Which area is not protected by most homeowners insurance?

So, what is and isn’t covered in most homeowners insurance policies?

Most homeowners insurance policies cover damage from fires, windstorm, hail, water damage (excluding flooding), riots & explosion. Other potential causes of loss included, theft and the extra cost of living elsewhere, due to the structure being repaired or rebuilt. Please keep in mind, not all natural disasters are covered. If we take a look at floods or earthquakes, very often these natural disasters are not covered in your typical homeowners insurance policy. If you’re looking to protect your home from risks like these please look into earthquake and flood insurance specifically.

Your homeowners insurance policy also covers your legal liability. If you, members of your family or even your pet hurt other people or their property, not just in your home, but away from it. You may want to look into umbrella policies as well.

Levels of Homeowners Insurance Coverage

There are 3 coverage options:

1. Actual Cash Value
This policy will pay to replace the house or possessions after a deduction for depreciation.

2. Replacement Cost
This policy will pay the cost of rebuilding and / or repairing the house or replacing possessions without a deduction for depreciation.

3. Guaranteed / Extended Replacement Cost
This policy will offer the highest level of protection. A guaranteed replacement cost policy will pay whatever it costs to rebuild the house as it was before the fire or other natural disaster. This is even if it exceeds the policy limits. It will give protection against sudden increases in construction cost due to a shortage of material after a widespread disaster. Normally it won’t cover the cost to upgrade the home to comply with current building codes. Although, with an endorsement or an addition to the policy called an Ordinance or Law can help to pay for these additional costs. Please talk with an agent for more information regarding this.

What are you insuring with homeowners insurance?

The two very distinct items are covered with homeowners insurance. The structure of the the home & your personal belongings. Below we go over both in more detail;

Structure of The Home

Here are 3 ways to insure the structure of your home:

1. Replacement Cost. Insurance that pays the insured the cost of repairing or replacing the damaged property without deduction for depreciation. But, of course limited to a maximum amount.
2. Extended Replacement Cost. Extended replacement cost policy, refers to the one that covers costs up to a certain percentage over the limit (usually around 20%). This will give you protection against things like a sudden increase in construction prices.
3. Actual Cash Value. Covers the cost to repair / replace your home minus depreciation cost for age & use. IE; if the life expectancy of the roof is 18 years and the roof is 12 years old, the cost to replace it in today’s market is going to be a lot higher than its actual cash value.

Personal Belongings

The 2 ways to insure your personal belongings:

1. Replacement Cost Coverage. Insurance that pays the dollar amount needed to replace damaged personal property with items of like kind or quality without deduction for depreciation.
2. Actual Cash Value. Insurance under which the policyholder receives an amount equal to the replacement value of damaged property minus depreciation. Unless a homeowners policy specifies that property is covered for its replacement value, the coverage is for actual cash value.

Liability protection

Liability provides coverage against lawsuits for bodily injury or property damage that policyholders or family members cause to other people. In addition, it pays for damage caused by pets. The liability portion of the policy will pay for both the cost of defending the policyholder in a court of law and any court awards.This is up to the limit of the policy. Liability limits usually start at around $100,000. An umbrella insurance policy or an excess liability insurance policy, which will provide broader coverage, including claims for libel and slander, as well as higher liability limits, can be added to the insurance policy.

Additional living expenses

This will pay for the additional cost of living away from home if a house is inhabitable due to damage from a natural disaster or other insured disaster. It will cover hotel bills, meals & expenses that come about while the house is being rebuilt. This coverage for additional living expenses will differ from company to company. You’re going to want to speak to agent for more information.

Which area is not protected by most homeowners insurance?