Home Insurance 101

Protecting Your Property:

A Beginner’s Guide

Your home is more than just a place to live; it's where memories are made, and dreams are realized. Protecting your investment with the right insurance coverage is essential for safeguarding against unforeseen events. In this Home Insurance 101 guide, we'll explore the basics of home insurance, helping you understand what it covers, why it's important, and how to choose the right policy for your needs.

Understanding Home Insurance:

• What it Covers: Home insurance typically covers your dwelling, personal belongings, liability protection, and additional living expenses in case of a covered loss.

• Types of Policies: There are several types of home insurance policies. Some of the include: Primary Homeowners [standard], Seasonal/Secondary Homeowners, Condo Owners, Landlord, Renters, etc.

• Coverage Limits: Your policy will have coverage limits for different categories, such as dwelling coverage (to repair or rebuild your home), separate structures coverage, personal property coverage (for your belongings), and liability coverage (for legal expenses if someone is injured on your property).

Factors Influencing Premiums:

• Location: Where your home is located plays a significant role in determining your insurance premiums, with factors such as proximity to fire stations, crime rates, and weather risks impacting rates.

• Home Characteristics: The age, size, construction type, and condition of your home affect insurance costs. Features like a newer roof, security systems, and fire-resistant materials can lead to discounts.

• Personal Factors: Your credit score, claims history, and the amount of coverage you choose also influence your premiums.

Terms & Coverages to Know:

• Dwelling Coverage: This covers the structure of your home, including walls, roof, floors, and built-in appliances, in case of damage or destruction due to covered perils like fire, windstorms, or vandalism. The coverage amount is based off the estimated cost to rebuild your home [reconstruction cost], NOT the market value. There will almost always be a gap between the reconstruction cost and market value and that’s ok!

• Separate Structure Coverage: This covers most everything not attached to the home such as outbuildings, detached garages, pools, driveways, fences, detached patios, etc.

• Personal Property Coverage: This protects your belongings, such as furniture, clothing, electronics, and other personal items, from covered perils, whether they are inside your home or temporarily outside. Another way to look at it: If you were to take your home, flip it upside down and shake it, for the most part, anything that would fall out would be personal property.

• Liability Coverage: Liability coverage helps protect you financially if someone is injured on your property or if you accidentally damage someone else's property. It can cover medical expenses, legal fees, and settlements if you're found responsible for the injury or damage.

• Additional Living Expenses (ALE): If your home becomes uninhabitable due to a covered loss, ALE coverage helps pay for temporary living expenses, such as hotel bills, meals, and rental accommodations, while your home is being repaired or rebuilt.

• Deductible: This is the amount you're responsible for paying out of pocket before your insurance coverage kicks in to pay for a covered loss. Choosing a higher deductible typically lowers your premium but means you'll pay more if you file a claim.

• Perils: Perils are events or risks that can cause damage to your home or property. Common perils covered by home insurance include fire, theft, vandalism, windstorms, hail, and certain types of water damage. It's important to review your policy to understand which perils are covered and which are excluded.

• Endorsements: Also known as riders or add-ons, endorsements are additional coverages that can be added to your home insurance policy to customize your coverage. Examples include coverage for high-value items like jewelry or collectibles, earthquake insurance, or sewer backup coverage.

• Actual Cash Value (ACV) vs. Replacement Cost Value (RCV): These are methods used to determine the value of your covered belongings or home in the event of a loss. ACV takes depreciation into account, so you'll receive the current market value of the item, while RCV provides enough money to replace the item with a similar one at today's prices, without deducting for depreciation.

Understanding these coverages and terms can help you make informed decisions when choosing a home insurance policy and ensure you have adequate protection for your home and belongings.

Additional Coverages and Endorsements:

• Sewer & Drain Back-Up: This provides damage for your personal belongings and damage to your home resulting from a drain backup. Without this endorsement, this is an excluded coverage.

• Service Line: This endorsement provides coverage for sewer lines and buried electrical on the property for a sudden break situation.

• Scheduled Personal Property [aka: Floaters]: For high-value items like jewelry, artwork, or collectibles, you may need additional coverage beyond the standard personal property limit.

What’s NOT Covered:

• Flood Damage: Standard home insurance policies typically do not cover damage caused by floods. Homeowners in flood-prone areas may need to purchase a separate flood insurance policy.

• Earthquake Damage: Similarly, earthquake damage is usually not covered by standard home insurance policies. Homeowners in earthquake-prone regions may need to purchase separate earthquake insurance to protect their property from this risk.

• Wear and Tear: HOME POLICIES ARE NOT A WARRANTY and generally do not cover damage caused by normal wear and tear or lack of maintenance. This includes issues like rust, rot, mold, and general deterioration over time. This also goes for items like appliances that eventually go out and need replaced over time. Home warranties can be purchased to cover items such as these.

• Intentional Damage: Damage caused intentionally by the homeowner or any member of the household is typically not covered by home insurance policies. Sorry, you can’t burn your house down to get a new build.

• Neglect: Damage resulting from neglect or failure to properly maintain the property is usually excluded from coverage. This includes issues like termite damage or water damage from a leak that could have been prevented with proper maintenance.

• Business Activities: Home insurance policies typically do not cover damage or liability arising from business activities conducted in the home. Home-based businesses can sometimes acquire coverage through an endorsement on their home policy if it qualifies. Some business exposures may require a separate business insurance policy.

• High-Value Items: While home insurance provides coverage for personal belongings, there may be limits on coverage for high-value items like jewelry, firearms, artwork, and collectibles. Additional coverage or endorsements may be needed to fully protect these items. These are often referred to as floaters.

• Vehicles: Contrary to what many assume, your vehicles are not covered by your home policy even while parked at home. The coverage for those only exists on you auto insurance policy.

It's important to review your home insurance policy carefully to understand what is and isn't covered, as well as any specific exclusions that may apply to your policy. If you have concerns about certain risks, you may need to purchase additional coverage or seek out specialized insurance policies to ensure you have adequate protection.

Home insurance provides valuable protection for your most significant investment—your home. By understanding the basics of home insurance, evaluating your coverage needs, and selecting a policy that suits your requirements, you can ensure your property and peace of mind are well-protected against life's uncertainties. Remember, investing in the right insurance coverage today can save you from financial hardship tomorrow.