What is Covered or Excluded from a Homeowners Policy
Home Insurance companies today offer six standard sections of coverage. Knowing these coverage amounts will allow you to maximize the benefits you receive from having home insurance.
Coverage A on an insurance policy is the Dwelling Coverage amount. The dwelling portion of your insurance covers the physical structure of your home; the walls, floors, ceilings, etc. This coverage protects your home from damage to the actual structure and anything that is permanently attached to the structure. The amount that is determined is based on the square feet; Year built, etc. The amount cannot arbitrarily be changed without giving a very good reason to do so. An example would be adding square feet or a significant renovation. To make this easy, contact your independent agent, and they can figure out for you what it would cost to replace your home, using proprietary program
Your homeowner's insurance coverage should start with a Replacement Cost (RC) policy that covers the entire expense of replacing your home if there is a loss. You also can opt for what’s sometimes called a “guaranteed” replacement policy that typically includes around twenty-five (25) percent of additional coverage over the estimated value to replace your home.
What Determines Replacement Costs of Coverage A?
Local construction costs
Your home’s square footage, including any additions you have added
The type of exterior wall construction (frame, masonry or veneer)
Number of bedrooms, bathrooms and other rooms
Roof material and type
Other structures on the property including garages and sheds
Unique features such as arched trim and fireplaces
If you are not sure where to start, consider using an online “Replacement Cost Estimator” and share your calculation with your independent agent.
You Could Estimate Yourself Your Home Insurance Coverage Limits
Every home — and therefore every home insurance policy — is unique. Moreover, while it does not take a rocket scientist to calculate homeowners insurance coverage limits that feel right for you, it does require a little math.
First, Calculate Your Home’s Replacement Cost
This is arguably the most critical factor to consider when determining the level of dwelling protection coverage on your home policy.
Replacement Cost is different from your house’s market value, which often takes your land and/or property into consideration in its valuation. Your home’s replacement cost, on the other hand, is merely the amount of money it would take to rebuild your home from the ground up should a covered disaster turn it to rubble (which means your land is not included in the calculation).
To calculate your home’s replacement cost (or replacement value), start by researching the average cost-per-square-foot that home builders in your area charge. When you multiply your home’s square footage by the average rate, you can get a pretty good idea of your house’s replacement value.
The national average rate charged by building contractors in 2017, for example, was $120-$150 square feet. So if your home is 1,500 square feet, its replacement cost would be $225,000. Moreover, that is not including other essential features of your home — like the cabinetry, flooring, appliances, HVAC system, and windows, to name a few — that should be added to your home’s replacement cost estimation.
Coverage B is for other structures on the property. It is common for homes to have other structures on the property that are not connected to the home like fences, mailboxes, sheds, and detached garages.
Coverage C is coverage for your Personal Property. This coverage insures all of your belongings. This is an essential coverage when the interior of the home sustains damage, like in a fire. On most policies, there is only so much coverage that they provide for valuable items such as paintings, jewelry, guns, etc. It is in your best interest to review your policy to see if more coverage is needed to insure you have the right amount of coverage. Should you need to insure antiques, guns, expensive jewelry, artwork, you would need to add a rider or scheduled item to your homeowner's policy.
Coverage D is for Loss Of Use. This coverage is only used if your home is damaged from a covered peril to the extent that you can no longer live in it. For example, if a pipe bursts and floods the house or you have a fire, and it causes you to live in a hotel for a couple of months while the house is being repaired; the loss of use coverage will reimburse you for the expenses such as food, lodging, gas, etc.
Coverage E is personal liability coverage. This coverage protects you from instances where you are liable for negligent actions.
Coverage F is medical payments. Medical payments coverage on a homeowners insurance policy is similar to medical payments on an auto insurance policy. This coverage is to pay medical bills for those who get injured while on your property.
Many homeowners are unaware that Flood and Earthquake are not covered under home insurance policies. You can purchase separate policies for them which are more affordable than you think. Knowing and understanding your policy can make sure that you and your family are adequately covered. If you should have any questions regarding the ABC's of homeowners insurance (or need a quote), please feel free to contact one of our agents at (425)337-2456 or 800-742-1896.
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