Coverage
The Basic Coverage Available on the Home Insurance Policy is:
Dwelling Coverage- This value is the amount to cover the replacement of the home. There are four types of coverage that are most common:
- Replacement Coverage with Extended Coverage- This coverage starts with the replacement value of the home. If there were a maj0r catastrophe that caused building costs to rise in your area, the extended coverage would add coverage for an additional percentage.
- Replacement Coverage- This coverage is replacement coverage… Most if not all carriers have stopped offering this level of coverage. This level of coverage would infer that whatever the cost, the policy would pay to replace the structures.
- Stated Value Replacement Coverage- This coverage provides replacement coverage only to the limits of the policy. There are no additional funds available for the added costs to replace the structure if the building costs were to go up quickly due to a catastrophe.
- Actual Cash Value- This policy provides coverage for the depreciated value of the structured. If the home is 10 years old and experiences roof hail damage, the coverage would be replacement value minus depreciation.
Detached Structure Coverage- This is coverage is for the shed in the back of the yard or the stand alone garage. The value for this coverage is traditionally a % of the Dwelling Coverage. This coverage comes standard and can not be removed from the policy. NOTE: If the detached structure is worth more than the % that comes standard in the policy, this coverage can be increased to meet the need.
Personal Property Coverage-Coverage in this category is extended to the personal property in the home and a portion of property at a remote location- dorm, hotel, etc. The value of coverage is again a percentage of the Dwelling. Coverage can be increase if the value is deemed to low. Increasing coverage DOES NOT necessary increase coverage for certain items. Policies have inherent limitations to certain types of items: Jewelry, furs, electronic equipment, computers, sports equipment, etc.
Loss of Use- In the event a claim resulted in not being able to occupy the home, this coverage pays for you to stay at an alternate location for up to 12 months. Some carriers limit the amount of funds this can provide. Other carriers provide the coverage with no stated limits. CAREFULL- Loss of Use vs. Loss of Rents are totally different. If the home is rented and a homeowner policy is insuring the home, loss of use would not be paid at the time of a loss. Having a Landlord policy in place would provide loss of rent if the tenant could not occupy the home due to a loss.
Medical Coverage- Guest injuries at your home could result in your being sued for negligence. It the goal of Medical coverage to protect the insured from a lawsuit by providing funds for guest medical expenses. Some carriers limit the coverage. Watch for limitations. The desire is to find coverage that outlines a stated max for each person injured without a limit to the number of people injured in a single claim.
Liability Coverage-This can be a much more important coverage than one may believe. The Townhome policy requires a high level of liability coverage due to the proximity of the neighbors. Liability coverage positions the insured to make another person “whole” for the negligence of the insured. Example: A deck falls of the home and injures 5 guests. The Medical Coverage was not sufficient to meet the costs. The guest’s lawsuit would potentially result in a liability claim. Example:The insured accidentally burns his home down. The dwelling coverage would replace the home. The problem is the fire caused damage to the neighbors homes too. The neighbors would sue and the home policy’s liability coverage would potentially be positioned to pay for those damages.
The title of this section is- Basic Policy Coverages. There are many other coverage options. Those home insurance coverage options will be discussed in future posts.
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