Published by Taylor Walker
First-time homeowner and overwhelmed at the thought of purchasing home insurance? Buying a home is an extremely exciting time for many; however, it can also be incredibly stressful with periods of uncertainty and doubt. Of the many decisions required to purchase a home, one that receives the most apprehension is purchasing home insurance.
For many, purchasing home insurance is a dreaded experience that is usually classified as complicated, time-consuming and overwhelming. Consumers frequently find themselves in a panic – confused by their policies, insurance terms and coverages. However, this does not have to be the case. Educating homeowners on the importance of policies and endorsements will significantly take the stress (and pain) out of the home buying process.
To begin, there are 5 primary coverages that all homeowners should consider when shopping for insurance: Dwelling, Personal Property, Liability, Loss of Use (Additional Living Expenses) and Water Backup. While many other coverages could (and should) be included in most home insurance policies, for the sake of the new home buyer, these 5 coverages should be the primary focus.
This coverage applies if a home is completely destroyed by a fire, tornado or any other covered peril. “Covered perils” range from a variety of situations, such as windstorms, hailstorms, vandalism, lightning strikes and fires – to name a few. Coverage, however, does not apply to situations including floods, earthquakes or general wear and tear to a home. “Wear and tear” includes any typical maintenance issues due to normal deprecation, such as replacing an old roof or updating an outdated plumbing system. While wear and tear damages are at the responsibility of the homeowner, natural disaster damages should be either endorsed or covered through a separate policy via your agent.
*When reviewing dwelling coverage, consider purchasing either the extended replacement cost or guaranteed replacement cost option. Both provide additional protection beyond the dwelling amount limit; however, extended replacement is capped at typically 150% or 200% of the total dwelling coverage limit, whereas guaranteed replacement cost is unlimited. In the event of a total loss, these options help ensure the full replacement of the home.
Personal Property Coverage:
This coverage protects the belongings and possessions inside of a home, which includes furniture, clothing, electronics, appliances, etc. Theoretically, if a homeowner cuts the roof off the top of their house, turns it upside down and shakes it, everything that falls out is under this coverage. While this coverage fully protects a homeowner’s essential items, there are coverage limitations when considering expensive valuables. Jewelry, furs, guns, paintings and other expensive collectibles should be insured individually under a rider or valuable articles policy.
Liability coverage protects a homeowner from visitors getting hurt on the homeowner’s property. This coverage can even provide protection if a homeowner is away from their home. Although recommendations suggest purchasing $300k-$500k of liability coverage, a homeowner can never purchase enough. For additional liability coverage, consider a personal liability umbrella policy, which can extend your coverage beyond $1 million and provide legal protection over the most valuable assets.
Loss of Use Coverage:
Wonder if the hotel expenses of a covered claim are applicable for reimbursement? Absolutely! Loss of Use Coverage, which is more commonly referred to as Additional Living Expenses, covers the incurred costs of a policyholder to live in a comparable space similar to their home before the loss. Many middle-market companies place a capped limit on the amount of coverage based on a percentage of the dwelling value. However, an unlimited amount of protection at an affordable value is most ideal.
Water Backup Coverage:
Clogged drain causing water overflow or blockage? While most home insurance policies cover water damage, water backup is an optional coverage that must be endorsed on a policy. Failing to request this coverage puts a homeowner at risk for common loss. Causes of water backup include overgrown tree roots, clogged pipelines and faulty sewage systems, which can cause extensive damage to a property’s foundation, floors, walls and even ceilings.
Considering these five coverages throughout the home-buying process will ensure homeowners can confidently make the safest and most informed choices for their future property.
Contact Taylor Walker at Pritchard & Jerden for more information on how to fully-insure your home and valuables.