We are going to discuss five coverages that you should consider when you’re looking for the best homeowners insurance. It’s important to remember that not all home insurance policies are the same. There are many different coverage’s and having the right coverage can make the world of difference when you need to file a home insurance claim.
The first coverage we’re going to talk about is dwelling coverage. Dwelling coverage on your homeowners policy is the main coverage on your homeowner’s policy. This covers the actual structure of your home, like the walls and the roof and things to that nature.
Insurance companies will run a replacement cost estimator or an RCE to figure out how much the dwelling coverage should be on your home insurance policy.
The RCE is based off of the characteristics of your home: when it was built, the style of the roof, how many bedrooms, how many bathrooms, the flooring you have.
So make sure when you talk with your insurance agent that they ask those questions and that you give them all that information so that they can correctly calculate the replacement cost of your dwelling for your house. Some brokers or agents wont ask you all these questions, but it’s important they do. You don’t want to run into a scenario where you don’t have enough coverage on your dwelling and your home is damaged or even worse. It’s burned to the ground.
You need to make sure you have enough replacement cost coverage to be able to repair or rebuild your home.
The second coverage we’re going to talk about is other structures coverage. Now, generally, other structures comes automatically as a percentage of whatever your dwelling coverage is. Usually it’s about 10% of the dwelling coverage limit.
Other structures are structures that are on your property, but not directly attached to your main home. So this could be like a shed, garage, workshop, walls and sometimes even swimming pools. These are all other structures because they’re not directly attached to your main structure.
For the most part, the amount of other structures coverage that comes automatically on your policy as a percentage of the dwelling coverage is going to be enough coverage. However, if you have a lot of other structures, they’re very expensive, like a huge covered garage or a separate casita, you need to make sure you have enough coverage. Check with your agent that you have enough coverage for other structures.
The third coverage that you should consider when trying to find the best homeowners policy is liability coverage.
Liability coverage is something that is very important, but often gets overlooked by agents.
What is liability coverage? Well, let’s make it simple: liability coverage protects you from lawsuits that will arise from things that you are negligent or liable for. Think about things like dog bites, people slipping and falling in your home, people hurting themselves while swimming in your pool.
There are thousands of examples, thousands of things that can happen, that you are negligent for and that you could be sued for.
So this is a very important coverage and here’s the crazy part – A lot of insurance agents and a lot of insurance companies only give you $100,000 of liability coverage! That may sound like a lot of coverage, but it’s not when you are getting sued. $100,000 does not go very far these days.
Here’s the crazy part – If you bumped that $100,000 to $500,000 in coverage it’s probably only going to cost you an extra $2 or $3 a month. That’s it! So go right now, check your homeowners policy. If you only have a $100,000 or $300,000 in liability coverage, call your insurance company now and update that to at least $500,000 in liability coverage.
And if you’re concerned that $500,000 is not enough, consider an umbrella policy.
HO3 vs HO6
The fourth coverage that you should consider when trying to find the best homeowners policy is HO3 vs HO5. I know I just lost a bunch of you there when I started using those terms, but it’s actually very simple.
Let’s discuss the difference because there is a difference. Yes, there are different types of homeowners policies and there is a very big difference between an HO3, which has just a normal homeowners policy and an HO5 homeowners policy.
An HO3 policy is a named peril policy.
What does that mean? That means that there are certain things that are listed in the policy that are covered. If something happens to your home and you turn in a claim and you want your homeowners insurance company to fix it, whatever happened has to be listed in the policy as a covered peril, or a covered incident, if it’s not covered in the policy specifically, sorry, it’s not covered. Your claim will be denied.
Let’s talk about an HO5 policy. An HO5 policy is an open peril policy.
What does that mean? It means they don’t specifically list out all the things that are going to be covered. Instead they have a list of exclusions. So if something happens to your home and you want it to be covered, it’s going to be covered unless it’s specifically excluded in the policy.
So this opens up the policy to be able to cover so many more things, because all those things don’t have to be individually listed in the policy. Like I said, if it’s not excluded, it’s going to be covered, generally.
Just like with liability coverage and updating coverage, it’s very inexpensive. To update from an HO3 to and HO5 homeowners policy is going to be just a couple of dollars a month.
So go and check your policy, talk with your agent, make sure that you have an HO5 policy and not an HO3 policy.
Special Limits of Liability
The last coverage that you need to consider when shopping for the best homeowners insurance is special limits of liability, or sub limits.
Everybody knows that you have personal property coverage on your policy. Usually this comes as a percentage of the dwelling coverage. But there are some things that aren’t automatically covered under personal property.
Let’s just say, for example, you have $150,000 in personal property coverage. Now let’s say you have a $20,000 wedding ring. Is that covered? You have $150,000 of personal property coverage. You have a $20,000 ring. It’s going to be covered. No problem, right???
That is not the case. Every insurance policy, even HO5 policies have special limits of liability for things like jewelry, guns, collectibles, coins, etc. that are only going to be covered up to a certain limit, regardless of what the personal property limit is.
So if we go back to our jewelry example, our wedding ring, if you don’t specifically list it on your policy and something happens, that piece of jewelry is going to be subject to the sub limit, which generally is around $3,000 for jewelry, sometimes up to $5,000 for jewelry. So that is all you’re going to get, even though your personal property coverage is 150,000.
So you need to talk with your insurance company, discuss any large value items that you have of personal property and make sure that those things are not limited by the sub limits or special limits of liability.
So those are the five things that you should look for and that you need to look for when searching for the best homeowners insurance policy. We’re happy to go over your policy for you, even if we don’t insure you.
However, if you don’t want to talk to us, call your insurance company, they should be able to tell you if you have those things. And if you don’t, they can get you pricing to update those things.