What is covered by standard homeowners’ insurance?
Learn about the four essential areas of protections provided by a typical homeowners policy
Coverage A or Dwelling coverage
A homeowner’s policy will pay to repair or rebuild your home if it is damaged or destroyed by specified events, such as fire, hurricane, hail, lightning or other disasters listed in your policy. This value is the maximum value your insurance company will pay to rebuild your home, in the case of a total loss. Being underinsured by only $30,000 may seem trivial, until you have a total loss and the full $30,000 comes out of your pocket, you will be pleased about having saved the small premium difference.
Coverage B or Separate structures coverage
Also known as detached structures, is often an automatic add-on to your main coverage and includes items such as a garage that is not connected to your home, a tool shed or gazebo, even your swimming pool. While most insurance companies generally add 10 percent of the insured value of your home, this is often modifiable with Farmers to be either 5% or 10%. Homes that do not have a detached garage, do not have a shed or any real separate structures, the 5% is often sufficient, saving you money
If you do not have a detached garage and any structures not connected to your home, we will find this and work with you to see if this coverage can be reduced as we do not want you to pay for something that you will never benefit you. The other scenario holds true as well. Say you have a detached garage, a workshop and a gazebo. It is quite possible the 10% may not be enough.
A standard policy will not pay for damage caused by a flood, earthquake or routine wear and tear.
When purchasing coverage for the structure of your home, remember this simple guideline: Purchase enough coverage to rebuild your home.
Coverage C or Personal property
Your furniture, clothes, TV’s and other personal items are covered if they are stolen or damaged by an insurable event. The coverage is generally ranges from 40 to 70 percent of the insured value of your home. This value is sometimes modifiable as well. Let us know if you believe the coverage listed is far more than you need, or not enough, and we will look to see if this amount can be modified.
Personal belongings coverage includes items stored off-premises—this means you are covered anywhere in the world. Some companies limit the amount to 10 percent of the amount of insurance you have for your possessions.
Expensive items like jewelry, furs, art, collectibles and silverware are covered, but the policies limited payout may not be enough to replace your belonging. To avoid this situation and to get their full value, purchase a special personal property endorsement or floater and insure the item for its recently appraised value.
Coverage D or Additional living expenses (ALE)
ALE pays the additional costs of living away from home if you cannot live there due to damage from an insurable disaster. Farmers will cover hotel bills, restaurant meals and other costs, over and above your usual living expenses, incurred while your home is being rebuilt. Not all carriers have the same coverage as Farmers, so be sure your carrier provides sufficient coverage.
Note that ALE coverage does have limits, which may include a time limitation. However, these limits are separate from the amount available to rebuild or repair your home. Even if you use up your ALE your insurance company will still pay the full cost of rebuilding your home up to the policy limit.
Coverage E or Personal Liability protection
Liability covers you against lawsuits for bodily injury or property damage that you or family members cause to other people. It also pays for damage caused by your pets. So, if your son, daughter (or even your dog) accidentally ruins a neighbor’s expensive rug, you are covered. (However, if they destroy your rug, you’re out of luck.)
The liability portion of your policy pays for both the cost of defending you in court and any court awards—up to the limit stated in your policy documents.
Liability limits generally start at about $100,000, however, we have a strong view that the minimum really should be $300,000. Not only does this offer greater protection, but also often meets the underlying requirements should you purchase an Umbrella policy. Personal Umbrellas provide broader coverage and higher liability limits.
Coverage F or Medical Coverage
Policies also include no-fault medical coverage. Should a friend or neighbor be injured in your home, this individual can simply submit medical bills to your insurance company. This will avoid any liability claims being filed against you. This is often an overlooked coverage, and most policies have no coverage or cover only $1000. We recommend $5000 as if there is an incident that may require an ambulance, the cost will easily exceed $1000.
If you rent out part of your house, ALE also covers you for the rent that you would have collected from your tenant if your home had not been destroyed.
We hope the above detail has helped you understand and always feel free to contact us for more details.
