These two policies would require completely different coverage as one will need coverage for loss of rents if the property is damaged and the landlord will lose investment income due to the property being vacant during the time of repair. Some properties only require Fire coverage to be covered as the property is being rehabbed and there are no occupants or belongings on premise. For detailed definitions visit our Homeowners Insurance glossary terms.
How am I covered?
NOTE: It is important to understand that by default your homeowner policy will not extend coverage for damage caused by a natural flood damage. This would mean that if there is a severe rain storm which causes your property to flood, no coverage would be allotted unless added as an endorsement or separate flood policy. Some states may have an exception to this rule.
If however, as severe storm caused a tree to fall on your roof and the hole in the roof caused your property to flood, this most likely would be covered under your policy. Each policy and company is different on how they define flood and pay coverage. I have detailed coverage below to illustrate the most common type of coverage which is the primary residence owner-occupied policy which is your standard homeowners policy.
I will start by defining actual cash value, replacement cost and extended replacement costs as these are very important homeowners insurance policy attributes. You will have to determine which of these your policy falls into. It is important to understand that you can usually change between the three by calling your agent and updating your policy. All changes must be completed prior to a claim on your policy as this change will affect the payout of your claim significantly. The most common coverage type is extended replacement Cost.
Actual Cash Value – Is the value of your home minus a deduction for age, wear and tear and other factors Replacement Cost – This coverage type pays for loss to your home on a replacement cost basis up to the coverage limit you choose. This would mean, if you have $250,000 dwelling coverage, this is the max that the insurance company will pay. No depreciated value. Coverage is given up to the policy limit on your policy’s declaration page.
Extended Replacement Cost – This coverage type pays for loss to your home on an extended replacement cost basis up to the coverage limit you choose plus 25% to 200% additional coverage for increases in construction costs or other factors. This would mean, if you have $250,000 dwelling coverage, The insurance company would allow an additional 25% to 200% in coverage to repair or replace your home. I have detailed the common homeowners insurance policy coverage below:
Dwelling Coverage – This is the limit that the insurance company would pay to replace your home in the event of a covered loss. It is usually calculated based your home’s information such as sq. footage, roof type, flooring type, and other factors to generate the value needed to replace your home should it be damaged due to a covered peril.
Separate Structures – This is the limit the insurance company would pay to repair or replace any separate structures in the event of a covered loss. Separate structures include a shed, separated garage, gazebo, etc.
Personal Property – This limit is the maximum the company would pay to replace any of your personal items such as TV, clothing, jewelry and cash in the event of a covered loss.
NOTE: It is important to understand that by default your home will not cover cash for more than $100 to $200. Collectible, Fine China, Jewelry and such items will also have a cap in coverage. Such items must be added on to your policy as a floater or endorsement which may require an appraisal to be insured at full value. This may also add additional costs to your policy.
NOTE: It is important to know whether your personal items are covered under actual cash value or replacement costs. Actual Cash Value will pay at the depreciated value and replacement cost will pay the amount necessary to replace the item with an exact or like kind.
Loss of Use - This is the limit the insurance company would reimburse you for additional living expenses to maintain your normal standard of living. This would be granted should your property be rendered uninhabitable due to a covered loss.
Personal Liability - This is the limit the insurance company when you are legally obligated to pay for bodily injury or property damages to others resulting from events such as Acts of your pets, Use of your premises (Such as swimming pools), Unintentional acts committed by your or a qualified household members (either on or off your premises). Your personal liability coverage also includes coverage for expenses such as attorney fees, court costs, investigator fees and witness charges when defending you in court. In most cases they will pay you for your time off of work when you are asked to appear in court. All policies handle this differently so it is important to consult with your agent to have a clear definition of how your policy covers personal liability.
NOTE: All policies handle this differently so it is important to consult with your agent to have a clear definition of how your policy covers personal liability.
Medical Coverage – This is the limit the insurance company would pay for any monies incurred by any non-household member for bodily injury on your premises. This is basically a medical aid to others should they have a bodily injury at your residence such as a slip and fall, etc.
Building Ordinance - This is the limit the insurance company would pay for the extra expense of rebuilding to comply with ordinances or laws, often building codes, that did not exist when the building was originally built.
Deducible - Your deductible amount is the amount of money you are responsible for as the insured before the insurance company begins payment.
What additional coverage can I add?
These are just a few additional options that may or may not be available with your policy. It is always important to consult with your agent to find out all of your options so that you may make the most educated decision on which fit your needs best.
- Increase Extended Replacement Coverage on dwelling amount
- Add Replacement Cost on Personal Property Coverage
- Add Identity Theft Coverage
- Add Jewelry, Collectibles, Fine China Endorsement
- Add Flood Coverage
- Add a Personal Umbrella
These are a few discounts that your policy may offer. It is always recommended that you consult with your agents to see which of these may apply to your policy.
- New Home Discounts – For New homes built within the last 5 yrs
- Gate Community Discount
- Security System Discount
- Multi-Policy Discount – When insuring your autos and your home with the same company
- Good Credit Discount
Your Homeowners Insurance Policy has a few different payment options.
These are a few recommendations we have regarding your homeowners insurance.
- Review your policy annually with your insurance agent.
- Complete a Contents Inventory Record in order to itemize your personal property, should you have a fire loss. Your agent should be able to provide a copy and will retain it for you.
- Discuss the need for a Personal Umbrella Policy with your agent.