How Much Coverage Do You Need?
Enough to cover:
Your Property and Belongings: The better your coverage, the less you will have to pay out of your own pocket if disaster strikes.
Self Protection: You need enough liability coverage to protect yourself from lawsuits resulting from your negligence or events that could occur on your property.
Lender Requirements: Your housing lender will require you to cover the house for at least the amount of the mortgage or the replacement cost of the dwelling.
Policy Requirements: Insurers may impose some coverage requirements for replacement cost protection. Preferred plans usually require policy limits at 100% of replacement cost. Standard plans usually require policy limits of at least 80% of replacement cost.
Types of Coverage in a Homeowners Insurance Policy
The following chart gives examples of the types of coverage that are usually listed in your insurance policy. These are only examples.
PLEASE READ YOUR POLICY TO KNOW YOUR COVERAGES.
Are There Any Additional Coverages I Should Purchase?
Extra Contents Coverage
Remember that most of the coverages are a flat percentage of the amount of insurance on the home itself. For example: contents coverage is 50% of the insurance on the home itself. If you insure your home for $100,000, the contents coverage will be $50,000. For a minimal extra charge, you can increase the coverage on your contents without increasing the amount of insurance on the home itself.
Most companies offer "Guaranteed Replacement Cost Coverage" for an additional premium. Ask your agent if this is available and to explain the advantages of having this broader coverage. The most important coverage that is usually offered is full replacement cost coverage on your roof with no deduction for depreciation.
Personal Property Extensions of coverage
Another good example concerns special limits on certain types of personal property. For instance, most policies limit their coverage for the theft of furs or jewelry to $500.The limit for firearms or computers is probably $1000. Numerous other items are also typically limited to $500 or $1000 since the homeowners program is designed to fit the coverage needs of the average insured. It is the consumer's responsibility to review the limitations placed on certain types of property. If needed, increase the coverage of one area or another by adding a "Scheduled Personal Property Endorsement" to the basic policy.
You can also purchase additional liability coverage and medical payments coverage for a nominal premium.
The most important exclusion is flood, as many people have learned to their great misfortune. If you need flood coverage, any property/casualty insurance agent can help you get it. If you live in a flood-prone community, don't risk going without flood insurance. See your broker about flood coverage.
No standard insurance policy, including the homeowners policy, covers catastrophic damage that can be caused by an earthquake. For an additional premium, companies offer an earthquake endorsement with your homeowners policy that will protect you in case your home suffers earthquake damage. In some areas, this coverage is typically inexpensive and should be considered. For instance, the New Madrid fault runs through the Midwest United States, an area not perceived as having earthquakes occurring frequently.
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