Homeowners and Property Insurance

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Homeowners and Property Insurance

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Get the coverage you need at the price you can afford.

For most people, their home is the most expensive thing they own, and it contains all of their prized possessions. If your home is damaged or destroyed and you don’t have enough insurance, you are not only left out of the comfort of your shelter, you have also lost the money you’ve paid into your home (equity) and all of your personal things. Many types of damage happen every day, such as fires, wind damage, and theft.

Like most people, you probably borrowed money to buy your house from a bank.  The bank insists that you insure your home, but deciding what kind of coverage and how much to buy can be confusing.  The best way to get familiar with your homeowner’s policy is to talk to your insurance agent. With a better understanding of insurance, you will be more informed when you meet with an agent at The Southcott Agency, Inc.

Your agent knows what insurance coverage fits your needs. I have specialized in the insurance needs of homeowners and their families for many years, and I want to help explain the basics of homeowners insurance to give you a better understanding so you will feel more prepared, protected and informed. In the following section, you will learn some rules for saving money and getting the best coverage.

The typical homeowner’s insurance policy covers your house, garage and all other structures (buildings) on the property as well as personal possessions inside the house such as furniture, appliances, and clothing against damage, destruction, and theft. The extent of the situations covered depends on the type of policy.

There are six major types of coverage provided by a homeowner’s insurance policy:

  1. Dwelling: the structure of your home itself
  2. Appurtenant or Other Structures: detached garage or storage unit
  3. Personal Property and Contents: furniture, clothing, electronics, etc.
  4. Family Liability: coverage if someone in your family (living with you) is responsible for injuring another person or damaging their property
  5. Guest Medical: covers medical costs to a guest who is injured on your property, regardless of fault
  6. Additional Living Expenses (or Loss of Use): pays for you to live somewhere else while repairs are made on your home

Dwelling coverage pays to rebuild or repair your home.Make sure you have enough insurance to cover the cost of rebuilding your house at current construction cost. To find out the amount of coverage needed, take the total square footage of the house and multiply by current local rebuilding costs per square foot.

For example: A 2000 square foot home with local rebuilding costs of $150 per square foot (2000 x 150) comes to $300,000 of dwelling coverage.

Other Structures covers any buildings that are detached from your home itself. This could include a garage that is separate from your house (attached garages are included in your dwelling coverage), a storage building, or any other structure. These are usually covered at about 10% of the cost to rebuild your home.

Personal Property and Contents covers household contents (furniture, clothes, appliances, etc.) usually 50% to 80% of the amount of your house is insured for. This means if you insure your house for $100,000, its contents are insured for up to $50,000 to $80,000 depending on the insurance company limits. This automatic coverage pays only the actual cash value of damaged, stolen, or destroyed household goods. You can get more coverage by paying a higher premium.

Family Liability provides coverage for you or someone in your family who lives with you if they are at fault for injuring a person or damaging their property. If you are sued as being at fault, this coverage also pays your legal fees.

The Guest Medical portion of the policy covers the medical costs for accidental injuries caused to visitors while on the property, such as a guest slipping and falling down improperly maintained stairs. If a visitor trips and falls, injuring themselves badly, they could sue you. These are serious problems that could do damage, if not destroy, your financial security.

Homeowners insurance also covers Additional Living Expenses. Sometimes known as Loss of Use, this reimburses the policyholder for the additional cost of living somewhere else while their home is being restored after a disaster.

Before buying home insurance, you should understand the difference between “actual cost value” and “replacement cost”. Actual cash value is an items replacement cost, minus depreciation (how much the value of the item goes down over time).

Replacement Cost Contents coverage gives you much more protection than actual cash value coverage. For example, what happens if a burglar steals your six-year-old TV? With actual cash value coverage, you get only what you would expect to pay for a six-year-old television set. With replacement cost coverage, the insurance company replaces your old TV with a new TV similar to the stolen one.

Extended Replacement Cost on Dwelling coverage pays a certain amount above the policy limit to replace a damaged home, generally 120% to 125%. It is similar to a guaranteed replacement cost policy, which has no percentage limits. Most homeowner policy limits track inflation in building costs. Guaranteed and extended replacement cost policies are designed to protect the policyholder after a major disaster when the high demand for building contractors and materials can push up the normal cost of reconstruction.

One Final Tip To Remember When Purchasing Homeowner’s Insurance:

Coverage for flood and earthquake damage is excluded in your homeowner’s policy and must be purchased separately.If you live in an area that is prone to flooding, you may be required to buy a flood insurance policy, which costs start at about $300 per year.

If you are not required to buy the coverage and still live in a flood-prone area, your homeowner’s policy will not provide coverage for losses arising from flooding. Ask The Southcott Agency, Inc about flood insurance for more information.

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