Overview of Standard Homeowners Insurance Policy Elements

 

Knowing and understanding your home insurance policy coverages, endorsements and exclusions is VERY important step that must be done before a catastrophe strikes.

 

A Home Owners Insurance Policy is designed to protect home owners against certain perils or situations. Depending on the coverage you select, there may be a deductible, or amount which you will cover before your insurance coverage kicks in.  Each Homeowner’s insurance policy is designed by detailing the perils (situations) which are covered, special endorsements (extra coverage) and the exclusions which your Insurance provider will not cover.  This coverage and protection provided by your Homeowners Policy can be based on actual cash value or replacement cost.

 

The typical Homeowners Insurance policy is divided into 2 sections:

• Section 1: Property Insurance – Protection of your Home
• Section 2: Liability Protection  - Protection in situations where you are liable to others

 

Insurance Declarations Page

The Insurance Deb clarations page is usually the first page of your homeowners policy.  The Declarations page details the coverage provided by your policy and provides a high-level  breakdown of your coverage. 

Section 1: Property Protection is usually broken down into four sub-sections:

• A. Dwelling
• B. Other Structures
• C. Personal Property
• D. Loss of Use

 

Coverage A. Dwelling usually covers your house, any attached structures, built in fixtures or appliances, plumbing, electrical systems, heating and air conditioning systems and the electrical wiring.

 

Coverage B. Other Structures generally covers detached structures such as detached garages, storage sheds, and other buildings, structures or fixtures attached to the land such as fences, driveways, sidewalks, patios, and seawalls. If a detached structures used for business purposes are not covered under a personal home owners insurance policy.

 

Coverage C. Personal Property is used to cover personal property. Personal property coverage includes the contents of your home and other personal items owned by you or family members who live with you.

Many Home Insurance policies do not provide coverage for boats and motorized vehicles unless they do not require a license and are only used on the property.  Additional coverage can be added to the base policy to cover expensive items such as jewelry, firearms, business property and more.  You should check with your Insurance agent regarding the

Home insurance policies provide very limited coverage for small boats; however, most home insurance policies do not cover motorized vehicles unless they are unlicensed and used only at your home. Some items may have seemingly low coverage limits such as firearms, artwork, business property and jewelry.  Nonetheless, additional coverage is usually available by adding endorsements to your policy.

 

Coverage D. Loss of Use generally, there is a loss of use whenever there is an interruption to the normal use of the property.  Loss of Use covers living expenses over and above your normal living expenses if you cannot live in your home while repairs are being made or (depending on your policy) if you are denied access by government order.

Most Insurance Companies include a section in their policies for Additional Property Coverages.  This section defines additional costs covered by your Insurance policy if a covered peril occurs.  Additional Property Coverages may include coverage for items such as debris removal, removal of damaged trees and shrubs, fire-department service charges, property removal, Identity Theft or illegal use of credit, collapse of buildings, and glass breakage.

 

Endorsements

An endorsement is a written document attached to an insurance policy that modifies the policy by changing the coverage afforded under the policy.  Endorsements generally cost additional money but add additional protection to your homeowner insurance policy.  Some examples of the most common endorsements include:

• Guaranteed replacement cost coverage will pay the cost to rebuild your home as long as you have met the requirements of your home insurance policy.
• Extended replacement cost coverage insures your home for a specific value and usually adds a 20-25% extended limit if reconstruction costs run over.
• Inflation Guard increases the amount of your home owner insurance to keep up with inflation so that you can maintain adequate coverage to replace your home in the event of a loss.
• Scheduled personal property provides extra coverage for listed articles. The standard policy has dollar limits on certain items, such as jewelry, furs, art, or guns. This endorsement allows a policyholder to purchase additional coverage for specific items of property, with each item or group of items, and allows for the amount of coverage listed.
• Secondary residence provides protection for a second home used for seasonal residence.

 

Also listed on the Declarations page is a section listed as Liability Coverages. The Liability Coverages section is broken down into sub-sections:

• E. Home Insurance Personal Liability
• F. Home Insurance Medical Payments

 

The Personal Liability section provides personal liability coverage for the insured and their family members living in the home.  It provides coverage against claims or lawsuits resulting from others injuring themselves on your property and damage to other’s property caused by an accident on your property.  Included are sports activities, pet activities, and accidental events such as, someone slipping on your driveway.

 

The Medical Payments section provides coverage for reimbursement of reasonable medical expenses incurred by the insured, resident family members and third parties for injuries sustained as a result of the activities of the insured and others covered by the Homeowners policy. This is called "Good Samaritan Coverage" because by providing emergency medical expenses of an injured third party, the insured does not admit liability, nor does the injured third party relinquish his or her right to bring suit against the insured by accepting the medical aid.

 

As with every homeowners insurance policy there are exclusions. Most Homeowner’s Insurance Policies do not cover losses due to neglect, vermin (rats, mice, cockroaches, termites, etc), floods, mudslides, water damage from sewer backups, damage resulting from war or nuclear hazard, earthquakes, power failures, seepage, or dry rot.

All home owners insurance polices have different covered perils and exclusions so you MUST check your policy to insure it contains all the Coverages needed for your specific situation.