- Property Coverage - to pay for repairs to your home, garage or other buildings that are damaged.
- Personal Property - if you have a loss of valuables in your home like jewelry, electronics or guns due to theft or damage.
- Liability - this will cover if there is a claim when someone is injured or their property is damaged.
- Medical Expenses - this would be medical coverage for someone that is injured, other than a resident, on your property.
- Living Expenses - if you have a complete loss, you may need extra temporary housing or food when you're forced from your home.
How to read your homeowners insurance policy
Your home is likely your most valuable asset, and a homeowners insurance policy is an important part of protecting your home and your belongings. If you have a mortgage on your home, your lender probably required you to get a homeowners policy. Even without a mortgage, homeowners insurance is still your best bet to protect your investment.
But do you even know what’s in your policy? Would you know your coverage in the event of an emergency? Are you underinsured? About two-thirds of American homes are underinsured, estimates Nationwide, some by up to 60 percent. And, CoreLogic, an insurance research firm, says three out of five American homes are underinsured by an average of 20 percent. Don't wait until you file a claim to find out you either lack coverage, or are underinsured and responsible for paying a lot of money out-of-pocket.
Despite how important it is, many of us haven’t taken the time to properly review this contract, but here’s how you can finally tackle that chore.
Understand the basics of homeowners insurance
The basic job of a homeowners policy is to protect your home and possessions from certain perils, such as wind, hail, fire damage and theft. It also offers liability protection, which protects your assets from liability claims, medical expenses and other damages if people are injured on your property.
Most common types of homeowners policies
While the majority of insurers use fairly standard forms to compile their homeowner policies, there can be differences. “Each policy will spell out certain things that are covered and others that are excluded, but they can vary from company to company,” explains Carole Walker, Executive Director of the Rocky Mountain Insurance Information Association.
The forms can vary, but in most cases, the layout of a policy is fairly consistent.
The declaration page should be reviewed carefully. It summarizes your coverages, as well as your personal and home information.
Information included on the declaration page:
- Policy number
- Policy period – the period of time the policy covers
- Name and address of the policy owner
- Address of the insured premises
- Name of mortgagee – usually your mortgage company
- Coverage types and policy limits that apply to your policy
- Deductible amount for the policy
- Home-rating information
- Discounts received
- Premium amount
- agents name
- Claims office number
Give the declaration page a thorough reading. Review the personal information for errors, and check that it reflects the proper coverage levels, as well as any additional riders you may have added.
Overview of your property coverage
When it comes to homeowners coverage, you need enough insurance in the event that you need to cover the cost of the following after a disaster:
- Rebuilding the structure of your home
- Replacing your personal property
- Paying for the cost of additional living expenses (if you need to live somewhere else while your home is repaired or rebuilt)
- Covering the cost of personal liability claims
Section I coverage A – Dwelling
A homeowner policy is broken into two parts; section I details your property coverage, and section II describes the liability coverages offered by your policy.
When it comes to the structure of your home, you should carry enough insurance to cover the cost of rebuilding your home, not the market value of or sales price, or the tax accessment. A home on the beach could sale for over 2 million. The same home in a small town could sale for $ 150,000. But the cost to rebuild will be much closer.
An insurance agent can help you determine appropriate coverage levels in your any area in Utah. , but here’s a quick calculation: Just ask for a replacment worksheet. This is a free service. A mortgage compony may require this also.
Total square footage of your home X local per foot building costs = Approximate coverage amount
You can get your local costs by contacting a real estate agent or a building association. The cost of the land is not added into your calculations, but you do need to factor in current construction costs.
Also, add in the cost of any upgrades you have made (that would cost more than the average per square- foot costs) or any unique materials you have used and would want to replicate.
Section I coverage B - Personal property
In most cases, personal property coverage is a percentage of your policy limits. The majority of policies cover personal property at 50 to 70 percent of the amount of structure coverage you have.
Do a detailed home-inventory/ video to determine if this will be enough. High-value property, such as jewelry, art, guns and coin collections, are usually limited to $2,500. If your items exceed this amount, it’s wise to purchase a rider to up the limit on these types of items.
Section I coverage C – Loss of use
This component of a homeowners policy will pay for additional costs that you incur when it is necessary to live away from your home due to damage from a covered peril. The coverage will pay for up to 12 months of the necessary difference in living expenses required to maintain your family’s current standard of living.
For example, if you normally spend $1,000 of groceries and dining each month, but your displacement causes the grocery and dining bills to increase to $1,400, your insurance will pay the additional $400.
This coverage will vary by insurer, but most policies offer 10 percent of your home coverage with additional coverage available for a price.
Additional information in Section I
After reviewing these sections in detail, have a look at the additional information that is included.
- Additional coverage: This spells out any additional coverages that are included with a policy. Examples of these are temporary repairs, tree and shrubs and even debris removal. Carefully review this section to make sure it includes everything you might need.
- Losses insured: This section spells out exactly what perils are covered, as well as any other conditions that must apply for a loss to be covered.
- Losses not insured: Review this section in detail, and ask questions if you don’t understand something. Common exclusions include mold, fungus, flooding, earth movement, acts of war/terrorism and nuclear hazard.
- Animal collision- pays for cost of a dog in the event injury or death.
- Plumbing plus. Will pay for plumbing fixture not normally covered under a break.
- Some companies however do covers plumbing and animal injuy,
Understand your personal liability coverage
Section II - Liability
The liability portion of a homeowners policy protects you against lawsuits for property damage or bodily injury that you or members of your family cause to other people. Examples of this would be a guest slipping on an icy sidewalk, tripping down your stairs or being bitten by your dog.
The liability portion of your policy covers the following:
- Injured party’s medical bills
- Legal fees
- Any damages awarded to the injured party
Most homeowners policies offer a minimum of $100,000 worth of liability coverage, but this is often not enough to cover all expenses. Industry experts recommend carrying at least $300,000 to $500,000.
If you’re in a position when you think it would be beneficial to have additional personal liability insurance, you can look into an personal Umbrella insurance provides extra liability protection above the limits of your car and home insurance policies. It covers damage claims that you, your dependents or your pets cause to others, and it kicks in once claims exceed your home insurance and auto limits
Important definitions for homeowners
Because insurance policies are written in a legal language, all homeowner policies come with a section dedicated to defining certain words. Here are just a few definitions you should be aware of when reading your policy:
Replacement cost 10% 25 % or 50% limits. Always get the highest. Not understanding this term can be an expensive oversight. “This simply means that your policy pays for the full amount to replace your dwelling or property, up to a maximum dollar limit,” In other words, it doesn’t matter if your TV is 15 years old, you are getting reimbursed for the cost of a brand new one.
Actual cash value: This is the flipside of replacement cost. “This type of coverage takes depreciation into account when calculating your payout,” says Boizelle. This means you are getting a much smaller check for that 15-year-old TV. Actual cash value does result in lower premiums, but it could end up leaving you with a large gap between the amount of the check you receive and how it costs to refurnish your home.
Deductible: While most of us understand the concept of deductibles, homeowner policies can have specialty deductibles. “Many states have instituted separate deductibles for wind and hail, and many policyholders don’t understand them.”
In some states the wind or hail deductible can be a percentage of your coverage instead of a set amount. As an example, a 10 percent wind deductible on a home insured for $300,000 puts the deductible at $3,000.
Insured: This spells out who is covered by your policy. If you have a pet, verify that the pet falls under this definition. This can be important if Benji bites someone, as the victim could sue. Many insurers exclude certain breeds, so verify your pet is covered.
Advice from insurance experts
Here are a few tips from industry experts to help you navigate the world of homeowners insurance:
Review your quote with an expert. Homeowners insurance can be tricky, so it pays to consult an expert after you narrow down your choices from a batch of quotes. “Never shop on price alone,” “as you usually get what you pay for.”
If you live in earthquake country, get Earthquake. Salt Lake City, Bountiful, Provo, Ogden have the Wasatch fault line.
Coverage levels are key. Understanding your coverage levels is important. “There is nothing worse than receiving a bill for an insurance-related fix and having the insurance company not cover all of it due to a technicality in the policy.
Inventory your personal property and review your coverage limits to make sure the limits will easily cover your items replacement costs.
Add-ons can be worth it. There are a number of riders that can be added to a policy, and many of them are well worth the price. “Consider adding sewer and drain backup coverage to your homeowners policy. It is one of the most common homeowners claims, averaging $10,000-$20,000 in expenses, and it is almost always ,” Sewer and Drain coverage averages about $ 30.00 per year.
The same goes for high-value items. “Valuable jewelry needs to specifically listed and appraised on a policy to make sure items are sufficiently covered. If items are not scheduled, most policies will only pay between $1,000 and $2,500 per item, Get a jewelry floater.
Any time you make a change or improvement to your home, you should review the dwelling coverage on your policy. If you’ve finished your basement, updated your kitchen or bathroom, it’s time to call your agent.
Be honest with your insurer. Always be honest with your insurer. Misleading them about the breed of your dog can be an expensive mistake if it turns out to be an excluded breed. “This will ensure your agent has a full picture of what needs to be insured and exposures that need to be avoided. Remember, failure to disclose material facts is grounds for a claim to be denied or the policy cancelled entirely,” Misrepresentation is grounds for a claim to be denied.
Shop smart: The cost of homeowners insurance has been on the rise for a number of years, so shopping your coverage regularly has never been more important.
A few tips from Walker on obtaining the best premium rate possible:
- Choose a deductilbe $ 1000 or higher, which will lower your premium.
- Don’t file small claims. Save your insurance for big events.
- Ask about discounts. Fire and hail resistant building materials will result in a discount, as will security systems and monitored smoke detectors.
- DISCOUNTS , such as auto and home, should result in a significant discount. Central alarm.
- Maintain your credit score as it has a major impact on your premium (in nearly all states including Utah)
Compare the best home insurance companies for the best rates
If your review turned up exclusions you are unhappy with, minimum coverage levels or is simply not offering the protection you need, it’s time to shop around. Visit Utahinsurance.com.
Rates can vary dramatically between insurers, so get quotes from a variety of the UtahInsurance.com and be sure that you are comparing apples to apples in regards to coverage levels and deductibles. Dont forget we insurance secondary, mobile, manufactured homes and Cabins, and Log Cabins.