Homeowners Insurance Coverage Types

Obtaining an instant home insurance quote is a lot easier once you understand the different coverage types. Here to help is an easy-to-comprehend list of what to look for in home insurance along with a basic explanation of each type of coverage:

• Damage to House: The "face amount" of the policy typically shows the maximum amount you will receive if your home was destroyed.
• Other Structures: This portion provides protection for sheds, fencing and other detached buildings on the property.
• Personal Property: Personal property typically covers the contents of your home and other buildings.
• Additional Living Expenses: In the event of a loss where your home was not suitable for living, this would provide coverage for the rent on a replacement home or hotel.
• Personal Liability: This provides liability coverage in the event someone was injured or had an accident while on your property.
• Medical Expenses: In the event of an accident or injury, medical expenses would be covered up to a specified limit.

Shopping for Supplemental Coverage

When shopping for homeowners insurance, it is a good idea to look into supplemental coverage at the same time. Remember, most home insurance quotes provide basic coverage to keep it affordable. Make sure you obtain all the protection needed by asking about these common supplemental home insurance types:

• Replacement Cost: One of the most common forms of additional coverage is replacement cost. This assures you receive the full value of the item without deductions for depreciation.
• Inflation Protection: Don't confuse replacement cost with inflation protection. Due to the ever rising cost of goods and services, it is a good idea to look into inflation protection when purchasing homeowners insurance.
• Personal Property Extensions: If you own expensive electronics, jewelry, antiques or other items, you may want to obtain a "scheduled personal property endorsement" for the full value of the item.
• Additional Liability: The rising risk of lawsuits, medical bills and other expenses may exhaust current liability limits. Consider increasing liability coverage to reflect the increased risk and avoid out-of-pocket expenses.
• Other Perils: Hurricanes, floods and earthquakes are just a few of the common environmental concerns that are often not covered by a traditional policy. If you live in an area prone to these problems, it is often advisable to obtain homeowners insurance for additional coverage.

Broad Versus Basic Homeowners Insurance Coverage

When shopping for a home owner insurance quote, it helps to understand the difference between board coverage and basic coverage, as well as special coverage forms. Learn how to distinguish the difference and decide which works best for your circumstance:

• Basic Coverage or HO-1: Basic homeowners insurance provides minimal protection to the house and personal property against fire, vandalism, mischief, lightning and extended coverage perils that can include any or all of the following:
  • Riots
  • Explosion
  • Smoke
  • Hail
  • Windstorms
  • Glass Breakage that is part of a covered dwelling or building
• Broad Coverage or HO-2: This typically provides protection to the dwelling and personal property including all of the above plus the following named perils:
  • Falling objects
  • Volcanic eruptions
  • Freezing-related damage to plumbing or appliances
  • Damage against artificially generated electrical currents
  • Weight of snow, sleet or ice that causes damage to the dwelling or other covered buildings
• Finally, there is Special Coverage, or HO-3, which covers everything previously mentioned and "risks of direct loss.” Essentially, almost everything is covered except those things specifically mentioned like flood, war or nuclear accidents.

Rental Home Insurance Tips

If you own or occupy a rental home, chances are you require completely different coverage than those with traditional homeowners insurance. Find out how to shop for the right home insurance with these rental home insurance tips:

• Tenant Rental Home Insurance: Always purchase rental home insurance if you are a tenant. The insurance coverage available to your landlord only provides compensation in the event of a loss to the dwelling or liability; should a loss take place that also results in your personal property being damaged or stolen, you will be left without any coverage. Rental home insurance provides protection against a loss due to storms, vandalism or theft for your personal property and possessions. It is typically very affordable and protects you, not the landlord.
• Landlord Rental Home Insurance: If you are a landlord, then you will need a different type of home insurance policy than what is purchased for your personal dwelling. Unlike traditional homeowners insurance, a rental policy covers the dwelling, other buildings on the property and liability. In the event of a loss, your tenant’s property is not covered, so it is a good idea to inform tenants of this situation and encourage them to purchase their own independent rental policy. Another popular rental home rider to consider is protection against loss of income in the event the rental home requires extensive repairs or renovations.

Are You at Risk and Not Even Know It?

Millions of Americans are underinsured without even knowing it. Sadly, it often takes a tragedy before they realize the sad facts. But by that time, it is often too late to take action. Find out if you are at risk of financial ruin by taking this quick insurance quiz. If you answer "yes" to any of the following questions, it is a good idea to obtain instant home insurance quotes in order to begin your protection today.

• Does your liability portion of the insurance policy provide sufficient protection to cover your assets? Remember, the cost of medical and legal bills has dramatically increased in recent years. Once the liability portion is exhausted, any remaining allocation could result in a claim against your personal assets.
• Do you own substantial property, investments or have a high-risk profession such as physician? If so, you may require additional liability coverage beyond that of a traditional homeowners policy. An umbrella policy is an excellent financial planning tool for many of these situations.
• Do you provide support to a high school or college student? If so, you may be legally responsible for claims arising from their activities.
• Do you own an aggressive pet? If so, you are responsible and could be sued in the event of an injury to another person.
• Do you own rental properties, vacant land or other forms of real estate? If so, you may need additional insurance coverage for the dwellings, liability and other protection in addition to that of your own home insurance.

Understanding Common Insurance Terms

Like many legal forms, home insurance terminology can be confusing. Here to help clarify some of the more common insurance terms is a brief primer with plain-language explanations.

• Declaration: A declaration is usually found on the first page and contains a brief summary of important information, including the name and address of the insured person, dollar amount of the policy, description of the property and cost. Always take time to verify the accuracy of all information on the declaration page. If you notice any type of error – no matter how minor – take time to note and correct it in writing and bring it to the attention of your agent as soon as possible.
• Definitions: The insurance company realizes the terminology can be difficult to understand, so they define what each major phrase or word means. If you still are not clear on how it relates to your specific situation, feel free to contact your agent; they will be happy to explain in more detail.
• Coverages: This section should specify the extent of the property, coverage and liability issued under the policy. If you do not see it here, do not assume it exists; instead, contact your agent and ask.
• Exclusions: Exclusions are those situations, items or circumstances that will not be covered; essentially, they are "excluded" from the coverage. For example, you may have full coverage on your home except in the case of a nuclear war, at which point the insurance company will not pay a claim. In some cases, there may be very few exclusions, while other policies have an extensive list of exclusions; check your policy to verify it provides the desired level of coverage.
• Conditions: Initially, conditions sound a little like exclusions, but they are quite different. Conditions stipulate the obligations of each party. The insurance company is only obligated to fulfill their portion of the contract if you do your part. For example, they do not have to pay a claim if you have not paid the premium.
• Endorsements: An endorsement is an amendment to an insurance policy that adds, moves or somehow changes the original coverage. Always review any endorsements to make sure they represent your desired changes.

How Much Insurance is Enough?

When obtaining a home insurance quote, one of the most frequent areas of concern is how much insurance is enough? While it might initially seem tempting to estimate a low figure, under-insuring a property can be a very costly mistake. Learn how to calculate the right coverage for your property with these simple steps:

• Understand the difference between replacement cost policies and actual cash value coverage. Actual cash value only pays a pro-rated amount based upon the current depreciated value of the item.
• Estimate the value of your house or property by using the average square foot cost for a similar-sized home of equal age in your area.
• Consider insuring the home for at least 80% of the replacement value.
• Consider periodically updating the replacement coverage to assure you remain at 80% or greater at all times. If you suffer a major loss, the policy will be pro-rated by the under-insured amount.

Personal Property & Homeowners Insurance

When obtaining a homeowners insurance quote, it is important to make sure you have enough insurance to cover your personal property in addition to the actual dwelling itself.

Most insurance underwriters provide standard limits for the structure, personal property and associated loss of use in the following percentages:

• Personal Property: Personal property coverage is typically valued at 50% of the dwelling property coverage. For example, if your dwelling policy were valued at $200,000, then personal property would be 50%, or $100,000.
• Loss of Use: Loss of use provides coverage in the event you are unable to live in the home during repairs or replacement. The standard policy provides 1% to 20% of the dwelling value.
• Other Structures: Other structures typically include sheds, barns or other out-buildings on the property with a valuation of 10% of the dwelling value.
• Keep in mind, the policy does not automatically pay the maximum value or limit in the event of personal property or other loss. If the value of the item was less than the limit, then the policy will only pay the actual amount of the loss. In addition, most home insurance policies only provide actual cash value on the content of your home; you must specifically request replacement coverage for personal possessions if that is the coverage you wish.

Home Insurance Shopping Do's and Do Not's

There are a few things to keep in mind in order to reduce the risk of a home insurance policy cancellation. Avoid potential problems by following these home insurance shopping do's and do not's:

• Do find out the date when coverage becomes effective. Once you fill out an application for home insurance, the company typically issues a "binder," a sort of temporary insurance. The binder is only good for a specific period of time, at which point the full policy goes into effect. Find out when the full policy goes into effect and when coverage begins to avoid a lapse in coverage.
• Do not misrepresent any information on the application. Even if the policy is put into effect, if there is a claim in the future and you were found to be dishonest, it could cause the company to deny the claim or even cancel your policy.
• Do report any changes when applying for home insurance. Common examples that are easy to overlook include recent claims, changes in marital status or new additions to the home including pets or children. Some changes may result in lower risk and therefore lower premiums, while others could place you into a higher risk category.
• Do not forget to pay the premium on time. It's a good idea to sign-up for automatic payments in order to assure prompt payment.

Top Things Your Home Insurance Doesn't Cover

Home insurance is an important part of your financial planning; it assures your family a safe and secure home even in the event of a major loss. Unfortunately, shopping for home insurance can also be complex and confusing, resulting in many people mistakenly believing they are covered when they aren't. Here is a list of things home insurance typically does not cover:

• Mini-Farms: If you own a small mini-farm, you probably do not have full coverage for the barns, tools, equipment and animals provided by a standard homeowner policy. Most mini-farms require a multi-line or multi-purpose policy to provide full coverage.
• Home Based Business/eBay Business: Do you run a small business from your home? If so, your homeowners insurance is unlikely to provide complete coverage. Whether it is a daycare, eBay business or other moneymaking venture, the equipment, inventory and even liability coverage typically requires a business policy.
• Flood Damage: Flood insurance is available via the federal government or purchased as a stand-alone policy in addition to your regular insurance. If you live in a flood zone, it may be mandatory.
• Recreational Vehicle/Motor Home: Although the name may imply it should be covered under your homeowners policy, a motor home or RV often requires special coverage under a motor policy.
• Possessions in a Moving Van: Even if you have full coverage on the contents of your home, the policy may not be in effect during transit. In most cases, it is necessary to purchase special insurance while your belongings are in storage or in transit.
• Campsite or Cabin: Properties that are not occupied full-time are not eligible for homeowners coverage, only a more basic "dwelling policy." If you require additional coverage for belongings, you can insure separately or via a rider.
• Expensive Items: Luxury items, antique, collections, jewelry and other valuables often have a "cap" or limit of $2,500 among most home insurance policies. You will need to obtain a rider or separate policy to insure these items separately.