What Does Homeowners Insurance Cover Me For in 2023? – Horan Insurance

The Big 6

Homeowners insurance, or hazard insurance, comes with six specific sections of insurance protection. Those include:

We refer to these as the “Big 6” because you will find them on every home insurance policy written in New York State. If you have been quoted for or have a homeowner’s insurance policy, you’ve likely seen this list before. They appear on your policy’s declarations section (aka those first few pages of your policy with your name and all the amounts listed).

Unfortunately, the list does little to state what the coverage means. For example, did you know that personal liability protection covers legal expenses? There is a lot packed into each of those sections, so let’s dig into them.

The dwelling or residence coverage

Not surprisingly, your home policy covers the space you live in, your actual home. You’ll see this coverage listed on your declarations page as Coverage A – Dwelling (or sometimes residence). If your house were to be damaged by fire, the dwelling insurance amount is what your insurance carrier will pay.

The dwelling coverage protects many vital components of your house. Your roof, siding, flooring, cabinetry, walls, and electrical system are all examples of what you can expect to be insured by the dwelling coverage. That might seem obvious, but it goes further.

Beyond those obvious things, the dwelling section also covers the major mechanical items in your house. Your entire heating and cooling system, water heater, plumbing, and built-in appliances are also insured here.

What about the spots that aren’t living spaces?

Everything mentioned thus far referenced the pieces and parts of the house itself. But wait! There’s more! The dwelling coverage applies to your basement, porch, patio, breezeway, garage, or anything attached to the house, even solar panels.

Your dwelling coverage handles quite a bit. Appropriate coverage is critical if you hope to rebuild your home after a fire.

How do I figure out how much house coverage I need?

As we discussed in “What Information Will I Need to Get Homeowners Insurance in 2022?” there is a good deal of information you’ll share about your house. Those details will help your insurance agent establish its rebuild cost.

Your insurance agent will use industry tools that help calculate the replacement value. These tools are helpful as they adjust for inflation and location. The more thorough the information about the house, the more precise the coverage will be.

Other structures coverage

Properties often have other things built upon them besides the house. Those are called other or related private structures, and you’ll see this on your declarations page under Coverage B. To be covered by the policy, the structures must be on the same property as the house.

Here are some common examples:

While the rebuild value of your house is scientific, determining the value of these items isn’t. You only get ten percent of the specific dollar amount insuring the house. For example, a policy insuring a house with $150,000 for dwelling coverage will provide only $15,000 (10%) for other structures. Hardly much of a science.

What if I need extra other structure coverage or don’t want it all?

If you have more structures on your property, there is a decent chance that ten percent won’t be enough to replace them. Ten percent of the dwelling amount is the minimum the insurance company must provide. However, many insurance carriers automatically provide between twenty and forty percent for no additional cost.

Regardless of the percentage, you could find that it’s still not enough coverage. Don’t worry; you can add more. Yes, it will cost a little more, but it is an option. Be sure to discuss all the details about the other things on your property with your insurance agent. Garages and inground pools are expensive to construct, so be sure you are satisfied with your carrier’s coverage.

What if you don’t have any other structures on your property? It’s common not to have anything on site besides the house, which renders this coverage useless. If you find yourself in that position, you’re stuck with it. The cost for this part gets baked into the policy, so removing it will not save you any money. You can file it under “better to have it and not need it than to need it and not have it.”

Personal property coverage

We’ve explained how all the buildings are covered, but what about all your stuff inside of them? That is known as personal property coverage, listed on your declarations page as Coverage C. From your bathing suits to your pool noodles; this is the part of the policy that insures your belongings.

The dollar amount of personal property coverage on your homeowner’s insurance policy is also a percentage of your dwelling’s value. In the case of personal property, you’ll receive at least fifty percent of the dwelling value. Using the example from earlier, that $150,000 in dwelling coverage equals an extra $75,000 (50%) for your stuff.

Many carriers automatically give more than fifty percent, but it varies. Most homeowners find the standard amount offered is more than enough, but you can add more for a fee. Any reduction of the standard amount of coverage will not decrease the premium.

What if most of my things are old and used?

Do you mean you don’t throw away your clothes after one wear? Many of your things have seen brighter days unless you’re an A-list celebrity. But just because it’s old doesn’t mean you’re ready to replace it. If it burns up in a fire, you’ll have to.

Your insurance carrier will value your property using either replacement cost coverage or actual cash value (ACV). Before anything becomes damaged, you must know which method they intend to use.

If your insurance company uses actual cash value, you might be disappointed. The ACV method considers the damaged items’ age and condition. The ACV process depreciates the item, leaving you with a fraction of what it would cost to replace it with a new one. For example, a laser jet computer printer purchased for $500 in 2012 might only have an ACV of $60. That might not be a big deal if a fire only burned the printer, but would you be okay with that valuation for everything you own?

If you said no to that last question, you’d want replacement cost coverage. The replacement cost method considers the cost of replacing a damaged item with a brand-new one. Yes, your old and now damaged property might no longer be available. You have to find something similar, but not significantly better, with replacement coverage. Your carrier won’t be replacing the laser jet with a 3D printer.

What about collectibles or my engagement ring?

We explored this topic in “How Should I Insurance My Most Valuable Things?” so be sure to see that for a more in-depth review. However, there are a lot of common possessions that do not get covered like other items you own. So, we’ll touch on some of that here.

Collectors’ items, such as stamps, baseball cards, and artwork, can have fluctuating values. You can ask three experts for their opinion on the same item, and you’ll likely get three different answers. That is one reason your homeowner’s insurance policy does not cover these items. Depending on the collectible, the policy might have between $500 to $1,500.

Jewelry is no different. Wedding bands, engagement rings, diamond earrings, or watches are all limited to a low dollar of coverage, usually between $1,500 to $2,500. The home policy also excludes theft and misplacement, which is how most jewelry is lost.

Much of this can be fixed by what is known as “scheduling,” which we also covered in “How Should I Insure My Most Valuable Things?”.

Loss of use coverage

If your house burns down, you’ll need to live someplace else for a while. Enter loss of use coverage, located on your declarations page under Coverage D. This part of your home insurance policy provides reimbursement for extra expenses you incur from having to live elsewhere.

During the rebuilding, you will encounter new expenses. You’ll be dining out more, renting a temporary home, or storing things that might have survived the fire. Your home policy has coverage for those kinds of costs.

The amount of coverage can be listed in one of two ways, by dollar amount or by time. It’ll be a minimum of twenty percent of your home value if it’s a dollar amount. If it’s a timeframe, typically twelve months, then it’s how much you need until your time runs out. There are arguments about which way is better, but we’ve yet to see anyone run out of money or time.

Does loss of use pay for all my bills?

No, loss of use will not pay for everything. Nor will it provide compensation for meals at the highest-rated restaurants in Skaneateles. It only pays for the extra costs you encounter because of the loss. You are still responsible for your mortgage payment, property taxes, homeowner’s insurance (ahem), and all other household costs you would have had if the fire had never happened.

Personal liability coverage

Did you know you are responsible if someone gets injured while on your property? Should you get sued, your home policy offers protection in the form of personal liability coverage. You can find that on your declarations page under Coverage E.

When considering the ways people get hurt, the possibilities are endless. Your insurance carrier would use your liability coverage if someone were to sue you. If the ruling favors the injured party, your liability coverage amount goes toward the judgment.

New York home insurance policies provide a minimum of $100,000 per occurrence in personal liability coverage. The insurance company pays your legal expenses, which doesn’t reduce your amount of coverage. Your coverage extends to all “insureds” within the home. For more details on who is insured, be sure to read “Does Homeowner’s Insurance Cover Everyone Who Lives With Me?”.

What are some examples of things that could happen?

Again, the possibilities are endless. However, these are some of the most common ways injuries occur:

What if the person who got hurt wasn’t a guest or was trespassing?

As the property owner, you are still liable for the injuries of others, invited or not. If a 3rd grader leaves the school bus and gets injured while running across your front lawn, that falls on you. Your UPS driver is bitten by “the friendliest dog in the entire world” during delivery; that again is on you. If your daughter’s boyfriend hops the fence to throw rocks at her window but loses an eye when one bounces back, you could be going to court.

I’m freaking out now. Can I buy more liability coverage?

We know; things were going great until this personal liability business came up. Don’t worry; you can get more, and we encourage you to. Many insurance carriers now offer up to one million dollars for personal liability. The additional cost is minimal and worth every penny should you ever need to use it.

Medical payments to others

We have reached the last one of the big 6. The Medical payments to others cover minor injuries that do not require a lawsuit. The medical payments portion is on your declarations page under Coverage F. New York home policies provide a minimum of $1,000 in coverage.

Medical payment coverage differs from personal liability insurance in a couple of ways. First, the injured person does not have to file a lawsuit to be compensated. Second, coverage will only apply for expenses incurred up to 36 months from the accident.

We prefer to identify medical payments as “don’t sue me money.” It’s much easier to cover the cost of a few stitches with a medical payments claim. Most carriers respond swiftly as they also prefer to avoid a lawsuit.

You can increase your coverage for this valuable coverage too. Almost all carriers offer up to $5,000, and a few will offer more. Like personal liability, the extra cost is almost unnoticeable. We suggest that you add as much as you can. The insurance company has deeper pockets than many of us, so try to get the most you can.

Homeowners insurance does a lot. It must cost a fortune, right?

Considering all the potential expenses your home insurance could pay for; it’s easily one of the best values today. The sum of the big six will often exceed one million dollars in combined coverage. Considering the average homeowner’s insurance policy costs about $800 per year, it’s hard to dispute the deal we’re getting. If you’ve ever had a significant claim, you already know.

What should I do next?

Now that you’ve learned more about your homeowner’s insurance coverage, we’d like to offer you a couple of different options.

You can enhance your home insurance with additional coverages. Learn about those options in “What are the best endorsements to add to my home insurance?”. For an overview of home insurance in general, try “How to Get Homeowners Insurance.”.

If you’ve had just about enough insurance knowledge, and are ready to turn things over to us, tap the Get a Quote button below. Or, if you have a question we haven’t answered, use the contact form below, and one of our insurance pros will provide an answer ASAP.