You never want to jeopardize your home because you didn't understand how your insurance policy works. This is the case for many people who spend a lot of money to protect their residences. But don't worry, The Colucci Law Group is here to help!
One of the biggest mistakes you can make is failing to get basic coverage for your home. Standard homeowners insurance policy covers damage caused by certain major threats like fire, hail, wind, lightning, falling trees, tornadoes, cars, and vandals. But you must buy extra coverage for earthquakes, flooding, hurricanes in many locations, overflowing rivers, whether caused by bursting levees, or a spring thaw.
Standard homeowners policies, known as HO2 or HO3 policies, apply to damage of your home, structures, and other items such as a barn, shed or fencing. You want to ensure the "replacement value" of your home which is usually higher than its tax-assessment value and price on the market. You also want to opt for two extra-cost riders: the "extended coverage" rider and the "ordinance" or "law endorsement" rider. The "extended coverage" adds up to 30 percent to replacement value to cover higher costs for labor and materials needed from a natural disaster while "ordinance" pays the highest cost of making repairs that associate to current building codes.
Standard policies also cover your clothing, electronics, furniture, and other belongings, as well as liability for people injured or any damage caused to others. Considering liability policies start at $100,000, you should buy at least $300,000 for your home. This extra amount will raise your premiums so take a $500 or $1000 deductible to keep that in check and keep that in savings just in case of a loss.
Flood damage can be quite expensive and isn't covered by standard policies. An inch of water can cause over $20,000 in damage alone! Although private insurers usually don't cover flooding, The National Flood Insurance Program offers federally sponsored protection from your agent. Your mortgage lender probably requires you to have flood insurance if you live in a high-risk area. Even if your risk is moderate to low, you still want to consider flood insurance because premiums are proportionally lower than standard or high-risk coverage.
Neither flood insurance or the standard homeowner policy will cover sewer backups. Make sure to buy separate coverage or an endorsement for $40 to $50 a year for when the toilet backs up or the sump pump fails. States vary in what coverage is offered for broken pipes. For example, Florida policies won't cover the burst pipe but will cover the construction costs to get to the pipe.
States along the Atlantic and Gulf coasts, from Texas to Maine, as well as Hawaii and D.C., allow insurers to charge higher hurricane deductibles even though your basic policy might provide coverage for damage caused by hurricanes. The higher deductibles are a result of officially designated storms under a variety of circumstances specified in your contract and will supersede your standard deductible.
A typical hurricane deductible will range from 1 to 5 percent of the home's insured value. So for a home insured for $300,000, you would have to pay the first $3000 to $15,000 out-of-pocket before your insurance company pays a cent.
Insurers are refusing to cover some hurricane-prone places making homeowners in those areas to rely on separate hurricane policies. These state-run insurance pools (like the Texas Windstorm Insurance Association, North Carolina Joint Underwriting Association and Florida's Citizens Property Insurance) are definitely worth considering.
Standard homeowners coverage usually excludes earthquakes but most insurers offer earthquake coverage as a separate policy or endorsement. Californians, specifically, can buy this coverage from insurers in the state-managed California Earthquake Authority. As well, you should expect higher earthquake deductibles in more active areas.
If you own any valuables such as antiques, furniture, jewelry, furs, artwork, memorabilia, or anything else expensive, you should buy the "floater" endorsement to cover their full value in the event they are lost, stolen, or destroyed.
Standard policy will typically cover any injuries sustained on your premises but for permanent or part-time domestic employees, also consider having workers compensation insurance. Workers Comp covers any employees if they are injured on the job. You should check if other employees of small businesses, like plumbers, home health aides, or gardeners) are insured by their companies.
As always, you can call the Colucci Law Group at (850) 391-7244 with any questions you might have.
Cover photo courtesy of Envato