As a Public Adjuster, one of my jobs is to educate the coverages of an insurance policy and help the insured recover the proper claim value after a covered loss. Regardless of your insurance carrier, homeowner (HO3) policies can be broken down into the following coverages:
Dwelling Coverage: this is the amount of insurance on the home itself – everything that is physically part of the structure. This will include the walls, roof, installed cabinets, flooring, etc. This value is usually set by the amount of square feet and grade of the home, but it’s important that if any improvements are made to the home over time that this coverage be re-evaluated for proper coverage. If you add a pool, undergo a kitchen or bathroom renovation, be sure that your dwelling coverage reflects the proper value of the home. (
Other Structures: this coverage is for any other structures on the property, not physically attached to the main dwelling structure like a shed, gazebo or detached garage. Be sure to ask questions and understand this coverage as may carriers only cover like kind and quality to primary dwelling (if detached garage if frame and not CBS like primary dwelling, there may be no coverage).
Personal Property Coverage: think of this as if you were able to lift the home and dump it upside down – the items that fall out are considered personal property; the items not permanently affixed to the structure itself (the standard is 50% of the dwelling). This is furniture, clothing, etc. NOTE: this coverage can either be Replacement Cost or Actual Cash Value. Replacement cost coverage (generally more expensive) is today’s market price to replace the item. Actual cash value is today’s cost minus depreciation. Another important thing to keep in mind when considering personal property coverage is that items such as guns (usually around $500 coverage), jewelry (usually covered at about $1,000), artwork, collectibles like stamps, furs, musical instruments, antiques, and silverware have a maximum coverage and must scheduled for their actual value on the policy. The coverage may be increased in an endorsement (change) to the policy, or a rider or separate policy is taken for specific items. These types of endorsements generally require professional appraisals within the last few years to be valid. If you don’t have the coverage on your homeowner’s policy, there are many companies that specialize in these type of insurance policies. Personal property inventory should be done and kept in a safe place (see attached inventory checklist).
Loss of Use: this coverage is for additional living expenses due to a covered peril. Additional expenses are just that: above your standard expenses. If the kitchen is not usable due to a covered peril, the insurance carrier will pay for meal expenses above the standard expenses. That is, if you were paying $100/week for food prior to the loss and $200/week after the loss the insurance carrier would pay the difference of $100/week because that is the additional expense. Or if for example the home is uninhabitable due to a covered peril, loss of use coverage will enable the homeowner to a comparable rental until up to this coverage limit (this is usually a reimbursable expense).
Liability: this coverage is to protect the homeowner from personal responsibility should they cause body or property damage to others. Often it can cover expenses such as defense costs.
Mold: most policies today are limiting mold coverage; be sure to ask specifically on your mold limit (many are $10,000 per occurrence which sounds reasonable but when it comes to mold that is exhausted quickly). You can either add or increase the mold limit on your policy through endorsement.
Wind: wind coverage is hurricane coverage. Some carriers will provide an x-wind policy covering for other perils but excluding wind damage. In Florida, a significant percentage of our premiums are for wind coverage but be wary excluding wind coverage.
Some optional coverages to consider:
Law and Ordinance: this is coverage on your dwelling that covers the home in the event that today’s construction costs are above the original building cost. Think of the plumbing, electric and roofing for example: what it would cost to put these on/update the home with today’s building codes. Most homes built prior to 2005 will require this coverage to be paid properly on an insurance claim.
Identity Theft: this optional coverage often covers legal representation or possibly loss of wages.
Off-premises items: personal items lost/stolen while traveling and a few carriers extend coverage to a storage unit, be sure to ask.
Water Backup: while some policies cover this, others provide it as “optional” where you have to pay additional for this coverage.
Equipment/Appliance Breakdown: this is not a standard coverage. If you’d like this policy, be sure to ask for a quote to add this to your policy.
Canine Liability: please educate your carrier on the breed and bite history of any animals on the property. Canine liability is an optional coverage on most policies (some for as low as $25/year) which could cover expensive defense fees.
Tenant Rent: if you rent out part of your primary occupancy home you need to make the insurance carrier aware and become educated on the coverages that apply to this. This optional coverage could cover you for loss of rent due to a covered peril.
Business expenses: educate the carrier if you have a home office. Some carriers will not insure home businesses and will deny claims based on lack of accurate representation of the property. If you have this coverage on your policy, and have a loss due to a covered peril, you may be entitled to reimbursement of office equipment.
Your homeowner’s policy should be in place to respond for when/if you need it; be sure to be honest and educate yourself on the coverages or ask for them to be explained to you. And should you have any upgrades/changes to the property be sure to notify the carrier.