Actual Cash Value: Unlike the coverage provided for your home and other structures, coverage for your household contents and personal possessions is normally offered on an actual cash value basis. In other words, instead of being paid the replacement cost of an item, a deduction is made for depreciation due to normal wear and tear, obsolescence and use, usually less than you originally paid. For instance, you might recover only $200 for the refrigator/freezer that cost you $1,000 seven years ago.
There’s a popular alternative: insuring your personal property on a replacement cost basis at a somewhat higher premium. The choice is up to you. For a more complete explanation, see Replacement Cost Coverage.
Additions and Alterations: As a homeowner, you want to be sure any significant improvements to your home are adequately covered within the dwelling limit of your policy. A new family room, bath or remodeled kitchen could easily add $30,000 to the value of a home, pushing you well over your policy limit. Similarly, if you build a new detached three-car garage, you will almost certainly go over the coverage that applies collectively to your detached structures (10% of your dwelling coverage limit). In all cases like these, tell your agent about your new addition or alteration and ask whether you need to increase your coverage.
Business Property: Your homeowner policy restricts coverage to $2,500 for damage to items at home “used at any time or in any manner for any business purpose”. You have a mere $250 coverage for same when it’s away from your premises. Clearly, your homeowners policy was not intended to insure merchandise or property at home that is used for business purposes. If you offer professional services out of your home or conduct some home demonstration and regularly have a living room full of freezer ware, basketry or cosmetics, talk to your agent; your policy can easily be upgraded to provide a higher dollar limit for your business furnishings, equipment and supplies. What if you regularly bring work and equipment home from the office? Your dedication may get you a raise from the boss but it won’t necessarily pay off if your company’s word processor gets stolen…again. Tt wouldn’t hurt to seek a more clear-cut interpretation of coverage from your agent.
Computer Equipment: Insured within your personal property coverage limit for types of loss listed here. Caution: computers, monitors, disk drives, modems, scanners, other peripherals and software should be covered with a special endorsement that provides higher dollar limits and protection against additional kinds of loss. Your agent knows how to help. Portable and laptop computers are covered wherever you take them. However, if your computer equipment is used even partly for business, coverage under your homeowners policy is limited. See Business Property.
Debris Removal: If your property suffers damage that is covered by your homeowners policy, reasonable costs to remove any resulting debris are also covered. If the cost to both repair the damaged property and remove the debris exceeds your policy limit, an additional 5% of your policy limit is granted for the expense of the debris removal.
Dwelling/House: For insurance purposes, your “dwelling” means your house itself plus any attached structures like a garage, carport or shed. It also includes any materials/supplies located on or next to your residence premises (if occupied) for the purpose of repairing, altering or constructing the dwelling or other structures.
Electronic Data Processing Tapes: These tapes, wires, records, discs and other software media are not covered if they contain business data. Blank or unexposed records and media are insured within your personal property limit for types listed here.
Explosion: Damage to your dwelling or contents due to an explosion (of your heater, for example) that occurs on or off your premises is covered within policy limits–subject to your deductible. Off-premises examples: industrial accidents, blasting work, sonic boom.
Fair Rental Value (your own premises): If a covered loss makes your principal residence unfit to live in, your policy provides your choice of either Fair Rental Value or Additional Living Expenses. If you choose Fair Rental Value, you will receive the fair rental value of that part of your residence, minus expenses that do not continue while the premises are unfit to live in.
Flood: Flood damage is never covered under a homeowners policy including a rain-flooded basement. If your property is located in an area that requires this coverage, you can obtain coverage for most properties through the National Flood Insurance Program. Any licensed property insurance agent or broker can help you get this coverage. Overflow or accidental discharge of water from within your residence may be covered.
Freezing: Damage to your residence, household contents and/or personal possessions from freezing is covered if you maintain heat in the building or shut off and drain the water system and appliances when the building is under construction, vacant or unoccupied.
Garages: A garage attached to your house is insured within your dwelling coverage limit. Detached garages are insured with other structures on your property, up to 10% collectively of the amount of coverage on your house. You can increase your coverage limit for an additional cost. Click here for types of loss covered.
Hurricanes: Damage to your house and detached structures from violent winds, such as hurricanes, cyclones and tornadoes, is covered. Damage to the contents of a building is not covered unless the storm causes an opening that allows damaging wind or water to enter; in that case, it is.
Injury to Others: You are insured under your policy’s personal liability section for bodily injuries you or residents of your household or your pets accidentally cause to others. This coverage applies on or off your premises, anywhere in the world–provided you are legally liable for the injury and the resulting loss. If your misdirected golf shot injures another person or breaks a window, your homeowners policy would most likely pay for the injury or any property damage.
Legal Defense: Your homeowners policy pays for legal expenses to defend a lawsuit brought against you for a covered loss (even if the suit is fraudulent or groundless). The cost of your defense does not come out of your coverage dollars.
Living Expenses: If severe damage to your house from fire, windstorm or another type of covered loss makes your primary residence unfit to live in, your policy compensates you for either Additional Living Expenses or Fair Rental Value reimbursement. If you choose Additional Living Expenses, you will be reimbursed for any increase in expenses over and above your usual expenses so that your household can maintain its usual standard of living until you move back into your house. Extra costs for staying in a hotel/motel, use of a Laundromat and telephone expenses are some examples of what would be covered.
Malicious Mischief/Vandalism: Coverage is provided for your personal property, your home and other structures unless the damage occurs in a building that has been vacant (empty and unfurnished) for more than 30 consecutive days before the loss. If your home is under construction at the time of the malicious mischief or vandalism, this is not considered “vacant” and your loss is covered.
Medical Payments to Others: Your homeowners policy provides this coverage, which differs from personal liability coverage in two ways:
If someone is injured on your property, coverage is available to pay that person’s necessary medical expenses–under the medical payments to others limit (usually $1,000)–whether or not you are responsible for the injury. These expenses may include medical, surgical, x-ray, dental, ambulance, hospital, professional nursing, prosthetic devices and even funeral expenses. Your policy also pays for injuries occurring off your premises if you, a family member living with you, a residence employee in the course of their employment (while on the job), or a pet causes the injury.
Medical Payments applies only to injury and not to property damage.
This coverage does not apply to you or residents of your household except residence employees.
Pipes (Water): Damage from burst water pipes is covered within your dwelling coverage limit. Damage to pipes themselves is also covered.
Power Failure: If a power failure occurs on your premises, any resulting damage to your property is covered. If a loss is caused by a power failure off your premises, the loss is not covered. For example, if a storm knocks out power from your local electric company and your freezer-full of filet mignon is endangered, better have an immediate barbecue feast. (Special coverage can be purchased to insure your refrigerated goods against spoilage in this case.)
Power Surges: Your are covered for damage caused to domestic electric appliances, except to a tube, transistor or similar electronic component.
Replacement Cost Coverage: On your household contents, this popular alternative to Actual Cash Value reimbursement pays you at today’s cost to replace or repair lost or damaged property–subject to your policy limits and your chosen deductible (and provided actual repairs are made). This coverage must be specifically requested.
Water Heater: If your water heater suddenly and accidentally tears apart, cracks, burns or bulges, any resulting damage to your personal property is covered. If water drips or seeps from your heater over a period of time and gradually ruins your carpeting or flooring, this “slow loss” is not covered. If you notice dampness around a water heater, you’ll save money by calling the plumber before serious damage occurs. Damage to your water heater itself is not covered, unless the damage results from fire or another type of covered loss listed here. Damage from freezing of your water heater is not covered.
Windstorm/Hail: Damage to your house and other structures from violent winds and hails–including hurricanes, cyclones, tornadoes and typhoons–is covered up to policy limits. Loss to property inside a building is not covered unless the storm causes an opening that allows damaging wind, rain, snow or sleet to enter. If you leave a window open and the rain blows in — grab a mop; insurance does not cover you.)
