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6 Coverages Found In All Homeowner’s Insurance Policies
With very little money, you can actually get a great amount of coverage from homeowner’s insurance. So much so that many people frequently feel that everything is covered in one way or another.
But that is a mistake.
Because even though it spans a huge umbrella, you will also find that it has the widest span of limitations and exclusions written somewhere in the policy contract.
Before you learn about what are your exclusions, the more important aspect is to learn what comes under these plans. This is when your insurance agent actually becomes useful.
There are 6 common types of coverage common in all homeowner’s policies. And they are categorized in a no-nonsense way – Coverage A to F.
Coverage A – Destruction or damage to residence
If you had arranged for full coverage on your residence, you are financially protected from damages or destruction by events such as fire and flooding. Your insurer will full pay for repairs or even replacements. You can find out exactly are the events that are included by going over your policy.
That is pretty straight forward.
The confusing part comes into the picture when you had insured your home for less than it’s total replacement cost. When you are under-insured for a total loss, you only get what you are covered for.
For example if your house is insured for $400,000 and it gets destroyed by fire, you will only get to claim $400,000 even though the cost of cull replacement may be $500,000. You can’t realistically expect $500,000 when you signed on for just $400,000 right.
You can also suffer a setback for partial damages. Because when you are insured for depreciated market value, your claim will also be given on a depreciated basis.
So the best course of action is to get coverage on the full cost of new replacement.
Yes the premium might be a little more expensive. But that will really be peanuts if you compare that with the money you are talking about for a full residence replacement.
Coverage B – Destruction or damage to detached structure
Detached structures are areas not directly connected to the liveable area of your house. These include gardens, swimming pools, garages, etc.
The amount of coverage for detached structures is usually about 10% of Coverage A. This means that if your home is insured for $500,000, your detached structures are insured for about $50,000.
There is always the possibility that a detached structure is worth more than the amount of coverage it has. In this case, you have to request that the limit on it is equal to the full replacement value of all detached structures in the premises.
Be wary if you are using any of them for business purposes. It can be excluded altogether.
Coverage C – Destruction, damage, or theft of personal property all around the world
That sounds good to everyone’s ears.
Take note that there are 2 ways to value your personal property. It will either be by a replacement cost, or an actual cash value.
On the surface, it would look like going for the replacement method is more advantages. That is correct.
If for example, you lose your baggage worth $50,000 to replace, you will get that amount. If you had chosen to go for the actual cash value method, you might get a lower amount when depreciation is factored in.
The replacement cost method of valuation will of course cost a little more.
And as a criteria, an insurer will want to see that you have actually replaced your belongings before granting you’re the full value. Until then you will only be able to obtain the used value. The level of coverage is up to 75% of Coverage A.
Coverage D – Added living costs resulting from loss covered in A, B, or C
If indeed something extraordinary happens to your home and you are left with no place to live, you will need money for all the living costs.
This include those for lodging, food, transport, etc.
While some items may rise exponentially in price, some will come down as well. The difference between the two is the added living cost. It can also be referred to as the additional living expense.
This is what Coverage D takes care of.
Be mindful that this does not cover the total costs, but the additional costs.
It usually pays up to the policy limit or up to 12 months, whichever comes first. The total limit can differ from insurer to insurer. Some might be generous enough to give unlimited while another might just provide a percentage of Coverage A.
Coverage E – Property damage and non-vehicle related personal liability for injuries all around the world
This is a whole umbrella that protects you from almost anything you can think of concerning personal liability that is not vehicle related. It even reimburses the costs of lawsuits.
This means that if a wayward ball from your tennis practice breaks someone’s nose, you can rely on this. If you hit a baby while running down the street, you can rely on this. And even if your cat goes around scratching children in the neighborhood, you can rely on this.
It cast so wide a net that it is surprising people don’t buy enough of it even though it is well within their budget. Most homeowner’s insurance policies provide free coverage up to $100,000.
You should weigh it up and see if getting more is more appropriate for you. Getting additional does not really cost much.
But also be wary of going overboard with your buying spree. Take into account your assets and income when working out a suitable realistic number.
Coverage F – Medical expenses for injuries to guests at your home
When a visitor to your house gets injured in an accident in the premises, they are covered up to your limit.
Although we don’t think about this much, be reminded that medical bills these days are flying through the roof. But you don’t have to pay much attention to this if you are not one who often invites your buddies over. Even if guest frequently visit your place, they are probably covered by their own insurance policies anyway.