Congratulations on becoming the proud owner of your home. For most of us, myself included, this is the largest purchase that we will make in our lifetimes. Because of this, it is extremely important that you obtain the proper coverage to protect your investment.
The most common policy used to protect your home from loss is a Homeowners Policy. This is a package policy which provides coverages for most of the exposures faced by the average homeowner.
Here is a quick video that will go into detail about some of the important coverages on a homeowners insurance policy.
The first coverage provided by the Homeowners policy is the dwelling coverage. This is the part of the policy that pays for loss to the home. This type of policy requires the owner of the home to insure the home for what it would cost to REPLACE the home should it be damaged. Now this may be different from what you have in mind because most home owners are interested in insuring their home for what it is WORTH!
Please keep in mind that since the Homeowners policy is a replacement cost policy, there may be a difference between what the replacement cost of the home is and what the market value of the home is.
As part of the package, the Homeowners policy also provides property coverage (usually at 10% of what you have on the dwelling) on detached structures that are on the residence premises. This coverage would pick up damage to structures such as detached garages, swimming pools, driveways, fences, barns, etc. Be sure to add the value of all of these together as the normal limit of 10% may not be an adequate limit.
The Homeowners Policy also provides coverage for our stuff. One of the great things about this coverage is that your stuff is covered anywhere in the world, not just while it is in your home. The usual limit for personal property coverage is 50% of the limit you have on your home. So, if your Homeowners Policy provided a Dwelling limit of $ 300,000, the typical limit on the personal property would be 50% of that or $ 150,000.
There are certain types of personal property though that are limited to a certain dollar amount. Shown below is the typical sub-limits allowed for the following categories of property:
Money and coins, etc $ 200
Deeds, evidences of debt, etc $ 1,500
Watercraft $ 1,500
Trailers $ 1,500
Theft of jewelry and furs $ 1,500
Theft of guns $ 2,500
Theft of silverware, goldware, platinumware $ 2,500
Business personal property on the premises $ 2,500
Business personal property off the premises $ 1,500
It is important to note that most of these sub-limits can be increased by the addition of an endorsement. There of course, will also be an additional premium charge for adding additional limits.
Also, there are certain types of personal property that are not covered at all under the Homeowners Policy. For instance, animals, motor vehicles, aircraft, and water are a few of the types of property that are not covered at all.
LOSS OF USE
Should you have a loss at your home, there is also a good chance that you may have to move out for a few days or weeks so that the repairs can be made. When this happens, you may incur increased expenses for motel bills and for eating out, etc. The costs for increased expenses is also covered under the Homeowners Policy in this section. Loss of Use is usually written with a limit equal to 30% of the limit you have on your dwelling.
PERSONAL LIABILITY COVERAGE
Probably the most important coverage provided by the Homeowners Policy is the Personal Liability coverage. This coverage starts at a $ 100,000 limit and can be increased from there to $ 1,000,000 per occurrence with very little additional premium.
This coverage protects the home owner and their family members if they should cause injuries or damages to other’s property for which they are legally liable. Obviously it does not respond to auto liability claims since that type of loss is going to be covered by Auto Liability insurance.
For instance, if a guest is visiting your property and they trip and fall over a loose carpet….or if your dog bites a small child…or if you hit someone in the head with a golf ball while playing golf!!! All of these are types of claims that the Homeowners Personal Liability coverage would respond to.
UMBRELLA LIABILITY COVERAGE
And since we are now discussing liability coverage, please be aware that most of our insurance companies offer Personal Umbrella Liability policies as well. We are often asked as agents, “how much liability insurance do I need to carry?” This question really doesn’t have a pat answer. Since we don’t know how many people you are going to hurt or how badly, the only answer is that you need as much as you can afford.
Truthfully, you need one dollar more in liability insurance than the judgment against you. If you get a $ 99,000 judgment against you then $ 100,000 coverage is enough. If the judgment is $ 3,400,000 (there was recently a Lauderdale county award for this amount), then you obviously need $ 3,500,000 in coverage. Please consider this low-cost, high-limit option when analyzing your insurance package.