For most people, their home is one of the most valuable assets during their lifetime. Knowing this, it’s important to insure it properly and understand the coverages provided in a typical Homeowner’s Insurance policy.
Similar to the Personal Auto Policy, the homeowner’s policy offers 1st and 3rd party coverage in a packaged deal. Although there are many insurance companies offering many different types of homeowner policies, most all of them contain the same fundamental coverages.
Dwelling Coverage
The dwelling coverage pays to repair or replace your home in the event of damage from a covered peril. The dwelling is considered to be everything from the foundation to the ceiling and any other items attached to it. Attached means anything that is attached to the home and will leave a scar if removed. The standard homeowner’s policy will insure the dwelling for the “replacement cost” which means the amount of money it takes to replace your home to its “as new” condition in the event of a total loss. All insurance companies use a replacement cost software program to determine the cost of replacing your home. The market value or mortgage amount is never used to determine the replacement cost of your home.
Other Structures
This coverage pays for damage to structures on your property not attached to the dwelling. Typical other structures include detached garage, workshops, privacy fences and gazebos.
Other structures are also insured to replacement cost value and subject to the policy deductible.
Personal Property
Personal Property is considered to be anything in your home that will not leave a scar when removed such as furniture, clothing, paintings and pictures. Some appliances are considered personal property and some are considered dwelling, depending on whether they pass the “scar” test. Most homeowner policies contain sub-limits for jewelry, art, guns, and collections.
Additional Living Expenses
This coverage will pay for expenses you incur when you are forced to relocate temporarily while your home is under repair for damage caused by a covered peril. Typically this results when your home is partially damaged by fire or windstorm and you are forced to rent elsewhere until your home is livable.
Personal Liability
Personal Liability pays for claims resulting from a 3rd party being injured on your property. This coverage follows the homeowner wherever they go and is considered to be all purpose except for a few exceptions.
Medical Expense
This coverage pays for medical expenses on a per person basis for claims resulting from an accident caused by you, a family member or pet. Unlike Personal Liability Coverage, legal liability does not have to be established for a claim to be paid.
Option Coverages (Endorsements)
Depending on your insurance company, there are many optional coverages that can be endorsed (added on) to your policy to provide additional protection:
• Scheduled Personal Property – allows the homeowner to purchase additional coverage for property such as jewelry, gun collections, camera equipment, art and other collections on a worldwide basis.
• Water Back-Up and sump overflow – provides coverage up to limit selected for damage caused by sewer backup or sump overflow. Very important in older neighborhoods where the local municipality may not be updating its infrastructure.
• Identity Theft/Fraud – pays up to the limit selected for expenses incurred as a result of identity theft.
• Mold – this endorsement will provide coverage up to the limit selected for damage or liability caused by certain types of mold.
For consumers to make an informed decision regarding home protection, it is important to discuss your needs with a licensed agent or broker prior to making the Homeowner’s Insurance purchase.
