The post The Homeowners Policy Explained first appeared on Carson Insurance Agency.
]]>Before we discuss the specific coverages and limits of your policy, we first need to explain what types of events, or perils, are covered on your policy. If you have what is known as an HO3 or an HO5 policy (the 2 most common policies), the structure of your home will be covered against all perils except ones that are excluded by the policy. This is the broadest coverage you can get as it provides coverage for less common events. At claim time, instead of looking at the list of items that are covered, the insurance company would instead look to make sure the cause of the loss was not on the list of excluded items. Some commonly excluded perils include but are not limited to the following.
If you have an HO5 policy, your contents are covered in the same open peril fashion as above. However, if you have an HO3 policy, your contents are only covered against perils that are specifically listed on the policy. This is where an HO5 policy excels over an HO3 policy. The typically named perils include but are not limited to the following.
While this is a pretty comprehensive list of the common perils, it does leave a coverage gap for events such as the mysterious disappearance of an item, dropping and breaking an item, or even less common events like if you spill wine on a couch or a pet destroys your favorite dress The aforementioned scenarios would be covered on an HO5 policy.
A homeowner policy has four basic included property coverages. These coverages protect the structures on your property, the property in the structures, and the loss of use of your property.
Dwelling Coverage: This coverage covers the main dwelling and any structures attached to the main dwelling.
Other Structures Coverage: This coverage covers any structures on the property that aren’t connected to the dwelling. This includes sheds, fences, pools, mailboxes, etc.
Personal Property Coverage: This provides coverage for property owned by the insured anywhere in the world. There are some stipulations on what type of personal property is covered and in some cases, there are limits on how much coverage is provided for categories such as jewelry, firearms, and others.
Loss of Use Coverage: This provides a place to stay if the home becomes uninhabitable due to a covered loss.
Personal Liability Coverage: This covers bodily injury or property damages that the insured becomes legally obligated to pay. In most cases, this relates only to the insured’s dwelling location.
Medical Payments: This is a no fault coverage that can provide money for medical costs to someone other than a resident that is injured on your property. This can pay even if the insured is not legally obligated to pay. For example, if a guest trips on a step and injures him or her self.
Personal Injury: Provides coverage for libel, slander, and other injury’s unrelated to bodily injury.
Water Sewer Backup: This pays for damages due to water that backs up into an interior drain from an outside source. The most common example is a sump pump that fails, letting water back up into the home and causing damage.
Earthquake Coverage: In Indiana, this coverage usually involves a higher deductible such as 10% of the property coverage. Its intent is to provide coverage for a catastrophic earthquake, not minor damages due to an earthquake. Because of the high deductible, the coverage is usually pretty affordable.
Personal Articles: Items such as jewelry, fine arts, and firearms usually have a separate lower limit on homeowner policies. Because of this, it may be necessary to insure larger collections with a personal articles (or inland marine) coverage. Many companies can insure these scheduled items as part of the homeowners policy. It is common for this coverage to have a $0 deductible.
Replacement cost coverage means that at the time of loss, the insurance company will pay the cost to replace the item fully and will not take depreciation into account.
Actual Cash Value coverage will pay the replacement cost minus the depreciation of the item.
Homeowners policies may pay replacement cost for losses to the dwelling but Actual Cash Value for losses to personal property so it’s important to look closely at you quote or policy to determine how yours is structured.
For the dwelling, assuming you have a replacement cost policy, you should insure your house for enough that it can be replaced if there is a total loss. Replacement cost is often times more than the home’s current market value. In most cases, the insurance company or your insurance agent will do a calculation of your homes replacement cost based on your homes square footage and features.
By default most insurance companies provide coverage for the rest of the property based on a percentage of the dwelling insurance. For example, an insurance company may default your personal property to 50% of your dwelling cost. In most cases, this value can be changed if it is too low or too high.
A conversation with your agent is the best way to make sure your home is properly covered. Make sure they know about any special features or property that you have that would fall outside a normal home.
The post The Homeowners Policy Explained first appeared on Carson Insurance Agency.
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