Homeowners Insurance Basics

Posted By: Eve Hoelzel ICOR Blog & News ,

Understanding homeowner’s insurance can be difficult for consumers.  Many policies have specified policy limits while others have actual cash value and others have specific exclusions.  Yes, this can be very confusing!   For this month’s article, I will be explaining the general coverage and exclusion included in a homeowner’s policy.  Understanding your primary home insurance policy is as important as understanding your landlord policies.  

Most common policy Form is an HO3.  Below are some of the HO3 coverage (coverage may change from one insurance contract to the next):  

  • Fire or lightening
  • Hail or windstorm
  • Tornado
  • Smoke
  • Riots
  • Damage caused by vehicles
  • Explosion
  • Theft
  • Weight of Snow, Ice or Sleet
  • Water overflow 
  • Freezing of pipes

There are five main sections in your homeowner’s insurance declaration pages:

Dwelling Coverage:

Your homeowner’s policy will protect the home in the event of a loss caused by fire, hail, tornado, lightening or other named perils listed on your policy.  This is very important to understand the perils you are insured against.   However, a standard policy will not cover damage caused by a flood, earthquake, intentional damage, wear and tear and government actions are normally excluded.   

If you have a standard homeowner’s policy but you decided to rent it out, please contact your insurance agent to switch your home policy to a landlord policy to better protect your asset.  Changing the policy from a homeowner’s policy to a rental policy would provide you loss of rents.  

Separate Structures:  

This coverage is for other structures that are non-attached to your dwelling.  An example of a separate structure would be detached garage, detached barn, shed or fence.  

Personal Property:

Personal items such as furniture, clothes, sport equipment, kitchen items, food, and more are covered within your personal property section, if they are stolen or destroyed by a natural event.   However, higher value property such as jewelry, silverware or art collection would have a sublimit.  You can cover these items by adding an endorsement/floater.

Some carriers include an Actual Cash Value (ACV) endorsement to your personal property to reduce the claim’s payment.  ACV is based on the current value of your personal property and not the cost to replace it with a new and like item.  I suggest to talk to your agent to remove the ACV endorsement and add Replacement Cost.  

Additional Living expenses:

Loss of use of additional living expenses are included in your homeowner’s policy when your home is not livable due to a covered loss such as fire, hail, or sewer back-up.  It will cover the living expenses incurred such as food, lodging, gas and other misc. expenses you would incur when you are not in your primary residence.    

Personal Liability:

General liability covers you and your family members for bodily injury or property damage claims made against you.   Most policies also cover damage or claims made against you because of your pets.   

An example of the above is:  If your dog bites another person who doesn’t live in the household, most policies would also cover this claim.  Some carriers now are excluding certain breeds of dogs.  Please consult your Agent to make sure your breed of dog is covered in the event of a claim.     

Most homeowners’ policies include $300,000 personal liability.  My recommendation is to increase this limit to $1,000,000 to protect yourself against claims made against you or family members.    

It is important to understand that your personal liability coverage doesn’t cover your business pursuits.  You would need to have a separate policy for your business.  If you work in real estate, you have to obtain a different policy to cover your business exposure.  

Knowing your current homeowner’s policy and coverages and exclusions are very important.  Feel free to contact me if you have any questions about your Colorado homeowner’s policy.  My goal is to give you peace of mind and make sure that you are properly protected.