Homeowners Insurance Explained
Do you find shopping for homeowner’s insurance confusing?
Do you wonder why the amount to rebuild your home is different with each company?
And what are all these optional coverages that the companies offer?
Do you really need them?
The first thing you need to know is that not all homeowner’s policies are created equal.
While on the quote sheet they may look the same, what is actually included in that 25 page policy you receive after the fact may be quite different.
99% of people don’t read those policies.
They never know what they have until it comes time to file a claim.
Then they are very disappointed.
We will guide you through the process.
Dwelling Coverage – Coverage A on the quote.
This is the amount you get to rebuild your home if it is destroyed.
This is not the market value of your home.
The market value may be higher or lower than the cost to rebuild.
The insurance company is not looking to buy you a new home, they are rebuilding your home.
Make sure you tell your agent about the materials used for flooring, counters, cabinets, etc.
Each company estimates what the cost is to rebuild the home based on the features of your home and the materials used to build it.
You need to insure your home for 100% of this estimated value.
Each company has software to do this estimate on their website and the amount can vary between companies.
The typical cost to rebuild in Arizona is $100 – $125 per square foot for a tract home, but this can vary.
Other Structures – Coverage B on the quote.
This is the amount you get to rebuild other structures on your property that are not attached to the home.
This would include sheds, pools, guest houses, barns, stalls, casitas, and detached garages.
Most companies automatically give 10% of what your dwelling amount is for this coverage.
If your Coverage A – Dwelling is $200,000 you would get $20,000 to rebuild any other detached structures on your property.
You can increase this amount if necessary so make sure you tell your agent about anything built on your property so you have enough coverage.
Personal Property – Coverage C on the quote.
This is how much money you get to replace all of your personal contents in the home.
The most important thing is to make sure you have Replacement Cost Coverage.
This means you will get to replace the item lost with a new item at full cost.
If you only have Actual Cash Value then you only get paid for the cost of what it would be to buy a used item.
Most companies give you between 50% – 75% of what the dwelling amount is for this coverage.
If your Coverage A – Dwelling is $200,000 then you would get between $100,000 to $150,000 for your personal contents.
Be careful, your personal contents add up faster than you think.
Make a video of everything in your home and store it off site.
That way if you have a fire or other disaster you can easily show the claims adjuster what you need to replace.
Loss of Use – Coverage D on the quote.
This is how much the insurance company will pay to house you if you need to leave your house for it to be repaired or rebuilt.
Most companies either provide for up to 12 months or 30% of what the dwelling amount is.
Personal Liability – Coverage E on the quote.
This amount is how much the insurance company will pay to someone who files a claim against you for an incident the say you are responsible for.
For example, someone trips and breaks a hip on your property.
You would be liable for medical costs, lost wages, and pain and suffering.
You want to make sure to have enough coverage so the person will settle and not take you to court.
Medical Payments to Others – Coverage F on the quote.
This is how much will be paid to someone who is hurt on your property to pay for medical expenses if you are not legally liable.
One more layer of protection from someone trying to file a frivolous lawsuit.
This is not coverage for household members.
There are many optional coverages that you can add to your home owners insurance policy.
Here are a few that I recommend.
1. Water/Sewer backup.
This is not covered on most basic homeowner’s policies.
This would cover if the sewer line backed up into your home.
Usually when it happens it can cost several thousands of dollars in damage to your flooring and walls.
I recommend adding at least the minimum $5,000 coverage to your policy.
Personal Injury – This covers you for libel/slander.
In the past this was more of a concern for public figures.
Today, with all the social media, everyone should add this.
Comments made on Facebook, Twitter, Linked In, etc. may be seen as defamation by the person or company you are commenting on and they can file a lawsuit.
Lawsuits have been on the rise for this issue recently.
Be especially careful with teenagers.
You are liable for family members in your home too.
Scheduled Personal Property
If you have any items that individually are worth $3,000 or more in the categories of jewelry, art, antiques, fur, guns, computers, and collectibles let your agent know.
Most policies have limits for what they will pay out for these categories in the event of a theft.
To schedule the piece, such as a wedding ring set, you would need an appraisal or receipt in the last 3 years.
You pay an additional premium but it insures you will get paid the full value for the item.
You also get the additional protection for “mysterious disappearance”.
So if you lose that piece of jewelry when you are out, you are covered.
If you have smaller pieces but the total of the category is more than what is covered you can also ask to increase the coverage for that category.
Make sure to talk about this with your agent.
Most companies offer coverage to help you in the event of ID theft.
It can either be providing the legal services or covering actual losses up to a certain amount.
Here are a few of the major differences between policies that you don’t normally see on the quote sheet.
1. Roof coverage
Some companies pay to completely replace your roof and cover the full cost to do so if necessary.
Some will only pay the cost based on the age of the roof.
For example: Your roof is supposed to last 40 years.
At 20 years you have a hail storm and need to replace the roof.
The new roof costs $40,000 (typical for a concrete tile roof).
You now have to pay $20,000 for your share of the roof since it was considered to be 50% of the way through the life of the roof.
2. Sub limits
All you see on your quote sheet is the total amount you get for personal property.
Every company has sub limits on many categories when it comes to theft.
The categories include jewelry, art, antiques, guns, computers, furs, and collectibles.
One company may offer $1500 total for jewelry if stolen while another company may offer $10,000 for that category.
This is not something you are aware of when shopping online.
Going online and buying a cheap policy seems great now.
When you file a claim and find out you owe thousands, you realize cheaper is not better.
I am here to make sure you get the right policy to protect you and make sure your insurance experience is a happy one.
Sondra Wendt – 623-297-1475
EZ Insurance Solutions