So, you're ready to call an agent and talk insurance! But, if you've never bought a policy before, you might be a bit intimidated a little bit. This blog is gonna give you a bit of clarity to impress your agent with. They get a kick out of clients who have done their homework a little!
Info to have ready for a quick quote:
Obviously, the address
Year the home was built- Older homes were built with more expensive wood, so we need to factor that in when we calculate how much to insure it for. Many insurers will rebuild the house with the same materials it was originally constructed with, but some will opt to use today's materials.
Square feet- We need to know how big your house is because we use that info to calculate the cost to replace it if it were completely destroyed.
Type of foundation- Raised foundation increases the replacement cost of your home since it costs more to build a home on foundation. This is why you see a lot of the newer homes built on slab.
Type of Roof- Some roofs cost more than others to replace and some carriers don’t accept certain types of roofs.
Information about any previous claims- Of course, just like your driving history, they want to know about your history with homeowners insurance.
Your Occupation- Many occupations can get you a discount. We like to make sure we don't miss any you are entitled to.
The Official Terms & Descriptions For The Coverage You Will Choose
Coverage A: Dwelling
Dwelling coverage is what they call the portion of your home insurance policy that covers the cost of rebuilding or repairing the home structure in the event that it is damaged or lost in a covered peril such as wind, hail, lightning or fire. Separate policies are needed for damages and losses caused by earthquake and flood insurance as these are not covered under standard home insurance policies.
The amount of dwelling coverage that you should purchase should be enough to cover the cost of rebuilding your home in the event of a complete loss. Do not confuse this amount with the market value of your home, as the market value includes the value of your land. Remember that in the event of a disaster, your land will not be lost, only the buildings that stand on it.
In Merced County, the average cost to rebuild your average house is $150 per square foot. If you have granite, hardwood floors, and other upgrades it could run as high as $200 per square foot to rebuild it exactly as it was.
The cost to rebuild varies from county to county, zip code to zip code even. This is largely due to inflation, and cost of labor and materials In San Francisco, you would have to pay much more for your building supplies as well as the labor associated with construction. We have all sorts of nerdy math formulas we use when we recommend coverage for your home.
Coverage B: Other Structures
Other Structures applies to the other structures that are on your property but not attached to the primary dwelling (your home). Other Structures may be any of the following: Detached Garage, Barn, Fences, Guest House, Pool House, Shed, workshop, etc.By default, the Other Structures Limit is 10% of the Coverage A Dwelling amount. For example, if the Coverage A amount is $400,000. The Coverage B would be $40,000. Coverage B can be increased by the insurance Agent per request or determination that an additional amount is needed. Coverage B is never lower than 10% of Coverage A and cant be removed even if you argue that you have no other structures. It’s built into the policy and must be there in order to be in compliance with the Department of Insurance.
Coverage C: Personal Property
Personal Property coverage is the limit that the insurance company will pay out in the event of a covered loss that destroys your personal property. This property is anything that isn't attached to the home (because the home is covered under Coverage A) and is also not covered under an Auto type insurance policy. Personal Property can also be located off premises but might have some limitations. Examples of such property could be secondary residence or luggage while you are on vacation as well as personal property in a vehicle (i.e. your auto policy won’t cover your leather jacket if it’s stolen from your car, you would need personal property coverage from a Homeowner’s or Renter’s policy) coverage. In the name of competition, some insurers will offer various adjustable amounts on personal property.Personal Property limits are by default between 50-75% of the amount that is noted on Coverage A. For the vast majority of insureds, this amount is more than adequate.
Coverage D: Loss of Use
Loss of Use pays out in the event that you are unable to live in your primary home due to a covered loss.
One example would be if your home caught fire and you had to either rent a home or live in a hotel while it was under repair. Loss of Use could also pay for storage of personal items. As long as the loss was due to a Covered Peril, this portion of your policy will kick in and help you out. You would still be responsible for paying your mortgage payment while your home is being rebuilt, so the Loss of Use coverage would certainly prove its worth for those extra expenses.
Policy limits vary by company on this coverage. Some policies cover the "Actual Loss Sustained" over a given period of time, others will name a specific amount or percentage based on Coverage A limits.
Coverage E: Personal Liability
Personal Liability covers Bodily Injury or Property Damage which you are legally responsible for.
Examples: If you have a pool and some neighborhood kids were over swiming and one of them drowns, the childs parents might sue you for negligence. You might have a little dog that bites someone on or off of your property (some breeds are excluded from this coverage). Another common claim we see is someone who visits your property trips and falls either down stairs or elsewhere on the property, they can sue you.
Policies normally include $100,000 of coverage for Personal Liability. You can extend this limit up to $300,000 or $500,000. There are some insurance carriers that will allow for $1,000,000 in Personal Liability Coverage on their policy.
Higher limits of Personal Liability can be obtained through an Umbrella Policy. Umbrellas range from $1,000,000 on upwards of $20,000,000.
Coverage F: Medical Payments
Medical Payments are specifically payable towards injuries sustained by someone that is not the insured or regular resident of the property. Your policy will usually come with $1000 and you can opt to increase this amount. Medical Payments can be claimed regardless of fault or negligence. It can be paid without a lawsuit, unlike Personal Liability.
Less recognized terms you may hear:
**Floaters, Scheduled Items and Inland Marine (Similar to Personal Property Coverage)
Inland Marine & Floater are older terms that are still used today, but more often you will hear us call them Schedule items when it comes to a Homeowners policy. Though it sounds as if it is some kind of boat coverage, it really applies to special form insurance to cover very specific losses. It is intended to be used for items that travel out of the home. Thus, they "float".
Many of the "floating" items you have are eligible for specified coverage without paying your deductible on your Homeowners insurance policy when you make a claim for them. Some examples are, Jewelry, Coins, Antiques, Art, Guns, etc. Insurance policies Do cover these without specifically listing them but by default they have a specific limit of the amount the company will pay for a specific class of item.
For example, a Wedding Ring might have an appraised value of $10,000. However, your homeowner’s policy may limit the maximum paid out on each type or class of an item to a specific amount such as $1,500. How are you going to feel if you lose your wedding ring and you only get $1500 for it? You would have to ask for this item to be Scheduled in order to receive the full value of the ring, & no deductible will be applied. Some items such as Jewelry or Art may require a recent appraisal to substantiate the value of each item, to prevent you from insuring your cubic zirconia for $10k. PEOPLE HAVE TRIED THIS!
Floaters also allow for additional loss types that may not included in standard Personal Property Peril types.