Homeowners Insurance

Homeowners insurance is a promise from the insurance company that they will pay to repair or replace your home in the event of a major loss, like fire, tornado, theft, wind or hail damage etc.  There are many more benefits of having a homeowner’s policy but the biggest reason is simply because you have invested a lot of money into something and chances are, you would not be able to pay out of pocket to have your home replaced after a big storm.  In addition to that, you are typically not the only interested party in the actual property (your house), I’m talking about the banks that gave you the money to buy your home.  The bank will want to know that their investment is covered by someone or something that can afford to keep the value of the building intact.

How much home insurance do I need?

The amount of insurance that you need depends on your situation, and everyone has different needs, (especially in Kansas).  But let’s start with some basics to give you an understanding of the things that you will want on a homeowner’s policy.

Coverage A - Dwelling limit

  • Coverage A, or dwelling replacement is the amount of money that the insurance company will use to totally replace your home.

Coverage B – Other Structures

  • Other structures coverage applies to structures connected to the dwelling by only a fence, utility line, or similar connection.  This coverage is usually automatically included at 10% of coverage A (replacement cost)

Coverage C – Personal Property

  • Personal property is generally covered worldwide to personal property owned or used by an insured. Personal property is usually 50% of coverage A, but can vary on certain types of policies.

Coverage D – Loss of Use

  • Loss of use is also known as additional living expense. Loss of use is the money the insurance company will pay during the time that your home is being repaired or rebuilt.  Typically, the amount of coverage that applies is 20% of Coverage A 

How is cost determined?

Each insurance company will do what they call a replacement cost estimator.  Here’s a little bit of what they’ll include:

  1. The cost to pay someone for the labor to rebuild
  2. Materials cost
  3. The cost to remove the debris after a storm topples your house
  4. Fire protection class – how close your home is to the fire department, and how long it would take for them to reach you
  5. The territory or region of the country you live in and the likely of a loss due to weather related events

These are some of but not all the rating factors that are included in how the rate is determined for your home.

 

debris being removed from house after storm

 

What are Endorsements?

An endorsement is something that can be added to an insurance policy.  Not every company out there operates the same way when it comes to making their insurance policy.  Each insurance contract or policy will have standard coverage's that apply but in many situations, each person’s circumstance is going to be different.  For that reason, most companies will allow the use of a change to be made to the policy to help accommodate for different things.

Some endorsements that can be added to a policy include:

Scheduled property

  • This is property that you specifically request coverage for on the policy. Why might you want to add this coverage?  Because there are usually limits as to how much an insurance company will pay for certain items.  Jewelry, watches, furs, silverware and watercraft on premises are all examples of a limit being applied to these items, usually up to $1,500. 
  • By requesting certain items to be covered, you get 2 things in return. 1, you will not have to pay the deductible for a covered cause of loss to that item and 2, you will be covered up to the limit that you request coverage for. 
    • A friend of mine recently got engaged and her policy only provided coverage up to $1,500. The ring cost $5,000 and my friend obviously wouldn’t be happy about only getting $1,500 if the ring was lost.  So, the item was “scheduled onto the policy, to provide proper coverage.

 

Identify Fraud Expense

  • Identity fraud is usually defined as stealing someone’s personal identification for many potential reasons including; creating separate accounts for themselves to purchase items, take out a home loan, remove funds from insured’s bank account or many other potential acts of fraud. The basic amount usually applied to a policy is $15,000.

 

Mechanical Breakdown

  • This is a newer coverage for many insurance policies added on in 2014 to cover for mechanical breakdown of household appliances, something which is normally excluded and hasn’t been available by endorsement before. The basic limit of $5,000 applies, but limits increase by $5,000 up to $50,000 for coverage.

What Discounts Are Available?

On a standard homeowner policy, there may be discounts that can be added to a policy which would help lower your premium, or cost for homeowner’s insurance.  Some of the discounts you may be eligible for are:

Multi policy

  • By having at least one more policy with the same company you can usually find a discount between 5% and 10%.

Updates

  • This might not even be considered a discount, but it is something that certainly affects your premium. These are perhaps the most common question that gets asked in the when looking at a new home to insure.  The primary updates that an insurance company are going to be concerned with are:
    • Roof
    • Pluming
    • Heating and AC
    • Electrical

new roof being constructed on home

 

The newer the updates you have the better off your rates are usually going to be.  If a homeowner has a 15-year-old roof, the likelihood of that potentially being replaced by an insurance company increases each year as more and more storms pass through impact the integrity of the roof.  The same can be said for the older the electrical is in the house and the potential that can cause a fire or even power surges to other appliances.