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Homeowners and Renters Insurance Basics

We all know that there are multiple types of insurance policies.  The information about each can be overwhelming and, in some cases, confusing.  The team at Abbott Insurance would like to take the opportunity to explain the fundamentals of Homeowners’ and Renters’ insurance policies.  Below you will find the basics of what each type of policy covers and what they do not.

Homeowners’ Insurance: What it Covers

When you buy a home, you automatically know that you will need to buy a homeowner’s insurance policy.  What you may not know is what this insurance covers you for.  A basic home insurance package will cover a number of things.  Here are some of things it does cover:

The Structure of Your House

Your policy will pay to repair or rebuild your home if it is damaged or destroyed by fire, hurricane, hail, lighting or other disasters listed in your policy.  Most policies also cover detached structures such as a garage, shed or gazebo, usually for about 10% of the amount of insurance you have on the structure of your home.  A good guideline for purchasing insurance on the structure of your home is to purchase enough to rebuild your home.

Your Personal Belongings

Should anything ever happen to your home, your personal belongings could be affected and need replacement.  Your furniture, clothes, sports equipment, electronics, jewelry and other personal items are covered if they are stolen or destroyed by fire, hurricane or other insured disasters.  The coverage is generally 50% – 70% of the insurance on the structure of your home.  Be sure to conduct a home inventory to confirm that this is enough to cover the replacement of all the items in your home.  Documenting what you have is critical to making the most out of your homeowner’s insurance protection!

Liability

Liability coverage protects the policyholder, family members and even pets from lawsuits for bodily injury or property damage that they are to blame for.  This will pay for court costs, as well as any awards you are ordered to pay in court (up to the limit of the policy).  The liability portion of your policy conveniently travels with you as well.  So, if you have an accident at a neighbor’s house or anywhere else you may travel, your policy covers you.  Homeowner’s insurance also provides no fault medical coverage in the event someone is injured in your home.

Additional Living Expenses

Additional Living Expenses or ALE cover expenses of staying elsewhere if your home is not livable, due to damage incurred by a covered disaster.  ALE will pay for things like hotel bills, restaurant meals and other related expenses.  Keep in mind that ALE coverage can have limits, including limits of time.  If you need additional ALE coverage, it is easy to increase the coverage if you need it.

ALE coverage limits are separate from the amount available to rebuild or repair your home.  So, even if you use up your ALE, the insurance company will still pay the full cost of rebuilding your home up to the limit of your policy.

Homeowners’ Insurance: What it Doesn’t Cover

Now that we’ve discussed some of what homeowner’s insurance does cover, it is time to talk about what it doesn’t.  You shouldn’t assume that just because you’ve purchased a policy that it covers you for everything.  It is important to read the details of your policy to determine where you may need extra coverage.  Here are some things that are not covered by homeowner’s insurance:

Floods

If you want flood coverage, you’ll have to purchase an additional policy to cover damage caused by floods.

Earthquakes

Earthquake coverage is not covered under standard home policies.  Talk to your agent to see what your options are.

Sewer Backup

If a sewer backs up into your home, it can do some serious damage.  It is also not typically covered by a standard home policy.  If you are concerned that this may be an issue for your home, experts recommend considering extra insurance that may be available as part of your current policy.

Mold

Most standard home policies either limit mold damage coverage or exclude it entirely.  You can add coverage, but it will cost you more.  The best thing to do is to keep it from growing in the first place.  If you have any flooding or a leak, get rid of the moisture as quickly as possible.

Renters’ Insurance: What it Covers

Not everyone owns a home.  There is a good portion of the population that rents their residence.  But just like homeowners, renters need a way to protect themselves and their belongings.  That’s where renters’ insurance comes in.

So, what does renters’ insurance cover?

Personal Property

Renters’ insurance will protect your personal property if it is stolen or damaged in a fire.  You will be able to replace those items to the limit of your policy.  So be sure to choose a policy that has adequate coverage to replace items that cannot be recovered.

One thing you should also keep in mind is that a standard renters’ policy has limited coverage on items such as jewelry and coin collections.  If you think you may need more coverage than your policy provided, talk to your insurance agent about scheduled personal property coverage, and if it is right for you.

Liability Insurance

Just like you’d find with a homeowners’ policy, renters’ insurance also has liability coverage.  So, if you are found to be at fault for injuries to someone else, you’re covered.  No one ever thinks an accident will happen, but we all know on occasion that they do.  As with all coverage, be sure to review the limits of your coverage to determine whether the amount is appropriate.

Additional Living Expenses

Additional living expenses come into play when a catastrophic event occurs, and you are unable to stay in your dwelling.  It covers costs such as hotel bills, food, and any other costs you incur because you are unable to stay in your home.  As always, review the coverage limits in your policy to determine if they are right for you.

Natural Disasters/Catastrophic Events

Disasters and catastrophic events that are covered by your policy typically include fire/smoke, lightning, vandalism, theft, explosion, windstorm and certain types of water damage (ex. Burst pipe, flooding due to negligence by another tenant).

Riders/Floaters or Scheduled Personal Property

A rider/floater is a separate policy that provides additional coverage for more costly valuables if they are lost or stolen.  Items like jewelry, furs, collectibles, sports equipment, musical instruments, cameras, etc.  To determine if you will need a floater, be sure to take a home inventory.  There are several tools available to help you complete one.  You can learn more about them here: http://geni.us/homeinventoryapps

Renters’ Insurance: What it Doesn’t Cover

Now, even though renters’ insurance covers quite a lot to protect you and your belongings, there are other things it doesn’t cover.

Floods and Earthquakes

Similar to a homeowners’ policy, renters’ insurance doesn’t cover flooding or earthquakes.  Any damaged sustained by these events will not be covered under a standard policy.  Flood policies must be purchased separately.  Review with your insurance agent to see if coverage for earthquakes are available.

Pets

Another thing your policy may not cover is your pet.  If you have a dog, most standard policies have restrictions on what are considered high risk breeds.  You may have to get special coverage that covers dog owners’ liability.

Pests

Do you think you may have a pest infestation?  Renters’ policies do not cover this.  If you think you may have a bug infestation of any kind (roach, bed bug, etc.) or rodent infestation, your policy doesn’t cover the costs to get rid of them or repair the damage they may cause.

There you have it, these are the points essential to you understanding basic policy coverage for homeowners’ and renters’ insurance policies.  If you have questions about your own coverage, contact us today!

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Bill Abbott has found that 43% of other clients are overpaying for their insurance and 26% have missing coverages.
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