The primary purpose of homeowners insurance is to pay for the repair or rebuilding of your home after a loss, but did you know there are several other things your policy may cover? The two most commonly purchased policies – the HO-3 and HO-5 – contain a wide range of standard coverage to help minimize your financial losses. With one of these policies, you generally only need to decide on a deductible, endorsements, and exactly how much home insurance is enough to meet your needs.
Coverage A – Dwelling
Dwelling coverage helps cover the cost of repairing or rebuilding your home if it is damaged or destroyed by a covered event. On both the HO-3 and HO-5 insurance policies, Dwelling coverage pays for damages from all types of risks except for the ones clearly stated in writing. This important coverage is required to meet the terms of most mortgage agreements, but it is just as important for homeowners who wish to protect the investment they have in their properties.
Without sufficient coverage, you risk having too little money to rebuild your home. You also risk having too little coverage to pay for partial losses due to the ‘Co-Insurance Rule.’ Under this rule, insurers can penalize coverage for small claims in proportion to the amount you have underinsured your Dwelling coverage. Here at Vanyo Insurance, our goal is to help you accurately assess your structural coverage needs. We use a Home Cost Estimator to calculate the local cost of cleaning up debris and rebuilding your house with similar materials and finishes.
Coverage B – Other Structures
Your home is probably not the only independent structure on your property. You likely also have a fence and driveway, or perhaps a detached garage or tool shed. Insurers typically include coverage for other structures on your property by default – usually with coverage equal to approximately 10 percent of your Dwelling limits.
Coverage C – Personal Belongings
Your personal belongings include the contents of your home and any possessions you keep off property, such as items you keep with you inside your car or when you travel. Home insurance reimburses you for damage, loss, and theft of personal belongings, but HO-3 and HO-5 policies differ in the types of events that are covered. An HO-3 policy is a ‘named peril’ policy that only provides coverage for damages and loss caused by specific types of events named in the policy. An HO-5 is an ‘open peril’ policy that covers damages and loss from all types of risks except for those specifically excluded by the policy.
When you file a claim for damaged or destroyed possessions, you will need to declare your losses. If you only have a few things stolen from your vehicle, this may not be difficult. If, however, you lose your entire home and all of its contents in a fire, a home inventory could prove helpful in assessing the extent of your loss. We recommend taking inventory of everything you own and either storing it digitally, such as in a mobile app, or otherwise storing a physical copy somewhere other than your home.
Coverage D – Loss of Use
Coverage D is the part of your home insurance that pays for the extra cost of living when you cannot live in your home due to a covered event. If your home is uninhabitable, you cannot do your laundry or cook meals in your kitchen. You may also need to find temporary housing, such as a hotel or an apartment. Fortunately, home insurance covers Loss of Use – usually up to 20 percent of your Dwelling limits.
Coverage E – Personal Liability
How much will you be sued for? It is a question that few people think about – especially when shopping for home insurance. However, personal liability protection is a major component of a typical home insurance policy, so it helps to know how much you stand to lose when deciding how much coverage you might need.
Home insurance typically covers third-party injuries and property damages caused by accidents or negligence, with the exception of certain types of events, such as car and boat accidents. It covers you and also extends to members of your household, including your pet. For example, if your pet escapes your yard and bites a child riding her bike, the damages could be tens of thousands of dollars. In the U.S., dog bite injuries happen to be some of the most frequently filed claims, with average costs per claim reaching more than $37,000.
Here at Vanyo Insurance, we recommend purchasing enough coverage to protect your savings and assets now, as well as any income you may earn in the future. All of it could be at risk in a lawsuit, which is why many homeowners choose a minimum of $100,000 to $300,000 of personal liability coverage. For help determining how much personal liability protection you may need, contact our office today.
Coverage F – Medical Payments
Coverage F is a small, but helpful part of your home insurance policy, as it provides payment for injuries that occur in your home or on your property. There is no need to establish fault for the accident, as the benefits are usually capped between $1,000 and $5,000. This may be adequate to cover a doctor’s visit, health insurance deductible, or even an emergency room visit. Of course, as a homeowner, you can still be sued for damages, but medical payments coverage is sometimes enough to deter litigation for minor injuries.
Endorsements allow you to make your home insurance policy your own. They are completely optional, but many homeowners select one or more endorsements to increase compensation for claims and expand coverage to include more losses. Some endorsements, such as home business endorsements and scheduled coverage endorsements, are only recommended for policy-holders with specific risk vulnerabilities. Others are encouraged for a much broader demographic. Examples include:
- Water backup and sewer coverage
- Inflation guard for your dwelling
- Replacement value coverage for personal belongings
If you think you may need to add one or more endorsements to your coverage; contact a team member here at Vanyo Insurance Group today.
Beyond Home Insurance
Once you are confident in your home insurance coverage, it may be time to talk with an agent about increasing your liability protection outside the limits of your policy. Even the highest home insurance liability limits may not be enough to shield you against a major lawsuit. If your policy only pays for $300,000 of a $600,000 judgment, how will you afford the remaining $300,000? Will it come out of your savings accounts? Will it affect your future income?
With an umbrella insurance policy, the excess damages are likely covered up to the limits of your supplemental coverage, which is usually $1 million or more. Umbrella insurance pays for liability damages that exceed the limits of your primary coverage, as well as for some types of liability that may be excluded from a typical home insurance policy altogether. In most cases, coverage costs just $200 per year or less for a $1 million policy, although higher coverage limits are available.
For more information about umbrella insurance or to request your free quote, contact our office today.