanding of how the main home insurance policy coverages work, we’ll wrap this up with a brief discussion about deductibles. Deductibles are one of the most important parts of any insurance policy. In addition to determining how much money you’ll receive when you file a claim, they also affect how much you pay in premium. So, what is a deductible? When you experience a loss that is covered by your insurance policy, the deductible is the amount you’re responsible for before the insurance pays. Keep in mind that the higher the deductible, the lower the premium will be. And on the flip side, if you do want a lower deductible, know that you will pay more for your policies up front. When selecting your deductible amounts, it’s important that you choose a deductible that you can afford. If you select a deductible of $2,500, you’ll want to be sure that you have $2,500 available, in case you do have a loss.

We hope this brief video has helped you learn more about your home insurance options and how having the appropriate coverages in place can help protect everything you’ve worked so hard to achieve. If you have any questions at all, please don’t hesitate to give us a call – that’s why we’re here.