Coverage A, Dwelling
The dwelling coverage is the primary coverage of a home insurance policy. It provides coverage to repair, or rebuild, your home in the event of a covered claim. Typical covered perils include: Accidental discharge or overflow of water, explosion, fire, freezing, hail, lightning, smoke, theft, vandalism, ice/snow/sleet, and wind. Two major excluded perils are earthquake and flood; they require a separate policy for insurance. These perils are the most common, and it’s important to understand what is or isn’t covered in your home insurance policy.
The Coverage A Limit is the insurance carrier’s estimated cost to rebuild your home in the event of a total loss. The insurance company is not concerned with the “market value” of the home or your loan amount.
Although wildfire gets the most attention in the media space, water losses are the most common home insurance claim.
Coverage B, Other Structures
This coverage is intended for any permanent structure on your property that is not attached to the main home. Examples include: a detached garage, fences, gazebos, and even pool equipment.
Coverage C, Personal Property
Coverage C of a home insurance policy is for the contents inside your home. Things such as your furniture, clothing, TVs, kitchenware, etc. This coverage will repair or replace your damaged belongings. This insurance can also be applicable for your belongings away from your home – with the most common incidents being a vehicle break-in with theft or theft of luggage while traveling.
There are limitations in all homeowners insurance policies for certain categories of personal property. For instance: firearms, art, jewelry, collectibles, furs, cash, computers, purses, musical instruments, and more may be limited to as little as $1,000. If you have any “specialty” items, coverage can be endorsed but will require detailed information and likely an appraisal of the item(s).
Coverage D, Loss of Use
Also know as “Additional Living Expense” coverage, Coverage D of a home insurance policy will cover the costs incurred if you must move out for a covered claim. For shorter durations, this is typically to a hotel or AirBNB nearby. Longer, more significant claims typically require a long term rental solution. In addition to the rental costs, Loss of Use coverage can also be afforded to expenses such as: additional gas or food expenses while displaced, coverage of storage unit costs, pet boarding, moving costs, and more.
Coverage E, Liability
Coverage E of a homeowners insurance policy provides coverage if a claim is made, or a suit is brought, against the homeowner for bodily injury or property damage. The most common liability claim is for dog bites – and that is why a number of dog breeds are restricted with home insurance companies. (Read more about Dog Breeds to Watch For) Insurance payouts under the Liability coverage portion are typically for medical bills, legal expenses, lost wages, and sometimes death benefits. At Old Harbor, we recommend a minimum of $500,000 in liability coverage.
Coverage F, Medical Payments
This coverage is provided for small injuries, and associated medical expenses, for individuals injured on your property. An example would be someone that slips walking down your driveway and breaks their arm.
Coverage can be used for expenses such as stitches, casts, X-rays, physical therapy, and more. This coverage is applicable regardless of fault but will not apply to anyone that lives in your home. The maximum coverage offered with most insurers is $5,000.
This is the amount you as the homeowner are responsible paying for before the insurance company will pay out. Our recommendation for your home insurance deductible will typically be either $2,500 or $5,000. Small claims adversely impact your home insurance pricing, and as such we do not recommend a deductible below $2,500 ever. In California, where insurance is especially volatile and restricted, our recommended minimum is $5,000. You can read more about how filing small claims can be very problematic here: The Case Against Filing Small Claims.
Extended Replacement Cost (“ERC”)
Above we referenced that Coverage A in a home insurance policy is the calculated cost to rebuild your home. Well, what if the insurance company’s estimate is short? That is where ERC coverage comes into play. While the carrier’s estimate may be close to accurate at the time the policy is issued, costs can change over the policy term of a year. Things like Demand Surge can drive up the cost of building materials and labor. If the company’s estimate to rebuild your home is inadequate, Extended Replacement Cost kicks in and provides additional monies to finish construction of your home.
Water Backup Coverage
This coverage pays to repair damage done to your home by sewer, septic tank, or drain backup. The most common occurrence of water backup is during the rainy season when heavy rains can overwhelm city sewer and draining systems.
Libel, slander, false arrest/detention, malicious prosecution, wrongful entry or eviction are all potential issues that could trigger personal injury coverage. The environment today is increasingly litigious. That fact combined with the interconnectedness of the web and social media, has created a need for Personal Injury coverage more than ever. It’s important to note that there are limitations to coverage; intentional slandering, illegal activities, and more are excluded.