First, you need to know how much coverage you need. Some things to note is that appraisal value and sale value do not always reflect the replacement cost for a property. The reason for this is because appraisers and home buyers consider things like land value, location, amenities, lot size and other things like that. But when it comes to homeowners insurance companies they will only insure the property for what it cost to rebuild from the ground up so very rarely do we see market value and replacement cost factor in the same way.
That being said, how do you evaluate what the replacement cost is for your property? That is where a home insurance professional comes in. We have many different tools that will allow us to calculate the replacement cost for an individual property submitting to the underwriter for approval to issue coverage for that amount. It's also a very dangerous thing to be underinsured for less than replacement cost in the state of Utah.
Because there is a law of coinsurance that will penalize homeowners who insure their property for less than 80% of replacement cost. Also if you have a loan on your home you will have to provide sufficient coverage so that your loan will be paid off in the event of a total loss. A lot of times your mortgage will have insurance put on your home automatically if you fail to provide sufficient proof of homeowners insurance and a lot of times that coverage is not sufficient to truly replace your property in the event of a total loss. That's why it is important for you as a consumer to understand the amount of coverage necessary to replace your home.
So there are many different types of coverages you can purchase for your home, the best one being replacement cost which means that the insurance company would pay for the cost to rebuild the home from the ground up if destroyed by a named peril on the insurance policy. Also another important factor would be to calculate how much you will need in personal property insurance.
This covers all the stuff in your home like appliances, furniture electronics decorations and other things. Also you need to figure out how much you need in personal liability. Personal liability coverage in the event of someone slipping, falling, dog bites or even damage to property that could result in a lawsuit. So if you have low personal liability limits your risk of getting sued is much higher.
Location is a big factor when considering insurance. If your location is in a mountain range that is far away from a fire hydrant or a fire station, insurance companies see this and rate you for higher premium because it means more fire damage is likely due to fire services not being able to get there in time. Also if you're in an area that is prone to wind damage and has constant wind claims odds are you will be paying higher premiums or have higher deductibles in that area.
Another thing to consider when purchasing homeowners insurance is if the attached fences around your property and your outbuildings on the property are covered under your homeowners insurance policy. A lot of times this is not a built-in endorsement or coverage you will likely have to schedule your fence and your out building on your property with its own limit of insurance, deductibles and it will have its own premium. Typically we see that an average out building costs around $200 a year to insure and the average fence around the property is about $100 a year to insure. Of course depending on sizes, dimensions, build and other factors this rate could vary.
Should you purchase earthquake insurance for your property? To answer this we need to first understand what earthquake insurance covers. Naturally most insurance companies that offer homeowners insurance also offer earthquake insurance but they have varying deductibles and varying premiums. Typically you can expect to pay about three to four times as much for earthquake insurance then you would a normal homeowners insurance policy.
Also the deductibles for earthquake insurance are significantly higher than your typical homeowners insurance deductible. Most insurance companies require at least a 5% deductible which when you're considering your insurance limit is around let's say 500,000 that is quite expensive. So unless you have access to your 5% deductible and you can afford three to four times the amount and extra premium then earthquake insurance wouldn't be the best option for you at this time.
This means that if you're deductible is 5% and your limit on your insurance is 500,000 your damage must be more than $50,000 for the insurance company to pay out any claims. Also we should consider your location again. If you are living on the side of a mountain that is prone to landslides that could result in a total loss or a major loss on your homeowners insurance and you have the money for the deductible and can afford the extra premium I would highly recommend getting earthquake insurance quotes.
Then what about flood insurance? Flood insurance has to be issued through a special program that is designed specifically for flood which is not covered under your typical homeowners insurance policy. Depending on where you get flood insurance coverage depends on how much you will pay in premium, what is paid out and what are the different perils it covers and to what extent it will cover them.
Typically we don't issue flood insurance policies unless you were in a flood zone at which it is a mandatory coverage to have. However at our brokerage we do have multiple companies that specialize in flood insurance policies at a reasonable price that have decent coverages. If you would like to know more info about flood insurance to which I can tailor a policy for your specific need please click here.
Another question we usually get at our insurance brokerage is are wildfires covered under a normal homeowners insurance policy. The answer is yes they are covered, however going back to what we talked about before location is a big factor when these companies decide to issue a homeowners insurance policy with fire insurance coverage.
Some things to consider are if you have a wood stove or wood heat source in your home odds are you will pay more insurance premium than someone who does not. If you live in a mountainous area that is prone to wildfires or anything like that you can expect to pay more in homeowners insurance premium then someone who lives in just a normal neighborhood. As a matter of fact that is why a lot of insurance companies are shying away from ensuring cabins for that very reason alone. Also as we stated before another factor is how far away your property is from a fire hydrant or a fire station as the insurance companies see the further you are away from these things the more damage will occur in the event of a fire loss.
A big question we get asked a lot also is do I need to insure my pool on my property? This is a two-part question. The first question is should I insure my actual pool for property damage coverage. I typically don't see clients insuring their pool for damages unless it is for earthquakes as fire, wind & hail don't seem to be much of a risk factor when it comes to a swimming pool. The second part of this question is on the liability standpoint. Absolutely you should disclose that you have a pool on your property so that your insurance company can provide the recommended liability insurance coverage in the case of an accidental drowning, injury or property damage and other things like that happening at your pool.
Should you have higher homeowners insurance deductibles to save money? My answer to this is it generally depends on a few factors. First factor is how much you have in coverage and what your premium is because if you have lower premium already and lower coverage amounts it's not going to drastically decrease your home insurance premium having a higher deductible.
Second second factor I would say is how high of a deductible can you afford? Because the higher the deductible it means the more you have to pay out of pocket before the insurance company pays out a claim. So if you can't afford a much higher deductible you might be putting yourself in more financial Jeopardy by increasing it thus having to pay more out of pocket. To answer this question on a more personal and specific level feel free to visit my website and get in contact with me so we can go over your situation and make the best judgments based on your information and details.
What is equipment breakdown coverage in home insurance? This endorsement is not built into your normal home insurance policy but it is an endorsement that has its own separate deductible, separate limits and additional premium. Also it usually does not affect your premium if it is used. Then when do I recommend purchasing this endorsement?
I tell people to look into this endorsement when they have newer ACS, furnaces, fridges, freezers, water softeners and other appliances like that. This endorsement covers newer appliances for equipment breakdown but does not cover for normal wear and tear. So if you have older appliances odds are this would not be an endorsement in your favor because most likely your appliances would break down for wear and tear which would not be covered.
Do all homeowners insurance policies come with loss of use coverage or additional living expenses? I want to say typically yes this is a coverage that is part of your homeowners insurance. However to specify how much you have and how long it will last you will need to talk to your current homeowners insurance provider. This I feel is one of the more overlooked parts of the homeowners insurance policy.
This coverage is extremely important because this is what pays out in the event your home is a total loss or is damaged to the point where it is deemed not livable therefore requiring you to live in a different temporary location while your house is being repaired or built. So depending on how long it will take to rebuild your house and we all know due to the current economic situation with home builders this is not going to be a quick process. So make sure that your loss of use coverage would be sufficient to relocate you and cover lodging, extra transportation fees, additional parking expenses, extra grocery expenses and any other coverages for at least 1-2 years.
What are the different levels of coverages in homeowners insurance? I would say the first and best level of homeowners insurance is extended replacement cost value. This is essentially a replacement cost at 100% loss payout with an endorsement to increase the payout by a significant margin determined by your insurance provider to cover any additional costs in the event of a loss, even if it is higher than your policy limit.
The second level would be normal replacement cost which essentially ensures that you will receive 100% of the payout in the event of a covered loss on your home. The third level would be actual cash value which essentially means replacement cost minus depreciation. They would factor things like wear and tear among other things to determine what they would pay you out in the event of a total loss. However this could lead to a bit more out of pocket in the event of a claim.
What are some different endorsements that I can add to my homeowners insurance? You can add many different types of endorsements to your homeowners insurance. Such as water backup coverage, appliance breakdown coverage, service line coverage, scheduled personal property coverage, extended replacement cost coverage, guaranteed replacement cost coverage, flood coverage, earthquake coverage.
Let's go over each one in detail now. 1. Water backup of sewers or drains coverage is self explanatory. However what is not self explanatory is how much coverage can be applied as it is not built into a normal homeowners insurance policy. Typically if you have a sewer in your basement, your basement is finished, square footage and the percentage of completion of your basement. I typically recommend 5,000 to 20,000 in water backup and sewers or drains coverage as it does not really increase your homeowners insurance premium by much.
Service line coverage basically guards against any damage to a service line on your property such as power lines, sewer pipes and water lines among other things. Typical coverages cover excavation, repair and parts replacement. However coverage amount, eligible risks and how far the coverage extends outside your home depends on the insurance carrier offering the coverage.
Schedule personal property coverage is basically listing an item separately on your home or is insurance apart from your normal personal property insurance coverage with its own limit of insurance, deductible and premium. Typically we see anything from expensive road bicycles, wedding rings, kayaks and other things on a scheduled personal property coverage. Basically anything that you would like coverage on with a smaller deductible or anything that is above the limits already set in your personal property insurance coverage can be put on your home insurance with its own coverage limit and deductible.
The reason why people use this endorsement is because homeowners insurance policies have limits for things like jewelry, China sets, electronics, business property, guns and other things. So in order to provide adequate coverage that surpasses these limits a scheduled personal property endorsement is necessary.
Also another reason why people use this endorsement is because your homeowners insurance personal property deductible is usually around 1,000 but you can have a smaller deductible like $50 if you schedule something separately and apart from your normal personal property insurance.
As for the other types of endorsements, we already covered in the above sections but if you would like more information on different types of endorsements available to you please visit us at https://www.bluebridgeins.com/home-insurance-quote.
Are there any other homeowners insurance topics that you feel you would like me to go over or to explain a little bit more in detail? Please feel free to email me astillman@bluebridgeins.com or visit my website. Or call us from 9am-8pm Monday - Friday at (385)467-3060.
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