Animas Craft Woodworks

PROTECTING PROPERTY

How much coverage do you need?

By Connie Sutton

Homes are a valuable asset worth protecting, which requires a homeowners insurance policy. Nearly every lender requires homeowners to have insurance before issuing a mortgage loan, but lender rules only consider their investment. In fact, most lenders never consider personal property or liability coverage. Without it, homeowners could be paying out of pocket in the case of accidents and disasters. That is why having enough insurance coverage across the board is so important. Purchasing homeowners insurance can seem like a daunting process, luckily, there are a few basic guidelines to help you determine the amount of coverage you need. Structural Coverage

A standard homeowner’s policy provides coverage for disasters such as fire, lightning and hail. Depending on the location of the property, homeowners may also need to include flood coverage. For this part of a policy, the limits must be high enough to cover the cost to rebuild the home. The bank typically sets minimum coverage requirements. However, if they are based only on the mortgage price, it may not adequately cover the cost of rebuilding. When determining values, take local construction costs, the age of the home and whether any part of the house was custom built into account.

If you have an older home, it’s possible that building codes have been updated since the original construction. If so, there may be extra costs required to bring the home up to modern code requirements. If you suspect elements of the home aren’t up to current building codes, consider adding an endorsement to your policy. This insurance add-on pays a specified amount toward bringing a house up to code during a covered repair. Older homes might also need a modified replacement cost policy. This policy allows you to repair or replace features typical of older homes—like popcorn ceilings— with standard modern building materials and techniques. Personal Property Coverage

Most policies provide personal belonging coverage valued at 50 to 70% of the coverage on the dwelling. To determine if that amount is sufficient, consider conducting a home inventory. Once completed, determine if you want to insure the items for the cash value or the replacement cost. Replacement cost coverage is typically about 10% more. If you own higher-priced items like jewelry and computers, insurance companies often put a cap on coverage, so be sure to check the policy for coverage limits. Homeowners can also consider adding a personal property floater or endorsement to cover valuables individually or as a collection, with significantly higher coverage limits. ALE Coverage

Additional Living Expenses or ALE protects homeowners in case of disaster, such as fire or flood that forces individuals from their home. ALE covers hotel bills, restaurant meals and other living expenses incurred while the home is being repaired or rebuilt. If part of the home is a rented unit, this coverage will also reimburse you for the loss of rental income. ALE coverage limits vary from company to company. Some provide an unlimited amount of coverage, for a limited amount of time. Others may set limits on the amount of coverage. In most cases, you can increase ALE coverage for an additional premium. Liability Coverage

The liability portion of a homeowner’s policy protects the policyholder against lawsuits for bodily injury or property damage that a household member or pets may cause to other people. Most homeowner’s policies provide a minimum of $100,000 of liability insurance. However, it is increasingly recommended that homeowners consider carrying between $300,000 to $500,000 of liability coverage. Another option is to purchase a separate excess liability or umbrella policy. These policies can also act as a safety net in case of disaster since they start to pay after the liability in the event the underlying policy runs out. In addition to providing additional dollar amount coverage, umbrella or excess liability often offers broader coverage than standard policies.