Your home insurance policy safeguards the investment you make in your property. As one of your most valuable assets, your home needs coverage that enables the rebuilding of your property after a total or partial loss. However, that is not all the coverage you need. A standard home insurance policy typically includes additional coverage types that can protect your belongings, income and assets against a financial disaster. So exactly how much home insurance is enough? Continue reading to learn more and find out how to calculate your coverage needs.
Coverage A – Dwelling
Standard Dwelling coverage protects your home against a wide range of perils, some of which include fire, smoke, wind, hail, falling objects, and vandalism. This coverage protects the structure of your home, from the masonry and roof to the interior walls and flooring, as well as any structures attached to your house, such as a porch or deck.
Dwelling coverage is most beneficial to homeowners if the right limits are selected. Under-insuring a home, whether intentionally or non-intentionally, could result in a major financial shortfall in the event of a total loss. Even a partial loss could leave you with a big bill due to the ‘Co-Insurance Rule,’ which allows insurers to underpay for partial loss claims, if the amount you insure your home for is less than a certain percent (commonly 80%,) of the actual replacement cost value.
To ensure you are adequately covered, we recommend working with a helpful agent here at Couri Insurance. Using our Home Cost Estimator, we can assess your coverage needs based on the one thing that matters most: the total cost of clean-up after a disaster and rebuild your home from the ground up.
Coverage B – Other Structures
Coverage B is designed to protect the extra structures on your property that are not attached to your home, such as a guest house, a fence, or a detached garage. These structures are typically covered against a wide range of possible perils and usually for an amount up to 10 percent of the Coverage A limit. However, some homeowners require additional coverage beyond what is provided by the insurer. In these scenarios, higher limits may be available at an additional cost.
Coverage C – Personal Belongings
Imagine losing your home in a fire and having nothing left except the clothes you are wearing. Think of how overwhelming it could feel to have to start over again from scratch, replacing all of your furniture, apparel, home décor, appliances, and other household items. Coverage C is designed to minimize this financial burden, reimbursing you the (depreciated) cash value of your damaged or stolen possessions. Replacement value would cover the cost of replacing your items with new ones, but you must add this coverage to your policy in the form of an endorsement.
It’s worth noting that HO-3 and HO-5 handle Coverage C in different ways. If you have a standard HO-3 policy, your belongings are only covered for the specific named perils listed in your policy. While this is typically a lengthy list, it leaves out a lot of possibilities. HO-5, on the other hand, has fewer coverage gaps. Unless a particular risk is excluded in writing, the policy will cover it.
Coverage D – Loss of Use
If smoke damage forces you and your family to live in a hotel while your home is remediated, your additional living expenses could skyrocket. If a tornado destroys your home and forces you to find an apartment while your home is rebuilt, your monthly costs could soar even higher. Loss of Use coverage is designed to alleviate the financial burden of displacement, allowing you and your family to live as comfortably as possible without worrying about extra expenses.
Coverage E – Personal Liability
Under the personal liability section of your home insurance policy, you will find coverage that helps pay for the damages, losses, and injuries you are directly or indirectly responsible for causing to other people. If your limits are high enough – usually at least $100,000 to $300,000 – your personal liability coverage can protect you against a lawsuit. Though there are some exclusions, such as incidents caused by car or boating accidents, this coverage typically follows you and the members of your household wherever you go.
Examples of Losses
Many different scenarios can lead to liability for another person’s loss or injury. Perhaps a guest trips over a water hose in your yard, breaking his arm, shoulder, and collarbone. He sues you for the medical bills, as well as his lost wages due to being out of work for several weeks for rehabilitation. In another example, your dog may feel threatened by a small child petting him at the park. He responds with hostility, biting and disfiguring the child’s face. The child’s parents sue you for medical bills and emotional trauma.
The average cost of a dog bite claim nationwide is more than $37,000 as of 2015. Of course, you could be responsible for much more if the injury is severe. If you are sued for tens or even hundreds of thousands of dollars, having the right personal liability coverage is essential. Without it, you could be financially responsible for paying any unpaid damages by any means necessary – even if that means liquidating your personal assets or making payments from future income.
Coverage F – Medical Payments
Medical payments is a separate section of your home insurance policy that helps pay for medical expenses when someone is injured in your home. Unlike personal liability coverage, medical payments coverage typically comes with lower limits – usually between $1,000 and $5,000. However, this coverage is designed to provide payment regardless of fault, potentially helping you avoid a lawsuit in the event of an accident.
Your home insurance policy may also include optional endorsements designed to enhance your coverage. We recommend some types of endorsements for nearly every homeowner we serve, as we believe they can provide tremendous financial benefits when filing a claim. For example, home insurance typically covers water damage caused by a burst pipe, but you may need an endorsement to cover a water backup from your sewer.
Optional endorsements are recommended and added on a case-by-case basis depending on your risk exposures. Examples of common home insurance endorsements include:
- Inflation Guard
- Replacement Coverage for Personal Belongings
- Coverage for a home business
- Scheduled coverage for valuables
Beyond Home Insurance
Some homeowners may benefit from additional coverage beyond a typical home insurance policy. For example, if you are sued for $1 million, a $300,000 liability limit will leave you with hundreds of thousands of dollars in financial responsibility. An umbrella policy can provide supplemental liability coverage in excess of the limits on your primary coverage. This affordable coverage typically includes a minimum of $1 million in additional liability protection and is often as little as $200 a year or less. Contact our office for more information about umbrella insurance and whether it could be right for you.