When reading the declarations page of your home insurance policy you will find several commonalities from one company to another. Most companies will lay out your coverages in the same way. Today we will explain what each of those coverages mean.
Coverage A- Dwelling
Coverage B- Other Structures
Coverage C- Personal Property
Coverage D- Loss of Use
Coverage E- Liability
Coverage F- Medical Payments
Dwelling Coverage (Coverage A)- This is the coverage on your home insurance policy that covers your home itself in the event of a covered loss or peril. The coverage amount you choose here should be enough to rebuild your home. This coverage is called replacement cost value.
Actual cash value (ACV) policies are also available and will pay the replacement value of your home minus depreciation. In certain situations actual cash value is the only coverage available. This is usually the case when the home is older or when there is a significant loss history and insurance companies won’t offer you replacement value on your home. Each insurance company has their own underwriting guidelines so it is important to do your homework when shopping for insurance to see if replacement value is available.
Other Structures (Coverage B)- This coverage applies to any detached structures from your home. The most common structures here are garages, sheds, gazebos, and outbuildings. A typical home insurance policy will cover 10% of your dwelling coverage though higher limits are generally available. If your home is insured for $200,000 then your other structures coverage would then cover up to $20,000.
Personal Property/Contents Coverage (Coverage C)- This coverage takes care of your personal possessions in your home. You should choose enough coverage here to cover items such as your clothes, furniture, appliances, electronics, or any other items not permanently attached to your home.
A standard home insurance policy generally covers 70% of your dwelling coverage on replacement policies and 50% of your dwelling coverage on ACV policies. Higher limits are available here as well but most people find that 70% is enough. In this case if you have $200,000 coverage on your home then personal property coverage would be covered up to $140,000. Keep in mind that there are limitations on certain kinds of personal property such as jewelry, guns, computer equipment, artwork, etc. See Part 1 of Understanding Your Coverage-Personal Property Limitations for a more detailed explanation on these items.
Loss of Use (Coverage D)- This portion of your home insurance policy covers your costs associated with additional living arrangements while your home is being repaired from a covered loss. There are coverages here for things such as hotels, rent, and restaurants that you must use when you can’t inhabit your home during repair or replacement. Coverages on this portion of your policy is most commonly 20% of your dwelling coverage. If you are covered for $200,000 on your home then your loss of use will be covered up to $40,000.
Liability (Coverage E)- Liability protects you against lawsuits from other parties as a result of injury while on your property. This could be someone getting injured in a pool or on your front steps or if you own an animal that bites someone. Most standard home insurance policies will cover $100,000 as basic coverage. It is recommended to have higher coverages as, in most cases, the total annual increase in premium is about $8 to increase this coverage to $300,000 and triple your protection.
Insurance companies have tried to minimize these liability risks as of late by underwriting homes with certain risks. In most cases companies will not allow trampolines or pools with diving boards. In addition many companies will not accept a policy for homeowners with certain breeds of dogs such as Pit Bulls, Rottweilers, Chows, Dobermans, German Shepherds, Akitas, and American Eskimos. If you have questions as to whether you will be covered for liability losses on any of these items it is important to contact your agent to find out for sure.
Medical Payments (Coverage F)- The final coverage we will be discussing on your home insurance policy is medical payments coverage. This coverage is for minor injuries that don’t involve lawsuits. This would cover someone’s medical costs due to injury on your property. Standard coverage here is $1,000 per person though higher limits such as $2,000, $5,000, and in some cases up to $10,0000.
I hope this has helped explain some of the basic coverages in home insurance policies. Please feel free to contact us if you would like us to go into more detail or if we can answer any other questions.