Home Insurance- Are you covered?

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Home insurance is something people don’t like to think about until it comes time to file a claim. Oftentimes, it is too late at that point to determine if you have enough coverage. Here are some helpful tips to help you quickly determine if you have enough homeowners insurance coverage. So, pull out a copy of your policy, or, get your agent on the line and see if you are covered.

Coverage 101

There are 2 important things to understand about your homeowners insurance coverage before you start crunching numbers.

#1- A standard homeowners insurance policy is broken down into six different types of coverage intended to protect different parts of your home and family. Each of the six (outlined below) have different coverage limits and should be evaluated separately.

#2- Despite the amount of coverage you have, your policy will only protect you against the perils listed in your policy. These typically include damages caused by fire, wind, hail, lightening and volcanic eruption (to name a few). These typically exclude flood and earthquake damage. (Contact your agent if you need to purchase flood or earthquake coverage).

Now that we’ve covered those two important points, we can take a look at your coverages. A standard homeowners insurance policy has the following coverages included:

Coverage and What it Protects	Do you have enough?
Dwelling Coverage: Protects the structure of your home in the event of a covered claim. It includes repair or replacement of structural elements such as your roof, walls or flooring.	Your Dwelling Coverage limits should be enough to replace your entire home to its current state in the event of a total loss. To determine this amount, home insurance agents will typically multiply your home square footage by local building costs in your area. Use a home insurance calculator to help you determine your Dwelling Coverage.
Other Structures Coverage: Provides protection for the structures on your property other than your home including detached garages and/or sheds in the event of covered peril.	The amount of Other Structures Coverage you have is typically calculated as 10% of your Dwelling Coverage. So, if you had $200,000 in Dwelling Coverage, your Other Structures coverage would be around $20,000. Contact your insurance agent if you feel this amount if inadequate.
Contents Coverage provides protection for the contents of your home and your personal possessions within your home in the event of a covered claim.	A standard policy will offer around 50-70% of your Dwelling Coverage as your Contents Coverage. So, in the example above, if you have $200,000 worth of Dwelling Coverage on your home, you will usually have about $100,000-$140,000 worth of coverage for your personal possessions and home contents in the event of a covered claim. Take a quick Home Inventory to see if this coverage is sufficient for your home.
Loss of Use Coverage provides you and your family with alternate housing and living expenses in the event that your home becomes uninhabitable in a covered peril.	Usually the amount of Loss of Use Coverage that you have is equal to 20% of whatever your Dwelling Coverage may be. So, if you have $200,000 worth of Dwelling Coverage for your home, your Loss of Use coverage would be about $40,000.
Personal Liability Coverage protects you and your family against lawsuits	Most home insurance companies offer a minimum of $100,000 worth of Personal Liability Coverage; however, many homeowners choose to purchase between $300,000 and $1,000,000 worth of liability protection.
Medical Payments (also called MedPay) coverage provides reimbursement for medical expenses that you are responsible for when someone is injured on your property and there is no lawsuit involved.	Medical Payments Coverage typically pays out on a per incident basis. Most policies include $500-$5,000 worth of MedPay coverage. For example, let’s say the mailman fell on your front porch and sprained his ankle because of a faulty step. You have $2,000 worth of MedPay coverage. You could use your MedPay coverage to pay for his medical bills up to $2,000. A home insurance deductible does not apply to MedPay claims.

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3 Comments posted on "Home Insurance- Are you covered?"

rlewis01 on September 14th, 2009 at 9:56 am #

This is a very thorough post. It’s important for homeowners to have at least a basic idea about their coverage and realize what they’re covered for. I’m glad that this article mentions flood insurance is NOT covered under a standard home insurance policy. Good post!

insurance truth on September 21st, 2009 at 5:46 pm #

Good overview of the different types of coverage available under a homeowners policy.

The policies are also organized into groupings like HO-1, HO-2, HO-3, and so on, that provide different levels of coverage for different events.

Camilla on October 29th, 2009 at 2:59 am #

Very informative post you have here. I got home insurance several years ago and didn’t really bother with every single detail. I relied on my agent’s words. I didn’t even know about the 6 different types of insurance coverage. Now it makes me want to get the documents and do a comprehensive review. It’s really different when you start having kids and your family slowly grows. Suddenly all these things become more important than they were before.

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