Your policy declarations page or policy premium quotation will show which coverages your policy provides. There are a wide variety of homeowners policies available. Be sure to read your policy carefully to determine exactly what is covered and what is not.
It's important to verify that your coverage amount is adequate at the time of application and at each renewal. Here are some factors to consider.
The replacement cost of your home may not be the same as your local government’s assessed value or the current market value of your home as different criteria are used to establish these values.
Construction materials, the total square feet of the building, the number and types of rooms, the type of garage or carport, and special features of the home are all taken into consideration.
Insurance companies have established formulas which are used to help recommend the appropriate limits of coverage. These formulas take into consideration the same types of information used in appraisals and the replacement cost of your home may be very close to the appraised value.
Once a coverage amount has been determined, it should be periodically reviewed to ensure that the amount of coverage keeps up with inflation and other changes that affect the cost to repair or replace any damage to your home. If your coverage amount drops below 80% of the full replacement cost of your home, your insurance company may reduce the amount it will pay on a claim.
Many companies offer an automatic adjustment to your coverage to reflect anticipated inflation.
Your policy may increase by a fixed percentage at renewal and this automatic adjustment may be one of the features required by the company to insure your home for replacement cost.
Notify your insurance company when you make additions or substantial improvements to your property. Undertaking major renovations like roof replacements and electrical and plumbing system updates may also entitle you to discounts.
Dwelling coverage provides for the repair or replacement of your home.
Most homeowners policies offer dwelling coverage for all perils. An all perils policy does not list the types of losses insured against, but will cover all losses or all physical damage not otherwise excluded by the policy.
Common exclusions are for flood, earthquake, and maintenance-related losses.
Other Structures coverage provides for the repair or replacement of other permanent buildings on your property. It will protect your detached garage or personal workshop, but usually won’t provide coverage for tenant-occupied buildings or buildings used for business.
Your policy will usually include coverage for other structures in an amount equal to 10% of the dwelling coverage. If you have several outbuildings on your property or an unusually large detached garage, you may want to purchase additional coverage. Other Structures coverage usually provides protection against the same perils as those under the Dwelling coverage of your policy.
Personal Property coverage provides for repair or replacement of your furnishings and personal effects. Your policy will usually include coverage in an amount equal to 50% of the Dwelling coverage.
This coverage extends worldwide but will usually only provide up to 10% of the coverage limit for personal property while it is away from your home. Your child’s personal property in their dorm room is covered without this restriction.
Increased limits on personal property may be available at an additional cost. You may use a current inventory of your property, including photographs and receipts, to help you determine if you need more coverage than your policy automatically provides. Repair or replacement under this coverage is usually made on an actual cash value basis, which is equal to the replacement cost less depreciation.
Personal property coverage is usually on a named perils basis. A list of perils that the company insures these items against will be included in your policy. The named perils will usually include fire, lightning, windstorm, hail, explosion, riot or civil commotion, aircraft, vehicles, smoke, vandalism and malicious mischief, theft, and falling objects.
There may be limits to the amount available for recovery under some of these perils. For example, your policy may provide up $50,000 in personal property coverage, but your policy may have a limit of $200 for theft of money.
As with dwelling coverage, there are exclusions to be aware of. Personal property coverage will not cover the property of roommates or boarders. There is no auto coverage. A small boat or kayak may be covered under this section of your policy, but coverage is usually restricted by the length of the boat and the presence of, or horsepower of, a motor.
Property used for a business will not be covered, but you may be able to purchase additional coverage for some types of business property or inventory.
You may be able to purchase replacement cost coverage on your personal property or buy increased limits for certain types of personal property. Companies often offer increased limits on jewelry, sports equipment, cameras, stamp or coin collections, or computers.
Items that are unique or of significant value should be protected by purchasing scheduled personal property coverage or by buying a separate floater for these items. Scheduled personal property, an itemized list of property with detailed descriptions, may provide broader coverage than the personal property coverage in your homeowners policy.
Any items to be scheduled will need to have documentation of their value, such as an appraisal or receipt. Consider periodically having these items evaluated so that you have enough coverage to reflect their current values. Not all your personal property may be insurable and your policy should list these exceptions.
Loss of use or additional living expenses provides for the increase in your housing expenses when you are displaced because of a covered loss. For example, if a fire damages your home and you need to relocate until the damage is repaired, this coverage will pay reasonable costs to temporarily live at another location.
Your policy will usually include loss of use or additional living expenses coverage at 20% of the dwelling coverage limit without additional cost. There may be restrictions regarding the amount payable per month or a time limit that applies to this coverage.
If you rent out part of your home and it is uninhabitable after a covered loss, this coverage can provide payment for the rental value of the unit.
Medical Payments provides for the medical expenses of others when they are injured on your property. Most policies include at least $1,000 of coverage, but higher limits may be available.
Payment under this coverage is made without a determination of negligence. Any non-resident on your property with your permission is eligible for coverage under this section.
Personal liability provides for expenses of others for which you are determined to be responsible. Most policies include at least $100,000 of coverage, but higher limits may be available. When deciding how much coverage to purchase, consider the value of your total assets and how much you might lose if another person sued you and you lost the case.
Personal liability coverage extends beyond your property limits. In addition to providing coverage against negligence that occurs on your property, this coverage can provide coverage if your child damages a neighbor’s property. If an incident occurs involving family members, as defined in your policy, at other locations, the liability of your family members will also be covered by the policy.
This provides for an additional amount of coverage beyond the policy limits purchased, frequently 20% or 25% more coverage. This provides an extra cushion in the event that repairing or replacing your home costs more than anticipated when the policy was purchased. Ask your agent or insurer what options are available.
Home daycare coverage provides liability coverage for daycare facilities in your home where you care for a limited number of children.
In order to qualify for this coverage, you may have to provide a copy of your daycare license and show that your property is fenced or meets other safety requirements.
Home business coverage may be offered as part of your homeowners policy. Each insurance company defines the type of home business it is willing to cover on a homeowners policy.
Some companies will offer additional liability coverage and coverage for business property for an office or shop on your property.
Other companies may only provide additional personal property coverage for items used in your business or for a limited amount of inventory for your business.
Identity Theft is a relatively new coverage, offered in response to a growing area of concern to the public. This coverage typically provides reimbursement of expenses you incur while repairing the damage caused by an identity theft incident.
Your policy will outline the reimbursable services or free assistance available to you under this coverage.
This coverage may also be available to you through your credit card company or other providers of financial services.