Have you ever looked at your insurance policies and wondered what some of the terms meant? Or been confused as to what was covered under what section? As agents, we know the ins and outs of what all those insurance terms mean but realize that some of our clients might not so we’re going to do a series of basic primers on insurance over the next few months – call it Insurance 101.
Last month we covered auto insurance - now onto Homeowner's Insurance!
There are a few basic sections to a homeowner's policy that you'll find on every policy and then lots of options for add-ons, called Endorsements. The basic sections include:
This limit of liability covers the house and any attached structures like garages. This number is what the insurance company believes it would cost to rebuild your home in the case of a total loss. Remember that it will likely be less than the resale value of the home - this is just what it would cost to rebuild and doesn't take into account the market value or even the value of the land the home is on so keep that in mind when looking at this number.
Simply put, this is all your possessions. Insurance companies typically set this figure between 65% and 80% of your dwelling value but you can change that amount with your agent. When you consider that in a total loss you'd be replacing all your furniture, clothing, the kid's toys, electronics, kitchen items, tools, etc - it can add up quite quickly! As a side note, this is why we encourage you to have an updated home inventory - if you need to account for every single thing you own, you'll have already done it.
This covers you for lawsuits for bodily injury or property damage caused by you or a family member - that typically includes pets (with some exclusions) as well. It covers you at home as well as worldwide and helps to pay legal fees and any court awarded damages against you up to the policy limit.
This is money that helps cover medical expenses for guests in your home who are injured, regardless of fault. It is important to know that unlike the medical payments on your auto policy, this does not apply to you or your household members.
Loss of Use
If you can't live in your house because of an insurable event, this helps you cover the costs associated with moving to another place temporarily and covers the added living expenses that come along with being displaced from your home.
Now that you are familiar with the basic components of a homeowner's policy let's move onto the extras...
These add-ons enhance the already existing coverages and add additional layers of protection for things that are not typically covered. They vary from state to state as to what is considered standard but our companies offer endorsements for things like identity theft, water backup coverage, earthquake, hurricane, service line coverages, mold and biological damage, business property, and equipment breakdown. Let's discuss a few really popular and/or important ones:
Scheduled Property - formerly called Inland Marine within Nationwide, this is added protection for special items. Whether it is a piece of jewelry, a collection of rare and valuable books or artwork, this coverage ensures full coverage of those items.
Earthquake and Hurricane - granted, we don't get a lot of earthquakes or hurricanes in Ohio but other states do and we have been known to experience an earthquake from time to time. These are important endorsements in states prone to either of these because if the insurance company determines that damage to your home is caused by either of them and you don't have the appropriate endorsement, your loss will not be covered.
Water Backup - this endorsement extends coverage if your sump pump overflows or if water backs up through your sewer or drains. This typically doesn't include septic tank issues and every company covers these problems differently - give us a call and we can go through the specifics for your policy. Also, this is NOT flood insurance! So if the area around your house floods, this isn't going to cover it. There are separate policies for that!
Service Line Coverage - our modern homes have many outside services connecting us - gas, electric, water, cable and internet. If those lines are cut or damaged, they are typically the homeowner's responsibility to repair at their own expense. This coverage helps to pay for those repairs as well as damaged landscaping, the cost of excavation to access the damage and even will cover the cost of temporary living expenses should you need to move out while the repairs are made.
There are lots of other endorsements and a lot more that goes into homeowner's insurance but these are the basics that we think all our clients should be familiar with! If you have any questions at all, want more explanations, we would be happy to walk you through your policy and make sure you know exactly what it says and what it all means for you!