Homeowners insurance is kind of like cars. You have the base year, make, model and then you have add-ons. A car can come with a package or a group of features or you can add features a la carte. Homeowners insurance is similar, but more complex. A home insurance policy comes with the basics which I cover in this video. You should never purchase the basic policy without looking into the add-ons. If you are not sure what home insurance coverage you should have, here is a list of the top 9 coverages or endorsements you should have in your home insurance policy and 2 you should ask your insurance agent about.
Special Coverage for Dwelling –Insurance professionals may call this allrisks or open perils but it refers to the same coverage. A basic home insurance policy is typically written to include only 16 types of claims. However, if you add this coverage or endorsement it will open the policy to cover home claims, excluding 11 types of claims. Essentially you can have a policy that only covers claims that are listed or have a policy with 11 exclusions.
Special Coverage for Personal Property – Like the coverage for dwelling you can have either specific claims covered or specific claims excluded.
Replacement Cost for Dwelling – Without Replacement Cost coverage the policy would settle claims based on actual cash value. Most home owners want to be put back to their original home condition versus less. Furthermore when you have Replacement Cost coverage on your dwelling you should have an additional limit or cushion available should you need more than the dwelling amount for a total rebuild of your home. I recommend at least 150% to start.
Replacement Cost for Personal Property – Without this coverage claims would be settled on a depreciated value basis. Most people do not want to buy used personal items or shop at Good Will. If you want new for old then you will need this coverage.
Water Back-Up coverage – a homeowners policy does not include coverage for the back-up and overflow of drains inside your home without adding this coverage to the policy. Any drainage systems inside your home can back-up and overflow causing damage to not only the interior of your home but also to personal items. According to iPropertyManagement the average amount for a home water claim is $10,000.
Personal Injury – While many of us would not purposely attack another person you could be potentially accused or sued for it. This coverage may include slander, libel, defamation of character, invasion of privacy, mental anguish, assault, etc. Without this coverage you would be out of pocket for an attorney to defend you whether the accusations were true or not.
Identity Fraud – This type of event is so common place today that we are almost immune when it is announced that there was data breach. That being said such an event can be damaging to any one, with long term financial consequences. This coverage is minimal cost and worth having.
Service Line Coverage – Our homes are connected to an infrastructure of water lines. There are some areas of Baltimore and Maryland that are older and more susceptible to failure. A water line on your property that collapses causing water to back flow into your home can damage not only the inside of your home but personal items as well. The local community, city, and county will not fit the bill. Ultimately the home owner will if this coverage is not added to your home policy.
Equipment Breakdown – Homeowners insurance is not a warranty program. If an internal appliance, such as the HVAC system fails, the homeowners insurance will not pay to repair or replace the system. Insurance companies have gotten wise to the issues that come with home ownership and the cost of new appliances today. Without this valuable coverage you will be out of pocket to repair or replace your appliances should they fail.
Bonus Coverages:
Loss Assessment – It is very common for communities to have homeowners associations. If a severe weather event were to occur and damage portions of the community the by laws of the homeowners associations may allow them to charge back to home owners in the community an amount to cover damages. Without the appropriate amount of coverage you could be out of pocket thousands of dollars.
Ordinance & Law – Following on Loss Assessments homeowners associations may also require that your home have a certain esthetic look; roof type, siding, etc. This is common in golf communities. Also for homes located in coastal areas, mountainous terrain, etc. you may need to build to a certain code dictated by the city, county or state.
While this is not an all-inclusive list these are the coverages or endorsements that are added and/or discussed with my clients when reviewing their home insurance policy or quoting alternative options. Some of these coverages are new and were created as a result of the changing times. Some of these coverages have always been available but not used by agents. Regardless, as a home owner you should be aware of the various options available and discuss with your insurance agent on the best ways to protect your home.
If you haven’t reviewed your home insurance policy recently its time to call your insurance agent. A good agent will not only review your current policy for coverage gaps but discuss ways to fill those gaps.