There are countless things to consider when buying your first home. Is the home in a good neighborhood to raise kids? What’s the commute like? Can you afford it? What about ensuring your new home and its contents are adequately protected? Dissecting the ins and outs of your homeowners insurance policy might not be top of mind in the midst of closing on your first home, so we’ve broken down some important things to know.
Standard homeowners insurance policies protect your home from damage or loss due to fire or lightning, windstorm or hail, theft, smoke damage, glass breakage, falling objects, weight of snow, ice or sleet and electrical damage up to a certain dollar amount. It also covers your personal belongings up to a certain amount.
Replacement Cost Coverage
If your home is destroyed, a standard homeowners insurance policy will cover the cost to rebuild your home and also cover the additional living expenses you incur while it is being rebuilt. Replacement Cost includes the cost of labor and construction materials, but doesn't subtract for depreciation, so it's based on today's costs. Even though it accounts for inflation, it only covers up to 100% of the coverage amount you set for your policy.
Additional Replacement Cost coverage
Some insurance companies offer Additional Replacement Cost coverage which includes the cost of labor and construction materials, with no limit, and accounts for inflation. This is the only option that guarantees you’ll be able to rebuild the same house in the same location without having to pay out-of-pocket for repairs.
Your deductible is the amount of money you pay on your own before your insurance kicks in. It could range from $100 to $10,000. If you choose a low deductible, you’re taking on less risk, so your premium will go up. A higher deductible means more risk for you, and your bill goes down. When deciding upon a deductible, homeowners should consider their ability to pay the out of pocket expense at the time of the loss. Higher deductibles result in lower premiums.
Liability and Medical Payments
Liability and Medical Payments Liability and medical payment coverages are automatically included with each of our home insurance options listed above. Liability coverage protects you when people, other than those who live in your home, are injured while they’re on your property.
Flooding and Earthquake
Homeowners insurance does not cover flood damage as a result of a natural occurrence like tidal surge, rainfall or even sewer back up. Flood insurance can be purchased through the National Flood Insurance Program and is required if your property is located in a flood zone. However, water damage in your home due to frozen pipes, broken appliances or an overflowing bathtub is usually covered. Property damage due to an earthquake is also not covered under a standard homeowners insurance policy. It must be added as a separate endorsement or policy and may be subject to a separate deductible. Most states offer a separate earthquake endorsement.
Umbrella coverage is additional liability protection that stretches over both auto and home policies to cover some risks that may exceed those limits or aren’t covered under either policy, like libel, false arrest, slander and more.
Just like most insurance policies cover damage to your home up to a certain dollar amount; valuable, personal belongings are also only covered up to a certain dollar amount. If you have fine jewelry, expensive artwork or valuable heirlooms, you’ll want to list them separately so you can increase the protection for those high-value items.
If your friend slips and falls on ice on your property, your home insurance policy’s medical payments typically helps cover medical claims that are filed. However, if you or another resident were to fall on that same patch of ice, your health insurance will kick in to cover those claims.
If you run a small business out of your home, it’s important to purchase a separate insurance policy or add coverage to your current home policy to cover any business liability or equipment. Those items are typically not covered under your standard home insurance policy.
Like most other insurance policies, your home insurance has limitations to what is covered and what isn’t. Your policy can give you coverage for many different risks you face as a homeowner, but what’s protected varies depending on the policy you choose. Bottom line is take time to understand your home insurance policy thoroughly. Consult with your insurance representative to learn about the exact coverage you have. Be sure to ask questions because every state and every house and situation is different.
Reach out to one of COUNTRY Financial’s Colorado agencies in Fort Collins (970) 221-9655, North Denver (303) 940-6864 or South Denver (303) 368-5202, with questions.
Home insurance policies issued by COUNTRY Mutual Insurance Company®, Bloomington, IL.