When is the last time you reviewed your property and casualty policies, including homeowners insurance? Because it likely represents one of your largest assets, when you review your homeowners insurance policy annually, make sure your coverage is still adequate. 

Q: Which disasters does homeowners insurance cover and not cover?

A: Homeowners insurance commonly covers these perils:

• Fire
• Smoke
• Explosion
• Windstorm
• Hail, lightning
• Weight of ice, snow or sleet
• Water damage
• Vandalism, riot
• Damage from an aircraft, car or vehicle

If your house is destroyed by a covered peril, a standard homeowners policy will go a long way toward repairing or rebuilding your home.¹

A homeowners policy usually excludes these perils:

• Earthquakes
• Floods
• Sewer backups

You’ll need to cover those items under a separate policy or by adding additional riders to your existing policy. Regarding floods, you may be legally required to buy flood insurance. With all of the rain and flooding that has happened across the country recently, even if you aren’t in a flood zone, speak with your insurance agent to determine what options you have.

Q: What else does homeowners insurance cover?

A:²

• Other structures
• Personal property protection if your belongings are damaged or stolen
• Personal liability
• Medical payments if someone is injured in your home
• Additional living expenses in you’re forced to relocate while your home is being repaired

Each of these additional coverages will have limits and will need to be reviewed closely.

Q: How much coverage do I need? 

A: The answer is unique to each individual, because it depends on how much home you’re insuring, where it’s located, the condition of your property and the value of your home’s contents.

If something were to happen to your home, such as a fire, you should base your homeowners policy on what it would cost to rebuild and replace your home’s contents. You should also consider insuring it for more than the market price if: your house is older, you’ve got other structures on your property (like a shed or four-car garage), construction costs in your city are high or you live in a city where you are at higher risk for damage to your home from weather.¹

You will also need to know the value of the items inside your home to help ensure you have enough coverage if you were to lose them. It’s a good idea to take a video inventory of items and to have more expensive items, such as an art collection, appraised regularly.  

Q: How do I know whether I need an umbrella policy? 

A: Think of an umbrella policy as going above and beyond what your homeowners insurance covers. It’s a type of liability policy that provides additional protection from major claims and lawsuits. If the value of your total assets exceeds your homeowners policy liability limits, you should consider an umbrella policy. 

You can add an umbrella policy for an average of around $100-$200² annually, depending on your carrier, and the policy usually provides a minimum of $1 million in coverage. Insurance companies typically offer these policies in increments of up to $5 million to as high as $10 million.³ Keep in mind that when you add these types of policies, you may need to adjust the liability limits on your homeowners and auto policies. 

Q: What’s the best way to cover valuables, such as a wine collection?

A: If you have an expensive wine collection, fine art, valuable jewelry or antiques, your standard homeowners insurance most likely doesn’t provide enough coverage. For added protection, consider adding a rider to your homeowners insurance policy. It offers additional coverage for things you own that are worth more than the per-item limit of your homeowners (or condo or renters) insurance policy.⁴ You’ll need regular appraisals and an inventory of these valuable items so you know their value should they be destroyed or stolen and need to be replaced. 

Q:  How do I decide what deductible is best for me?

A: Your deductible should be as high as you can reasonably afford, because the higher your deductible, the lower the cost of your premium. The more you can afford in the short-term, the more you’ll save in the long-term because your premiums will be lower over time. Keep in mind, if you file a claim that your provider covers, the deductible is subtracted from the amount claimed. For example, if you have a $1,000 deductible and you file a claim for a new roof for $20,000. Your insurance company would pay you $19,000 for that claim.⁵

¹“20 Homeowners Insurance Questions You’re Too Embarrassed to Ask,” Policygenius. https://bit.ly/2YgVROz

²”Why You Should Buy an Umbrella Policy,” Policygenius.  https://bit.ly/2oL642e

³“Umbrella Insurance Policy,” insurance.com. https://bit.ly/2ZcxpKF

⁴“What is a Homeowners Insurance Rider?” Allstate. https://al.st/33AY1Z0

⁵“Average Cost of Homeowners Insurance,” ValuePenguin.  https://bit.ly/2Uq8fKQ

This is limited to the dissemination of general information pertaining to insurance. The information contained herein should not be construed as personalized insurance advice and should not be considered as a solicitation to buy or sell any security or engage in a particular investment strategy. There is no guarantee that the views and opinions expressed in this guide will come to pass.

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