Home Owners Insurance Made Simple

What it Means to You

If you are a homeowner you probably have Homeowner's insurance, either because your bank requires it, or because you can't afford to rebuild it if it burns down. But there is more to a Homeowner's policy than that.

The Policy

If you've ever actually looked at your policy you will see that it is divided into Sections and Parts.


SECTION 1

PART A refers to your physical home

PART B refers to  "there structures" like a detached garage

PART C refers to your personal property like the contents, eg:furniture, clothing

PART D refers to "loss of use" like the cost of additional living expenses because your home is damaged,. It covers hotel/motel bills, meals and other living expenses incurred while your home is being repaired


SECTION 2

PART E refers to "personal liability" which has 2  components:


BODILY INJURY: that is is someone gets hurt, sick, injured or dies while on your property.


PROPERTY DAMAGES:  when "tangible property" is damaged or destroyed . eg: backing your car over an unseen bicycle

How Much Insurance Do You Need?

Enough to cover parts A,B,C,D, and E.

Parts B,C AND D are covered as a percentage of Part A


PART A-THE PHYSICAL HOME

You need sufficient coverage to rebuild your home at current construction costs which generally go up every year. To accommodate that you should make certain your policy is a" REPLACEMENT COST*" policy. It's also important to have an "INFLATION RIDER" built into your policy which will automatically increase your coverage each your to allow for increasing construction cost.


PART B-OTHER STRUCTURES are usually covered at 10% of PART A coverage.

PART C- PERSONAL PROPERTY** is usually covered at 50% of PART A coverage.

PART D-LOSS OF USE is usually covered at 30% of Part A coverage.


PART E-LIABILITY it is generally considered that at least $300,00-$500,000  should be sufficient, however many people buy an additional "UMBRELLA***" policy for $1, 000,000.







*Replacement cost vs Actual Cash Value

Replacement cost will replace your belongings at today's cost, so a couch that $400 when you bought it might cost $800 today.


ACV will calculate the depreciation of your couch which today may only be worth $100. You don't want that surprise

Insuring Expensive Items

like art, jewelry, musical instruments, computers, collectibles or firearms may have a specific limit  if they are damaged, destroyed or lost. 

These items need to be "SCHEDULED"  for their actual value and an additional premium will be required based on the total value. 

UMBRELLA OR EXCESS LIABILITY

These policies provide additional coverage.  They pay after you have used up the liability protection in your underlying home or auto policy.


 These policies are not included in basic home or auto policies but may be included at additional cost as part of a package of all three policies. they may also  expand coverage to include libel, slander, and invasion of privacy. 


The cost will depend on the underlying insurance and the kind of risk you represent. the better your underlying coverage, the lower your sot of this insurance will be.