Wisconsin homeowners have a lot of insurance choices. For most, having the right coverage is the most important factor when deciding on a policy since it helps ensure there will be enough to rebuild or repair the home after a total or partial loss. With many factors that go into determining your coverage needs, how can you tell how much home insurance is enough for you? In this post, we will explore standard home insurance coverage options help you calculate the coverage you might need to protect your property and assets against an unexpected loss.
Coverage A – Dwelling
Dwelling is the first coverage listed on a typical home insurance policy, as it is the most extensive of all coverages on the policy. Dwelling coverage helps pay for the repair or rebuilding of your home after a covered event. If you have an HO-3 or HO-5 policy, your home is covered for damage from all hazards and risks except for the list of excluded perils in your insurance policy.
Selecting Your Coverage
Mortgage lenders typically require homeowners to carry a minimum amount of Dwelling coverage to protect the bank’s financial interest in the property. While having enough coverage to merely pay off the mortgage may satisfy the lender’s requirements, it does nothing to protect your equity in your property.
We recommend working with a trusted insurance agent here at Frydach Insurance to assess your coverage needs accurately. We use a Home Cost Estimator to calculate the amount you should insure your property for, with consideration for many different factors like:
- The size of your home
- The materials used to build your home
- The local cost of construction in the Germantown area
- The cost to clean-up debris and remediate your property after a disaster
Selecting a Deductible
In addition to selecting limits for your coverage, you will also select a deductible. This is a dollar amount that you agree to contribute toward the cost of any approved claims, big or small. Deductibles can be as much as $2,000 or more. Though that may seem like a lot of money to pay toward a loss, higher deductibles also tend to generate lower annual insurance premiums. If you prefer a smaller financial burden when filing a claim, lower deductibles are also available, often for as little as $500.
Coverage B – Other Structures
If you have structures on your property that are independent of your primary dwelling, you need separate coverage that pays to repair or replace them after a covered event. Coverage B on your insurance policy is designated coverage for these structures, providing similar protections as in Coverage A for detached garages, fences, gazebos, and other structures on your property. In most cases, insurance companies protect these structures with limits equal to about 10 percent of your Dwelling limit, but additional coverage may be available to those who need it.
Coverage C – Personal Belongings
Insurance companies include Coverage C on HO-3 and HO-5 to compensate policy-holders for the loss of personal possessions. This coverage is typically set at 50-80 percent of the Coverage A limit, although insurers also place dollar-amount limits on certain classifications of belongings, such as jewelry and firearms. If you have high-value belongings that exceed these limits, talk to an agent here at Frydach Insurance about scheduling additional coverage on your policy. A home inventory can help you keep track of your possessions and make it easier to declare losses for a claim.
Keep in mind that HO-3 and HO-5 cover personal belongings differently. HO-3 only reimburses you for damages caused by one of the named perils in your policy. HO-5 is more comprehensive, with coverage for all risks except those excluded in your policy. Regardless of which you choose, both will typically reimburse you for the cash value of your belongings rather than their replacement cost. If you prefer compensation that pays for new replacement items, talk with our team about adding an endorsement to your policy.
Loss of Use
There are still bills to pay even if a fire wreaks havoc on your home. If you are still paying a mortgage on your uninhabitable home, how will you also afford to pay for a lengthy hotel stay or short-term apartment lease? Loss of Use coverage helps pay for the additional living expenses you incur while displaced from your home – usually in an amount up to 20 percent of your Coverage A limit.
Continue reading part two of “How much home insurance is enough?”