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.
Coverage E – Personal Liability
It’s easy to focus on the dwelling coverage when shopping for home insurance, but personal liability is also an important part of your policy. In fact, it may even ultimately protect you against the loss of your home, not because of a fire, but rather due to your financial liability after a lawsuit. With the right amount of personal liability protection, your policy can provide payment when you are the subject of claims for third-party injuries or loss.
Types of Losses
There is an infinite amount of scenarios that could lead to bodily injury or property damage liability. Some, however, are more common than others. For example, dog bites are among the most common claims homeowners face, accounting for more than one-third of all claims and costing insurers more than $570 million in 2015 alone. On average, that is more than $37,000 per claim, although severe bites could garner much higher judgments.
Whether the incident occurs at home or while you are away, personal liability coverage typically follows you anywhere you and your household members go, with exceptions for certain events like car accidents.
How Much Coverage Do You Need?
Insurers offer various levels of personal liability coverage, although homeowners typically choose an amount between $100,000 and $300,000. We here at Frydach Insurance urge our customers to select high-limit coverage, which better protects your income and assets against litigation.
Coverage F – Medical Payments
When someone is injured in your home or on your property, medical payments coverage helps take care of the medical bills, whether for a doctor’s visit or a trip to the emergency room. This coverage, which is usually between $1,000 and $5,000, does not eliminate your possible liability for an accident, nor is it contingent upon fault. However, it does assure that those injured get the medical attention they need and may even be enough to prevent a possible lawsuit.
Many homeowners choose endorsements to close coverage gaps and further minimize exposure to certain types of risks. These endorsements are optional, but they can provide significant financial benefits should you ever need to file a claim. Examples include:
- Water backup and sewer coverage
- Home business coverage
- Scheduled coverage for high-value assets
- Personal property replacement coverage (versus actual cash value only)
Some endorsements, such as water backup and sewer coverage, are recommended for nearly all homeowners. Others, such as home business coverage, may only be appropriate for people with certain risk exposures. For help determining which types of endorsements may be right for you, contact our office today.
Beyond Home Insurance
You can reinforce the protection of your home insurance policy by supplementing it with umbrella insurance. This coverage is extra liability protection with high limits – usually $1 million or more. This coverage is above and beyond the limits on your primary liability coverage, helping to pay for excess damages that exceed the limits of your home insurance. In the event you face a million-dollar lawsuit, even a $300,000 home insurance liability limit would not be enough to shield your income and assets against garnishment and liquidation. Fortunately, an umbrella policy can be added to your insurance portfolio, often for as little as $200 per year or less.
For more information about umbrella insurance or to find out if it could be right for you, contact our office today.