One of the things that can make insurance difficult to understand is all the different limits on any given policy. For instance, the typical homeowners policy has five basic coverage categories. Most people only pay attention to two of the five: the dwelling amount and the personal property amount.
I totally get it.
The reason most people only pay attention to these two is because these are the two coverage categories that are most commonly claimed in an insurance claim.
But the other three categories are just as key, so let me take a few minutes here to go over those coverage categories and list some reasons why you should consider adding them to your policy.
Separate Structures Coverage
The first one is known as separate structures coverage. Detached carports, work sheds and more fall under this coverage.
I’m not going to take the time to go into this one in a lot of detail other than to say you need to make sure this coverage keeps up with what you’ve added to your assets over the years.
This protects everything on your property not permanently attached to your home.
Look for a Cris Answers article on this soon!
Loss of Use Coverage
The next overlooked coverage on most homeowners policies is known as loss of use.
This coverage actually pays you in the event that your home is damaged to the point you can’t live in it due to damage, and it will even pay you while your home is under repair.
You can use this coverage to rent hotels, extended stays, even lease apartments and houses if need be.
Typically, this coverage works as a percentage of your dwelling like 10-30%.
So if your home is covered at $400,000, your loss of use coverage would run $40,000-$120,000.
One important coverage question to ask is how long you can claim loss of use.
The better homeowners policies will allow you to claim up to one or two years.
Where this really comes in handy is if your home is a total loss. In the event of a total loss, it could take six months or more to rebuild.
If you’re loss of use coverage runs out at six months, you might have to pay out-of-pocket for the final few weeks or months, if your builder has been slowed down by weather or labor/supply demands.
Personal Liability Coverage
The final coverage that’s routinely overlooked is the personal liability coverage.
This coverage protects you if someone is hurt on your property, and they try to sue you for damages.
Unfortunately in our current culture, everyone is sue happy.
There are a lot of lawyers who make their entire living off liability lawsuits not just in auto accidents, but in accidents in homes as well. In fact, just this morning, as I was driving into the office, I heard one talking about dog bite cases, and their expertise in lawsuits prosecuting dog bite cases.
I’ve also heard of big lawsuits involving construction workers suing not only their employers, but also the homeowners where the accident occurred.
The sad truth is it’s all a money grab, so you need to be protected from these types of lawsuits.
That’s where your personal liability coverage comes into play.
Once again the more price-driven insurance agents/companies will lower this coverage to the lowest possible limits, which is typically $100,000.
Most of the time, this amount is automatically included at no additional charge to your homeowners policy.
Here’s what most people don’t realize: to up your liability coverage to $1 million you’re only talking about a few dollars per month extra.
On ALL my initial quotes I quote $1 million first just so people can see how affordable it is.
In our agency, it typically runs less than $4.00 a month for $1 million in liability coverage.
Protect Yourself Against the Large Losses
Remember this: you buy your insurance to protect you from the large losses, not the small ones.
Having to pay an extra $70 even $150 a year in homeowners premium is never fun, but it’s not going to bankrupt you.
On the other hand, carrying limits that are too low in any of these areas could be a situation that causes you a long-term financial hardship.
I’m not saying you have to have all these coverage options maxed out, but at least have the conversation when you’re talking, so you know what you have.