Home Insurance 101
Standard Home Insurance: What You Get
Even veteran homeowners insurance buyers can stumble when it comes to citing exactly what's typically included in a standard policy. That's why we've put together this handy Home Insurance 101 resource. Standard policies typically include six types of protection for you house. See the sections below for a quick general explanation of each type of coverage.
What is Dwelling Coverage?
Dwelling coverage (sometimes called Coverage A) is the portion of your home insurance policy that pertains to the cost of rebuilding and repairing your home in the event that it is damaged or destroyed in a covered peril such as wind, hail, lightning, or fire.
Most standard homeowners insurance, however, does not cover damage from floods or earthquakes. You will either need to add this as an endorsement to your existing policy or purchase a separate policy for protection from these losses.
The amount of dwelling coverage that you purchase should equal the cost of rebuilding your home in the event of a complete loss. Do not confuse this amount with the market value of your home. The market value includes the value of your land. In the event of a disaster, you won't lose your land, only the buildings that stand on it. The rebuilding cost, on the other hand, must account for local construction and materials costs. To determine the replacement value of your home, you insurance agent can produce a replacement cost guide based on your area.
The amount of dwelling coverage you have also is important because it determines your limits for other types of coverage. The limit for your personal property coverage, for example, is factored as a percentage of your total dwelling coverage. Because of this, it is important that you determine your dwelling protection first.
What is Other Structures Coverage?
Other Structures Coverage (Coverage B) is the portion of your home insurance policy that covers the cost of rebuilding or repairing structures on your property other than your home if they're damaged because of a covered peril such as fire, wind, or hail. This includes detached garages, sheds, and other detached buildings on your property - even fences - that may become damaged by a named peril.
Typically, a standard home insurance policy will provide 10% of the total dwelling coverage as protection for additional structures. For example, if you have $100,000 worth of coverage for the structure of your home, your policy would include $10,000 of coverage for other structures. Some policies require you to add other structure coverage to your policy as an endorsement. Ask you agent to be sure you are covered properly.
If you have more than one detached building on your property or an updated garage, you may need additional coverage above and beyond the standard 10%. Talk to a home insurance agent about scheduling an endorsement, which could raise your policy limits for your Other Structures protection
Personal Property Coverage - What is it?
Personal Property Coverage, also known as Contents Coverage or Coverage C, is the portion of your home insurance policy that covers the cost of replacing your possessions, or home's contents, in the event that they are destroyed in a covered peril (wind, fire, hail, lightning, etc).
How much do I need?
The answer depends on what you have and what it is worth. Typically, the personal property coverage limit for a standard home insurance policy is set at 50%-70% of the amount of dwelling coverage in your policy. In other words, if your dwelling coverage limit is set at $200,000, your personal property coverage limit will be $100,000-$140,000. Some policies require you to add personal property as an endorsement to your policy. Ask your agent to be sure you are covered properly.
That sounds like a lot. However, you might decide to purchase more depending on the value of the personal belongings in your home. The best way to know how much contents coverage you need is to perform a home inventory. A home inventory is a list of all your personal possessions with photos, receipts, and any other proof of ownership you may have.
A home inventory serves two important functions. First, it allows you to calculate the value of your possessions to ensure you are purchasing an adequate amount of contents coverage. Second, it will be your greatest asset in the event of a disaster when you need to prove to your home insurance company that you owned that flat screen TV and $3,000 leather couch, for example.
So act now and call our agency for a free home inventory file to get started. And remember - always keep your home inventory in a safe or at a friend's house so it is not ruined in a fire or other natural disaster. Better yet, store a copy electronically.
What if I need additional coverage for a specific item?
Most policies will have limits as to how much it will pay for each type of property under the theft peril. For example, most standard home insurance policies will only pay $1,500 for jewelry lost in theft. Often, a customer will have one particular item that is expensive and needs more coverage than what is included in his or her policy. Additionally, some policies require theft to be added as an endorsement to your policy.
At this point it is recommended that you schedule an endorsement on your policy for that item. For example, a policyholder with a necklace worth $10,000 would schedule an endorsement to the policy to cover it. If you think you may need additional coverage, talk to a home insurance agent about scheduling an endorsement on your policy. Talk to your home insurance agent about scheduling an endorsement, which will include theft on your policy for specific items such as jewelry, antiques, silver and guns.
What is Personal Liability Protection?
Personal Liability Insurance (Coverage E) is the section of a standard home insurance policy that protects you or covered family members against lawsuits for injuries or property damage. This type of insurance coverage would protect you in various situations where a lawsuit is filed, including the following:
- Your dog bites a neighbor, who files a lawsuit because of the expense of treating the wound and because it kept him out of work for several weeks.
- Your mailman falls on your porch steps because of a faulty railing and injures his back and leg, leaving him unable to work.
Standard home insurance policies will typically include a minimum of $100,000 in coverage for each liability claim. That coverage could be used to pay legal expenses or any award made in the case. Note, however, that you would be responsible for expenses or awards once your limit is exhausted.
Some homeowners choose to take out an extension of this coverage if they feel they need to further protect themselves against liability lawsuits. One common reason for taking out an extension of liability coverage would be a homeowner who owns a swimming pool or a trampoline.
Another type of liability coverage is Personal Injury Liability or an Umbrella Liability Policy, which protects the insured against lawsuits involving libel, slander, defamation of character, false arrest, detention, imprisonment or malicious prosecution, invasion of privacy and wrongful eviction or wrongful entry. This policy can also cover liability protection for auto accidents with the minimum underlying auto limits. (Be sure to talk to your agent.)
Is every lawsuit covered?
No. While you or covered household members can get protection from lawsuits alleging that you've caused injuries to others, lawsuits involving the transmission of a communicable disease typically are excluded by providers. Also excluded are lawsuits with allegations of mental/physical/sexual abuse and anything involving the sale, manufacture, or distribution of a controlled substance.