Know Your Homeowners Insurance

Insurance Insight with Jamey South

Since your home may be the biggest investment you ever make, it is important to understand your home insurance coverage options, from market value to replacement cost. We recommend that you purchase an amount of coverage at least equal to the estimated replacement cost of your home.

The choice is yours, however. Determining your home’s estimated replacement cost is important because this will ultimately determine which policy options are available to you. Since it is impossible to predict today what the exact cost will be to replace your home in the future, it’s important to have enough coverage to account for unforeseen circumstances.

Market conditions in your area may impact the amount it will cost to rebuild your home if you should experience a loss. Supply of labor, demand for labor, and the cost of construction materials all influence replacement cost estimates. Keeping up with the current market conditions in your area and changing your home insurance coverage amount accordingly will help you maintain coverage at least equal to 100 percent of the estimated replacement cost coverage for your home.

Homeowners insurance may cover losses to covered property caused by these:

  • Weather: Storms, fire, wind, hail, lightning, freezing, weight of ice, snow or sleet
  • Non-weather: Theft, vandalism, riots, aircraft and vehicles
  • Sudden/accidental: Water from plumbing, tearing/bulging of heating or cooling systems, artificially generated electrical current
  • Homeowners insurance may not cover the following:
  • If the insured intentionally causes harm to property or person
  • Business pursuits or professional services

Ownership, operation, or maintenance of aircraft, motor vehicles and some watercraft

Liability limit is important to understand when it comes to your homeowner policy. It determines how much coverage you would have should something happen to your home. These limits usually start at $100,000, but policies can be purchased with much higher limits. Most experts recommend that you have at least $300,000 to $500,000 of coverage, depending on the value of your home.

While your liability limit is a reflection of the amount of coverage for your actual home, other structures on your property, such as a garage, are usually covered for 10 percent of that amount. Coverage for personal belongings usually falls somewhere between 50 percent and 75 percent of the amount of coverage on the structure of the home.

As mentioned earlier, in case you have to live somewhere else because of damage to your home, most plans cover costs of living away from home (hotel, restaurants/food, etc.), up to 20 percent of your home’s liability limit. Other policies may provide complete coverage for living expenses but only for a limited period of time.