Most of us purchase homeowner’s or renter’s insurance directly from an insurance company or through an agent/broker and don’t really think twice about it as long as it meets the minimum requirements of the lender or the landlord; but there are several coverages or endorsements that are important.
Personal Property Replacement Cost Coverage
It is common for a policy be endorsed with this coverage enhancement but if not, the standard policy only pays out Actual Cash Value for your personal property or the stuff that you own. Actual Cash Value payout takes into consideration the depreciated value of the item. If you’ve ever tried to sell a used sofa or kitchen appliance you know that you generally cannot get much for it. The replacement cost endorsement ensures that the policy pays out replacement cost which is the value to replace that used refrigerator or television with a brand-new one rather than its current value.
Coverage A or Dwelling Coverage
Generally, a replacement cost calculation is completed to determine the limit of coverage needed but unless it is a high-value home and a full inspection is ordered by the insurance company, it is still just an estimate. This is where the Extended Replacement Cost endorsement comes into play. Generally available in 25% or 50% limits, this endorsement states the carrier will pay over and above the listed Dwelling coverage to rebuild your home, if necessary. This is important not only because the limit listed is just an estimate, but if there is large scale damage from a wildfire or other natural disasters, the cost of construction increases due the demand. In addition, any time there is a construction project of this size, like building a home, there is a good chance of unforeseen costs. We always include this at 150% on our policies to offer the maximum protection available.
Water damage claims are one of the most common types of claims homeowners face and most types of water damage claims are covered under the standard policy, such as water damage from a broken pipe or appliance. Water backing up from a sewer or drain however is not covered under the standard policy and if some coverage is not added back in via a Water Backup endorsement, your claim would be denied. Flood coverage, on the other hand, is always excluded and in most cases, will only be required by the lender if you live in a designated flood zone. In which case, a separate policy would be required.
Personal Liability Coverage
Personal liability covers you and your family from lawsuits like slip and falls, dog bites, swimming pool accidents, etc. and we always recommend taking more than the minimum $100,000. Increasing the coverage to $300,000 or $500,0000 generally only increases the policy a few dollars a year. We also recommend adding Personal Injury liability. This extends the liability to not only cover actual bodily injury and property damage claims but also mental injury, specifically because of false arrest, wrongful eviction and slander and defamation. In the world we live, with everything being permanently documented online through social media. A nasty tweet or Facebook post from your teenager could result in costly personal injury lawsuit, with this endorsement included you are protecting yourself from the defense costs as well as any potential payout.
These are just a few of the ways your homeowner’s policy can be enhanced for a relatively small increase in cost. If you are doing your own shopping it is important you are comparing apples to apples because the list of endorsements shown on the quote, or not, could drastically change the coverage you have depending on the situation. As always, contacting your local insurance professional to ensure you are getting the coverage you need and the most from your homeowner’s policy is the safest bet.
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