What Really Is Homeowner’s Insurance?
Most people who buy insurance for their homes really don’t know or quite understand what they are covered for. This explanation breaks down the major components of dwelling coverage in a simplified manner so that you understand what coverages you have or will have when you purchase a home. Consequently, you will also know which coverages are right for you and your situation and what questions to ask your agent.
Homeowners insurance includes these coverage components:
1. Dwelling (Coverage A)
2. Other Outside Structures (Coverage B)
3. Personal Property (Coverage C)
4. Loss of Use (Coverage D)
5. Personal Liability (Coverage E)
6. Medical Payments (Coverage F)
1. Your Dwelling is normally the biggest coverage. It is simply insurance to repair or rebuild the structure. It is very important to understand the difference from FULL REPLACEMENT COVERAGE and ACTUAL CASH VALUE when it comes to insuring your home.
-FULL REPLACEMENT COVERAGE is enough protection to rebuild your home, of similar, like & kind from the slab and up to the roof with today’s material and labor costs. This is not the market value of the home or how much you can sell your home for.
-ACTUAL CASH VALUE is basically what the market value of the home is worth. This coverage does not take into consideration what it would cost to rebuild a new home of similar, like & kind characteristics. ACV is today’s market value.
2. Other Outside Structures is normally 10% of what your dwelling is insured for. A covered structure is any structure other than a dwelling. Other structures on the premises include those set apart from the dwelling by clear space. This coverage is for your fence, gate, tool shed, swimming pool, detached garage, etc. Structures connected to the dwelling by only a fence, utility wire or similar connection are considered unattached. You should be able to increase this amount if you need to. Excluded from this coverage are buildings used in whole or in part for business purposes and buildings rented to anyone other than a tenant, except if used only for private garage purposes.
3. Personal Property is MOST of your personal belongings the insured owns or uses which is located anywhere in the world.
Replacement Coverage vs. Actual Cash Value
- Clothing
- Living Room Furniture
- Bedroom Furniture
- Dining Room Furniture
- Electronics (Stereo, Computer, Television, etc.)
- Kitchenware
- Toiletries/Personal Care Items
-Be sure to ask your insurance agent about your jewelry, firearms, computer, silverware, fine arts, furs, antiques, sports cards, etc. The home insurance policy may or may not cover these items. If the policy does cover