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Home Owners Insurance Basics
WHY HAVE HOMEOWNERS INSURANCE
While there are no laws requiring homeowners to carry homeowners insurance, if you have a lien against your home your lender will require insurance to protect their interest in the property.
But what about your interest? For many people, their home is their single largest asset. It only makes sense to protect that asset from loss.
WHAT DOES A HOMEOWNERS POLICY COVER?
A Homeowners policy are package policies, meaning that it covers damage to your property and your liability or legal responsibility for any injuries and and property damage you or a member of your family (or household pets) cause to others.
Damage to your home caused by most disasters is covered. BUT THERE ARE EXCEPTIONS: FLOOD, EARTHQUAKE, and POOR MAINTENANCE ARE NOT COVERED in a homeowners policy. (You don’t have to live in a flood zone to be affected by a flood. Without special flood insurance, you are not protected.)
Policies will vary among insurance companies. Variations range from what causes are covered to different amounts for loss to jewelry and firearms to policies that include features like identity theft protection. Taking a personal inventory of your needs and considering all of your exposures to loss will help to determine what coverages you and your family need.
WHAT IS COVERED IN TYPICAL HOMEOWNERS POLICIES?
Remember, all policies will vary depending on the insurance company providing the coverage. But the coverages below are typical of most standard policies. You must read your own policy to know what is covered and what is excluded.
COVERAGE A- DWELLING
Covers damage to your home. The amount of coverage should be enough to rebuild your home in the event of a total loss.
Be sure to ask your agent about the difference between actual cash value and replacement cost. Most policies for the dwelling replacement are at replacement cost, but the time of loss is not the time you want to find out.
Often policies will include and extended replacement cost endorsement which will raise the limit of the dwelling percentage to cover additional costs due to unexpected industry or economic changes.
Additionally, many policies will also include endorsements to protect you against an increase in cost due to ordinance or law changes.
DID YOU KNOW…
The City of Scottsdale requires fire sprinklers to be included in all newly built homes and homes that are significant remodeled.
In the event of a total loss, if your home were in the Scottsdale, the re-build of your home must have fire sprinklers. Without the endorsement to cover this cost, your insurance would not pay for this improvement of fire sprinklers since it was not a part of your original dwelling, nor included in the replacement cost amount.
COVERAGE B- OTHER STRUCTURES
Not all structures that exist on your property are actually attached to your house. Therefore, Coverage B offers insurance protection for other structures such as a detached garage, gazebo, or storage shed.
COVERAGE C- PERSONAL PROPERTY
Your personal possessions such as furniture, clothing and appliances are covered. Certain types of possessions are excluded or have limited coverage. Be advised that many policies do have several exclusions and limitations for this coverage. Make sure to read your policy and discuss this coverage with your agent.
IMPORTANT NOTE #1: Replacement cost of your contents is not always included in homeowners policies. This means that if your home burns to the ground, your insurance company will pay you the depreciated value of your 10 year old living room furniture set as opposed to just replacing your living room furniture set. This coverage only cost a few extra dollars, but well worth it at the time of loss.
IMPORTANT NOTE #2: Check with your agent about all peril coverage for your personal property. Often policies are written to only cover your personal property if it is damage, lost or destroyed by certain causes. It only cost a few dollars more each year to add this protection.
COVERAGE D- LOSS OF USE
The coverage is also called Additional Living Expense. Essentially, this pays for your housing and other living expenses (like meals and laundry) if a major loss makes your house uninhabitable and you have to move out temporarily while it’s being repaired.
COVERAGE E- PERSONAL LIABILITY
Provides coverage for bodily injury or property damage for which you are legally responsible. For example, let’s say your dog bites someone, a guest falls down your front stairs, or your son throws a ball through your neighbor’s window. You are legally responsible for these actions. Personal Liability helps to cover the associated costs of these related damages.
Most homeowner policies provide a minimum of $100,000 of liability protection. However, you can opt to increase this amount.
COVERAGE F- MEDICAL PAYMENTS
Pays all reasonable and necessary medical expenses for a period of three years from the date of an accident to a person or persons injured while on your property. This coverage does not apply to the insured or regular residents of the insured’s household.