Today, we are going to discuss five coverages that you should consider when you’re looking for a quote for homeowners insurance. Are you ready? Let’s go.
The first coverage we’re going to talk about is dwelling coverage. This 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.
Now, insurance companies will run a replacement cost estimator, or an RCE, to figure out how much the dwelling coverage should be. 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, etc.
So make sure, when you talk with your insurance agent, that they ask you all those questions and that you give them all that information. This way they can correctly calculate the replacement cost of your dwelling coverage. 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%. 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, fence, pool, things to that nature. These are all other structures because they’re not directly attached to your main structure.
Now for the most part, the 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 or very expensive other structures, like a huge covered garage, you need to make sure and discuss with your agent that you have enough coverage on the other structures coverage.
The third coverage that you should consider when trying to find the best homeowner’s insurance policy is liability coverage. Liability coverage is something that is very important, but often gets overlooked by agents and by homeowners themselves.
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 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. It may sound like a lot, but it’s not if you’re getting sued. If you bump that $100,000 up to $500,000 in coverage, usually it’s only going to cost you an extra $2 or $3 a month. That’s it!
So go right now, check your homeowner’s policy. If you only have 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 HO5
The fourth coverage that you should consider when trying to find the best homeowner’s insurance policy is HO3 verse HO5. Now I know I just lost a bunch of you there when I started saying all those numbers and letters, but it’s actually very simple.
Let’s discuss the difference, because there is a difference. Yes, there are different types of homeowner’s policies and there is a difference and a very big difference between a HO3, which is just a normal homeowner’s policy and an HO5 homeowner’s 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 homeowner’s 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.
Now 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, to update from an HO3 to a HO5 is going to be 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
So let’s talk about the last coverage that you need to consider when shopping for the best homeowner’s insurance. 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.
Let’s just say, for example, it’s $150,000 for personal property. Now let’s say you have a $20,000 wedding ring. You think you’re covered. You have $150,000 of personal property coverage, you have a $20,000 ring, it’s going to be covered, no problem.
That is not the case.
Every insurance policy, even HO5 policies, have sub-limits. Things like jewelry, guns, collectibles, coins, 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 that 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 are 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. And if they are, it’s generally a simple fix, you can specifically schedule it onto the policy.
So those are the five things that you should look for and that you need to look for when searching for the best homeowner’s insurance policy. We’re happy to go over your policy for you, even if we don’t insure you. 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.