Understanding Your Homeowners and Renters Insurance Policy

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Your home is a key component of your financial well being, so it only makes sense to insure it properly. With that in mind, it is important that you have your home insured for the correct amount to make certain you have adequate coverage that will allow you to rebuild your home to pre-loss condition should you experience a major home disaster. In most cases this means you'll want to insure your home to full reconstruction cost standards instead of simply insuring to the limits of your remaining mortgage or to the market value. 

Keep in mind that your homes Market Value may have little to no bearing on what it likely costs to rebuild it.  In fact, some estimates say it can cost up to 30% more because you must consider things such as extensive debris removal and working around existing structures that may not have been there when the home was originally constructed. Additionally, builders hired for reconstruction also require a higher skill set since they are required to work around existing power lines, structures, and landscaping. They also must be able to match up new materials to existing materials and be fully aware of new building codes that may demand design alterations in your home. Without this coverage level in place you may be forced to refine the size and scope of the reconstruction which may mean one less bedroom, losing the half bathroom, or a smaller garage etc.  Plus your builder is losing out on any commodities of scale they might have received when building out your subdivision in the first place, so material prices will usually be higher.  For that reason we strongly recommend using full reconstruction cost when deriving your insured amount because it most closely approximates the cost to rebuild the home to full pre-loss condition.

Renters Insurance

While your landlord has homeowners insurance coverage for the physical dwelling you’re living in, as a renter, you’ll need insurance to cover your personal property like furniture, clothing or electronic equipment in the event of a loss or damage from such hazards as fire, smoke, lightning, hail, windstorm,  explosion, vandalism, and plumbing leakage.  This coverage can extend to your personal items out of the home such your golf clubs that are stolen out of your automobile.

Renter's insurance also protects you if you are responsible for bodily injury or property damage to others, for example, if a visitor trips over a rug and breaks a wrist in the fall.  Most renters’ policies provide a minimum $100,000 of financial protection against liability claims like this and aid with lawsuits brought by others for accidental bodily injury or damage to their property from you, your children and your pets.

Basic Terms and Definitions

Coverage’s A and B
provide protection to the dwelling and other structures on the premises up to the policy limits.  The policy limit for Coverage A is set by the policy owner at the time the insurance is purchased. This is the amount the insurance company will pay to have your home or dwelling rebuilt in the event of a covered cause of loss.  The policy limit for Coverage B is usually equal to 10% of the policy limit on Coverage A.

Coverage C  (Personal Property)
covers losses to the insured's personal property.  The policy limit on Coverage C is often equal to 50% of the policy limit on Coverage A. 

Coverage D  (Loss of Use)
covers the additional expenses that the policy owner may incur when the residence cannot be used because of an insured loss.  The policy limit for Coverage D is equal to 20% of the policy limit on Coverage A.  This covers extra costs to rent a hotel room or other living space, set up utilities etc. while the home damage is being repaired.

Coverage E  (Personal Liability)
covers Personal Liability and is determined by the policy owner at the time the policy is issued. Liability protection options are usually in increments of $100,000.  Typical policies offer $100,000, $300,000, $500,000 and $1,000,000.  We recommend that you discuss with an agent how much liability insurance to buy.  (See Umbrella Coverage Options*)

Coverage F  (Medical Payments)
covers Medical Payment to Others for accidents on your property.  Common options we see are:  $1,000, $2,000, $5,000 per injured person.

Replacement Cost vs. Actual Cash Value (ACV)
In the event of a loss, Replacement Cost will pay you the dollar amount necessary to actually replace the insured item with a new version or similar.  Meanwhile, ACV coverage will pay you a pro-rated amount based on the life/use of the covered item.  For example; if there was a fire in your home and the living room furniture was destroyed, Replacement Cost Coverage would help you buy new furniture to fully "replace" what was lost.  If you had ACV coverage then you would only be compensated for an amount typically paid for an item of that age. Ex. your couch was $1500 new, but since you have ACV coverage and the couch is two years old now it's probably only worth $500, so that is what the insurance company would pay you.

This data is for informational purposes only and is a representation of a standard homeowners' policy, please refer to your policy for specific details and definitions about your coverage.

Auto Insurance

Auto Insurance

Bodily Injury, Liability Coverage, Comprehensive Coverage, and Collision Coverage. Let BID find you a better auto insurance deal.

Homeowners Insurance

Homeowners Insurance

Your home is a key component of your family's financial well being, so it makes sense that you insure it properly.  Let BID find you a better home insurance deal.

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LIFE Insurance

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