Home Owners Insurance
Most of us live a significant portion of our lives in and around our homes. We fill our homes with the necessary and unnecessary stuff of our lives. Losing our home and/or our possessions would be catastrophic. Homeowner’s insurance offers an outstanding value- they offer tremendous amounts of coverage for relatively few dollars. However, homeowner’s policies are one of the most complex policies you can buy. They are loaded with exclusions and limitations. Therefore it’s critical when buying a homeowners policy identify what you are exposed to that falls outside the basic box of coverages.
Most people make the mistake of shopping their insurance on price alone. What they usually end up with is a cheaper price for the wrong coverage! It’s unusual for us to take on a new client who doesn’t have at least one major gap, goof or inadequacy in their current insurance program. Insurance policies are complex legal contracts. It would be a mistake to treat them as interchangeable commodities.
The Six Major Parts of a Homeowners Policy
Coverage A-Dwelling – Covers damage to or destruction of your residence by a covered peril (wind, hail, fire, etc.) Most policies pay up to your coverage A limit plus a “coverage cushion” of 10% to 25% (if you insurance company advertises on television this is very likely the coverage you have). The better policies have a cushion of 50% to 100% and the best policies pay guaranteed replacement cost-meaning they will pay to rebuilt your home without a limit.
“The best coverage is “guaranteed replacement cost” which pays for rebuilding no matter what the cost”- Sept. 2009 Consumer Reports
Coverage B-Other Structures – Covers damage to or destruction of detached structures. Typically the amount of coverage is 10% or 20% of your Coverage A limit. For most people this is adequate. If you have numerous or expensive detached structures you will want to increase this coverage.
Coverage C-Property – Damage to, destruction of, or theft of personal property anywhere in the world. Pretend you could pick your house up, turn it upside down and shake it. Typically anything that falls out is considered personal property. We recommend adding replacement cost coverage for your personal property vs actual cash value (a depreciated amount). Be aware that an unendorsed policy typically has relatively low limits of coverage for specific classes of property (guns, fine art, jewelry, silverware, gold, collectibles, etc).
Coverage D-Additional Living Expenses Covers the added living costs you incur because of a loss covered by A, B, or C (housing/lodging, meals, utilities)
Coverage E- Personal liability (non-automobile) for injuries and property damage at home and anywhere else worldwide. Your personal liability protects you from injuries and property damage you may cause to others and not just at your home but virtually anywhere you travel. Here are a couple of examples:
- You are snowboarding and collide accidently with a skier who sues for injuries
- You seven-year old spills Hawaiian Punch on a neighbors white carpet, which causes a $3000 carpet replacement
- Your riding lawnmower kicks up a rock- into a neighbor-and injures her
- You get sued by a neighbor who jumps the fence into your yard to retrieve a ball and is bitten by your Chihuahua
Please note that many policies do not include coverage for libel and slander. They exclude coverage because they consider them intentional acts. There are several recent cases of people being sued (or threatened) for negative online reviews they have posted. Given the prevalence of the internet, forums, blogging, etc. we recommend choosing a homeowners policy that provides liability coverage for libel and slander .
Most policies we see have $300,000 in liability coverage. We highly recommend increasing this limit to at least $500,000 but preferably $1 million.
Coverage F-Medical – Covers a guest if they get hurt on your premises even if the injury is caused by their own carelessness. It pays for necessary medical treatment up to the coverage limit.
A Couple of Homeowner Endorsements to Consider
Building Ordinance & Law- Coverage – Municipalities have building codes. These codes often change between the time your home was built and the time you have a structural loss. Without this coverage- you are responsible for paying the added expense to upgrade the repair to meet the current building code. We highly recommend this coverage-, but especially for older homes.
Back-up sewer and drain coverage – The typical homeowner’s policy has no coverage- for water that backs up through your drains. You first line of defense is a good sump pump with a battery back-up. Then if you have a finished basement we recommend adding this coverage-. Warning: some carriers exclude coverage- for flooring and personal property- make sure your policy doesn’t. Buy enough coverage- to cover the maximum probable loss or the maximum available, whichever is less.
Home Business A homeowners policy is designed for residential-not business-risks. We recommend adding this coverage- if you do any type of minor business activity that involves your home (including a home office). A separate businessowners policy is recommended for anything greater-check with your agent.
Guaranteed (unlimited) Replacement Cost – If your home burns to the ground tonight, most insurer will pay up to a fixed maximum dollar amount to help you rebuild (typically your coverage- A limits + 10%-25% extra). A few insurers still offer guaranteed (unlimited) replacement cost coverage-. We recommend this coverage- in general but especially if you have an older home or a high-value home where the replacement costs are more difficult to determine. The second issue is when you have a catastrophic event ( like the San Diego wildfires of 2007) the likely rebuilding costs will skyrocket when you have a finite amount of contractors who are qualified to rebuild such homes.
- The basic policy sets a specific dollar limit on that type of property
- Certain causes of loss are excluded (mysterious disappearance & breakage for example)
- The property is unique and difficult to put a value on
We recommend “scheduling” your valuable high risk items on your homeowners policy. You pick up coverage-, get a broader cause of loss, and have the option to have a $0 deductible. If you have an extensive amount of this property you might consider a separate Inland Marine policy- talk to your agent.
Home Loss-Reduction Tips
- Install a UL approved smoke detector on each floor. Replace the batteries yearly
- Install a UL approved dry-chemical fire extinguisher in the kitchen. Check it periodically to make sure it’s fully charged
- Install dead-bolt locks on all access doors
- Install a motion detector alarm
- Install a central burglar and fire alarm (most companies offer a discount)
- Have your fireplace, flues, and chimney cleaned regularly
- If you buy a wood stove, buy a UL approved one and have it professionally installed. Don’t leave it unattended and have it professionally cleaned annually
- Change your locks if your purse or keys are ever stolen or go missing.
- Install a sump pump with a battery back-up
- Keep trees trimmed so they are safely away from the house
- If you have a swimming pool, have an approved fence. Take out the diving board (where most injuries occur). Add a locking pool cover (and alarm).
- Sign your kids up for a gymnastics class and forget about the home trampoline
- Install a carbon monoxide detector
- Plan a family escape route & have monthly drills
- Keep exterior drains free of debris
We have been extremely happy with the service that we have received from Cincinnati General Insurance. They go out of their way to find the best insurance policies for both our house and our cars. They also get back to us immediately for any information that we need or when we haJim and Christie B.
Please note: the information provided here is of a general information nature and is accurate to the best of our ability. We are insurance agents and not insurance experts. Please consult your own policy and with your own agent for specific coverage questions and concerns.