The Most Basic Types of Coverage on Your Homeowners Policy

Unless you have a very close relationship with your insurance agent or unless you’ve found one of those remarkable agents that makes sure you understand every facet of your homeowners policy, you’re probably a bit of a loss when it comes down to understanding every coverage that’s listed on your homeowners policy. Most people are quite honest about the fact that they typically don’t sit down to read every detail on the 30 page policy they receive in the mail.

However, it’s incredibly important to understand what you have coverage for and what you don’t, otherwise you could end up in a situation as those in Louisiana did when Hurricane Katrina hit: unfortunately, many did not have any flood insurance to cover their losses, as flood insurance is not covered on homeowners policies and must be purchased as a separate policy from the National Flood Association. For these people, it was too late and so many could have been saved if they had only knew more about what was on their policy.

To better understand some of the most important types of coverage on a homeowners policy, here are a few that you should be familiar with, and that could ultimately end up saving the investment you’ve worked so hard for.

Dwelling Coverage

Dwelling coverage is the limit that an insurance company will pay to rebuild your home from the ground up. When writing an insurance policy, agents typically use what’s called a ‘reconstruction cost estimator,’ which will tell them the insurer what it would cost to do so. It’s important not to mistake this for the value of your home, as its value and the cost it would be to rebuild it are two different things, so these two numbers ma y be significantly different. However, you should always make sure that all the information agents need to calculate this is at their disposal so that you get an accurate number and that you have enough to truly ‘replace’ your home should you need to.

Loss of Use

Lose of use coverage is there to pay for any additional expenses that you may incur should you experience a loss or any damages. For instance, if a small fire broke out in your home and it suffered significant smoke damage, making it impossible for you to stay there while it was being repaired, this coverage would help pay for a hotel room, any extra expenses you incurred as a result (such as if you had to drive further to work) or had to go to a Laundromat to do your laundry since you couldn’t use your own. An insurance company will pay in one of two ways: either by paying outright or by reimbursing you directly after they’ve received your receipts for the extra expenses.

Family Liability Coverage

Family liability coverage, also often referred to as CFL coverage, is the pre-set limit that the insurance company will pay to anyone if they were to sue you because an accident happened on your property. Examples of things this would pay for are if someone was at your home and was bitten by your dog, or if someone drowned in your swimming pool and a lawsuit was brought against you. Not only does this coverage pay for the medical expenses or other expenses incurred by the plaintiff, it would also help pay legal defense costs and any kind of settlements or judgments that you were ordered to pay. This is the coverage that you should definitely look into raising, as when you think of the expenses that could be incurred on top of court costs, pain and suffering, lawsuits, and others, a mere $100,000 wouldn’t suffice. Amounts for about $100,000 to $500,00 are generally offered, but most only choose $100,00 or $200,000 in coverage. Fortunately though, you can raise this liability limit from $100,000 to $300,000 for only an extra couple dollars a month: certainly worth the protection.

Water and Sewer Back Up

This coverage can often be confused with flood coverage, but it’s important to know that it’s not. This coverage pays for any damage incurred if water or a sewer were to backup and cause any damage, such as if a toilet overflowed, a sink, city sewer system, septic tank, washing machines, or sump pump backed up. This is most likely an optional coverage you can choose in coverage amounts typically ranging from about $500 to $5,000 on some policies, and although it may seem like a lot of damage couldn’t be done from this, there’s actually plenty that could be done, so make sure you ask specifically about this coverage to make sure you have it and that it’s not left off your policy.

The bottom line is that you should never assume that the protection on your home is ever enough. Even if you bought the highest coverage available for each peril, there’s still that chance that you could end up not having enough coverage, so taking the first step and at the very least getting higher coverage of at least one or two steps higher Is absolutely worth it and only takes a few moments of your time to research the coverage, find what you have, and then to obtain the coverage.