Is your home insurance great, or ‘just good enough’? All policies are not created equally, and neither are the different types of coverage within them. In this post, we want to help you better understand the coverage package available in the most commonly purchased home insurance policies and learn how to determine how much home insurance is right for you.
Coverage A – Dwelling
Both HO-3 and HO-5, home insurance policies, provide coverage for your home’s structure against a broad range of perils. Known as ‘open peril policies,’ HO-3 and HO-5 cover your home’s structure against all hazards that are not specifically excluded in writing. You’ll be required to pay a deductible toward the cost of your claim, but this is usually only $500 – $2,000, depending on the amount you select when you purchase your policy. A lower deductible reduces your financial burden after a loss, but a higher deductible can shrink your annual insurance premiums.
You should have enough Dwelling coverage to pay for the cost of cleaning up your property and removing debris after a disaster, as well as the cost to rebuild your home with similar materials and finishes based on current construction prices. If you under-insure your property, you risk having too little money to start over again after a major loss. Not to mention, insurers can enforce the ‘Co-Insurance Rule,’ which penalizes policy-holders with too little coverage. Even if you only file a claim for partial losses, the Co-Insurance Rule allows insurers to pay only a fraction of your claim in proportion to the amount your property is underinsured.
For help calculating the actual coverage amount you need, contact a helpful agent here at Wolfgram Insurance.
Coverage B – Other Structures
Similar to your Dwelling coverage, ‘Other Structures’ coverage helps pay to rebuild or replace stand-alone structures on your property other than your primary home. Examples include fences, driveways, pergolas, swimming pools, and detached garages, but there are many additional structures that could fall under this important coverage.
In many cases, insurance companies automatically include coverage for other structures at no additional cost. Your default coverage limit is likely a percentage of your Coverage A limit – usually 10 percent. However, additional coverage may be available to those with more substantial structures on their property.
Coverage C – Personal Belongings
It’s not enough to simply rebuild your home after a disaster; you need to replace its contents, too. Coverage C reimburses you for the loss of your personal belongings, usually with default coverage limits between 50 and 80 percent of your Dwelling coverage. This can help cover the loss of your furniture, electronics, clothes, rugs, appliances, kids’ toys, sporting goods, and more. It can even follow you, providing coverage for theft and other losses anywhere in the world.
To ensure your possessions are adequately covered, we recommend using a mobile app to take an inventory of the items you own. Then, regularly update it – especially when you purchase expensive items. A home inventory can keep your coverage on track and help you know when to add scheduled coverage for high-value items that exceed the dollar limits within your policy. It can also prevent you from overlooking any of your losses when you need to file a claim.
Coverage D – Loss of Use
Whether your home is a total loss or simply needs extensive repairs, you may need to find temporary shelter if your home is uninhabitable. Hotel fees, restaurant meals, and Laundromat expenses can add up quickly – especially if you are displaced for several weeks or months. Coverage D helps pay for your extra expenses when you lose the use of your home. This coverage is typically included automatically, generally with limits equal to 20 percent of your Dwelling coverage.
Coverage E – Personal Liability
Personal liability represents Coverage E on a standard home insurance policy. This coverage helps shield against financial damages when you are at-fault for a third-party’s injuries or property loss. As a policy-holder, you decide how much coverage you want, although we typically recommend a minimum of $100,000 to $300,000. Without the right coverage, your income, savings, and assets could be at risk if you are sued.
Types of Loss
Personal liability covers most injuries and property damage loss with a few exceptions for events like car and boating accidents. Insurance extends to you, members of your household, and your pets wherever you may go – not just at your home. For example, Wisconsin is among the top ten states for dog bites. With a national average of more than $37,000 per claim, personal liability insurance could save you tens of thousands of dollars if your usually docile pet suddenly attacks a person or another pet.
Other common losses include:
- Injuries on your property
- Damages to hotel rooms
- Injuries caused by bicycle accidents
- And more
Coverage F – Medical Payments
Injuries can happen anywhere – even in the safety of your home. If a guest is injured while visiting your home or while on your property, medical payments coverage can help pay for the stitches, x-rays, doctor’s office visit, or other medical bills. This coverage usually provides between $1,000 and $5,000 of benefits, but the payment is not contingent upon the fault of the homeowner.
Many homeowners add additional coverage to their standard insurance policies to help customize their home insurance according to their needs. You may have endorsements on your policy if you are vulnerable to specific risks that the general population is not, such as coverage for a home business or a high-value asset not fully covered by your personal belongings coverage.
Here at Wolfgram Insurance, we recommend some endorsements to nearly all homeowners. For example, water backup and sewer coverage is not a part of a standard insurance policy, but there is an endorsement that can protect your home against this type of hazard. Other common endorsements include inflation guard protection and replacement cost coverage for personal belongings.
Beyond Home Insurance
When accidents result in tremendous property damage, permanent disability, or even a fatality, it is not unusual for judgments to reach seven figures – an amount that even the highest personal liability limit is unlikely to cover. Instead of losing your savings and assets to a major lawsuit, umbrella insurance can provide additional liability protection when you need it most, safeguarding your family against financial ruin.
Umbrella insurance is supplemental liability coverage that pays more than the limits on your primary coverage. These policies typically come with a minimum of $1 million of coverage, although higher limits are available. Costing an average of just $200 per year, this is an affordable way for homeowners to better protect against unexpected events.