Understand Your Home Insurance Coverage

Understanding What Your Home Policy Covers

According to the Insurance Information Institute, there are certain hazards, or perils, that are covered by most standard homeowners insurance policies. While the coverage can vary from state to state or from one geographical region to another, homeowners policies typically offer coverage for the following:

  1. Fire/smoke
  2. Lightning strikes
  3. Windstorms
  4. Hail
  5. Explosion
  6. Vandalism
  7. Theft
  8. Damage caused by the weight of snow, sleet or ice
  9. Falling objects
  10. Aircraft damage
  11. Motor vehicle damage

While these hazards are typically covered, you should always check your own homeowners insurance policy to determine what it covers.

The structure (Dwelling)

You need enough insurance to cover the cost of rebuilding your home at current construction costs. Don't include the cost of the land. And don't base your rebuilding costs on the price you paid for your home. The cost of rebuilding could be more or less than the price you paid or could sell it for today.

For a quick estimate of the amount of insurance you need, multiply the total square footage of your home by local building costs per square foot. To find out construction costs in your community, call us and our agents can prepare a replacement cost for you.

Factors that will determine the cost of rebuilding your home:

  1. Local construction costs
  2. The square footage of the structure
  3. The type of exterior wall construction–frame, masonry (brick or stone) or veneer
  4. The style of the house (ranch, colonial)
  5. The number of bathrooms and other rooms
  6. The type of roof and materials used
  7. Other structures on the premises such as garages, sheds
  8. Fireplaces, exterior trim and other special features like arched windowsWhether the house, or parts of it like the kitchen, was custom built

Standard homeowners policies provide coverage for disasters such as damage due to fire, lightning, hail, explosions and theft. They do not cover floods, earthquakes or damage caused by lack of routine maintenance.

As always, our main priority is educating our home owners. For a free, no-hassle quote, speak directly to one of our agents at 1-888-913-6988 or submit your quote on our online quote system.

Replacement cost policies

Most policies cover replacement cost for damage to the structure. A replacement cost policy pays for the repair or replacement of damaged property with materials of similar kind and quality. There is no deduction for depreciation–the decrease in value due to age, wear and tear, and other factors.

If you purchase a flood insurance policy, coverage for the structure is available on a replacement cost basis.

Building codes

Building codes are updated periodically and may have changed significantly since your home was built. If your home is badly damaged, you may be required to rebuild your home to meet new building codes. Generally, homeowners insurance policies in Florida provide “Law and Ordinance Coverage”. This provides 10% or 25% of coverage in addition to the selected dwelling amount.

Older homes

If you own an older home insurance companies will insure older homes for the replacement cost as long as the dwelling is in good condition. In Florida a 4 Point Inspection is to verify the home is in good condition. The cost of that inspection in most Florida counties is $99 that includes the inspector going to the property inspecting the home and generating an official report with the supporting documents and pictures. This is the report that is then provided to the insurance companies.

Your personal possessions

Most homeowners insurance policies provide coverage for your personal possessions for approximately 25% to 50% of the amount of insurance you have on the structure or “dwelling” of your home. The limits of the policy typically appear on the Declarations Page under Section I, Coverage C, Personal Property.

To determine if this is enough coverage, you need to conduct a home inventory. This is a detailed list of everything you own and information related to the cost to replace these items if they were stolen or destroyed by a disaster such as a fire.

Replacement Cost or Actual Cash Value

You can either insure your belongings for their actual cash value, which pays to replace your home or possessions minus a deduction for depreciation up to the limit of your policy. Or you can opt for replacement cost, which pays the actual cost of replacing your home or possessions (no deduction for depreciation) up to the limit of your policy.

Suppose, for example, a fire destroys a 10-year-old TV set in your living room. If you have a replacement cost policy for the contents of your home, the insurance company will pay to replace the TV set with a new one. If you have an actual cash value policy, it will pay only a percentage of the cost of a new TV set because the TV has been used for 10 years and is worth a lot less than its original cost. Some replacement cost policies also replace the item and deliver it to you.

Insuring expensive items with floaters/endorsements

There may be limits on how much coverage you get for expensive items such as jewelry, silverware and furs. Generally, there is a limit on jewelry for $1,000 to $2,000. You should ask your agent or look it up in your policy. This information is in Section I, Personal Property, Special Limits of Liability. Insurance companies may also place a limit on what they will pay for computers.

If the limits are too low, consider buying a special personal property floater or an endorsement. These allow you to insure these items individually or as a collection. With floaters and endorsements, there is no deductible. You are charged a premium based on what the item (or collection) is, its dollar value and where you live.
You can determine the value by providing your agent with a recent receipt or getting the item or collection appraised.

Additional living expenses after a disaster

This is a very important feature of a standard homeowners insurance policy. This pays the additional costs of temporarily living away from your home if you can't live in it due to a fire, severe storm or other insured disaster. It covers hotel bills, restaurant meals and other living expenses incurred while your home is being rebuilt.

Coverage for additional living expenses differs from company to company. Many policies provide coverage for about 20% of the insurance on your house. Some companies will even sell you a policy that provides you with an unlimited amount of loss of use coverage, for a limited amount of time.

If you rent out part of your house, this coverage also reimburses you for the rent that you would have collected from your tenant if your home had not been destroyed.
You should talk to your agent or company to make sure you know exactly how much coverage you have and how long the coverage will be in effect. In most cases, you can increase this coverage for an additional premium.

Liability to others

This part of your policy 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 pets. It pays for both the cost of defending you in court and for any damages a court rules you must pay.

Generally, most homeowners insurance policies provide a minimum of $100,000 worth of liability insurance, but higher amounts are available. Increasingly, it is recommended that homeowners consider purchasing at least $300,000 to $500,000 worth of coverage of liability protection.

Umbrella or Excess Liability

You should buy enough liability insurance to protect your assets. If you own property and or have investments and savings that are worth more than the liability limits in your policy, you may consider purchasing an excess liability or umbrella policy.

Umbrella or excess liability policies provide extra coverage. They start to pay after you have used up the liability insurance in your underlying home (or auto) policy. An umbrella policy is not part of your homeowners policy. You have to purchase it separately. In addition to providing a higher dollar amount, they offer broader coverage. You are covered for libel, slander, and invasion of privacy. These things are not covered under standard homeowners or auto policies.

The cost of an umbrella policy depends on how much underlying insurance you have and the kind of risk you represent. The greater the underlying liability coverage, the cheaper the policy. This is becaue you would be the less likely to need the additional insurance. Most companies will require a minimum of $300,000 on your home and your car, if you own one.

A word about your deductible

A deductible is the amount you would pay out of your own pocket before the insurance coverage takes over. The amount you choose for your insurance deductible depends on how much you're prepared to pay if you have a covered loss. For instance, if you choose a $1,500 deductible, then you'll pay the first $1,500 of a claim.

There are many exclusions in the policy and many of them have exceptions. It's important that you read your policy to learn what is covered and not covered. Talk to one of our home insurance agent to get a fully understanding of what is covered or not.

 Call: (888) 913-6988

Be confident in your insurance choices. Contact your agent or Travelers representative today. We'll work with you to develop a homeowners insurance policy that fits your needs and your budget.