What’s Covered in Your Home Insurance Policy

Here are answers to some frequently asked questions I get as an insurance agent that will be helpful to any homeowner in Arizona. In addition to questions and answers, I have included coverage items to look for before purchasing your next homeowners insurance policy or upon your next policy renewal.

What is covered in my home insurance policy?

This may sound like a basic question but it is a very important one. The good news is the standard homeowner insurance policy covers most hazards or “perils” to the dwelling. It is probably easier to answer what is not covered vs. what is. Although this list is not complete, below are a few of the major ones.

–       Flood

–       Earth movement (Earthquake, landslide, sinkhole)

–       War

–       Nuclear hazard

–       Intentional loss

–       Wear and tear

–       Governmental action

–       Birds, vermin, rodents, or insects

Do I need to purchase a different type of homeowners policy if I am renting my home?

Yes. There are many different types of policies depending on the use of the home. Insuring a home with the wrong type of home insurance policy could leave you exposed and at risk of not have coverage when a claim arises. Landlord or rental policies cover you for the extra exposure of having a tenant in the home. For example, what if the tenant of your home is found liable for an injury to someone while on the property? If the home is insured as your primary home there would potentially be no coverage for the risk associated with the tenant.

Does a tenant need his own insurance policy if he is renting my investment property?

Yes, for multiple reasons. By having the tenant purchase what is known as a “renters” policy, the landlord and the tenant both benefit. The landlord gets an added layer of protection in the event the tenant is found liable for some damage or injury to someone while on the property. The tenants get coverage for their personal belongings (furniture, clothes, T.V. etc) as well as liability protection for their actions as well.

Is their added home insurance coverage I need if my home is vacant?

Yes. Many people in Arizona do not realize there is a vacancy exclusion in almost every home insurance policy. The time limit can vary, but most policies state that after 30 to 60 days of the home being vacant coverages are limited (if the home is seasonal and is correctly insured this would not apply). Losses from theft, vandalism, and water leaks could potentially go uncovered. If you know your home is going to be vacant for an extended period of time, having a property management company check on the home periodically could mitigate a lot of the risk.

How can I save money on my home insurance?

This is the question everyone wants to know. Home insurance pricing is based on many factors (age of home, proximity to fire station, estimated replacement cost, security features, etc).  Although insurance companies use basically the same criteria, you will find that their rates will vary greatly. Probably the best way to save money is to quote your insurance with multiple companies. You can call several companies for a quote, or use an independent agent that can get multiple quotes for you. Choose a high deductible. A $1,000 deductible should be a starting point. It is not uncommon for policies to be written at 5,000 deductibles or higher. The savings can be well worth it. Make sure you let your insurance agent know about any security features. Monitored alarms for fire and/or burglars will shave off 10% or more.

Now that you have a great quote on your home insurance, does the policy have the coverage you need? Many people think home insurance coverage is the same from company to company.

Here are 3 things to look for in a great home insurance policy:

1. “Guaranteed replacement cost.” What happens if your home burns down and the cost to rebuild is 300,000 and your policy is written for 250,000?  Most policies have some sort of “extended replacement” cost, but that may or may not be enough. Having a policy written with the language “guaranteed replacement cost” puts the burden on the insurance company to make sure there is enough coverage in the event of a total loss. However, to qualify for “guaranteed replacement cost”, you will need to make sure you inform your insurance agent if you make any changes to/in your home. Talk to your insurance agent about what can disqualify you from having this coverage.

2. “Water back up coverage.” I often hear, “Why would I need water back up coverage on a home in the AZ desert?” This is an essential coverage often times overlooked by insurance agents and insured’s. If water backs up through your toilet, sinks, bathtubs, etc, and causes damage to the flooring, chances are you may be out of luck. The standard home policy does not cover this.

3. “Building ordinance coverage.” Many cities in AZ are requiring the construction or remodeling of homes to include certain extras or upgrades to bring up to city building code. What if the city your home is in now requires all homes to have fire prevention sprinkler systems throughout the house? If your home needed repair from an insurance claim, you might be stuck paying the bill for the extra work. Such a law was passed in Scottsdale, AZ not too many years ago.

Another confusing aspect of home policies is the breakdown or separation of the coverages. What exactly are all those numbers and letters referring to and do I need less or more? Below is a summary of the coverages sections for you to refer to.

Coverage A – Residence (Dwelling)

This provides protection on: the house and attached buildings (dwelling, attached garage and porches, etc.), building equipment (furnace, hot water heater, etc.), fixtures, built in components, outdoor antennas including lead-in wiring and accessories, carpeting, building materials and supplies located on the insured premises for use in construction of or to the residence.

Coverage B – Other Structures
This covers fences, driveways, sidewalks, and other permanently installed outdoor fixtures, outdoor antennas including lead-in wiring and accessories, carpeting, building materials and supplies located on the insured premises for use in construction of or to a related private structure.

Coverage C – Personal Property
Personal property you own or in the care of you or your relatives residing in your household is covered. This coverage includes detachable building items such as window air conditioners, curtains, drapes and outdoor equipment not permanently installed.

This also includes coverage for the property of students who are resident relatives while temporarily living away from home at school or college.

Certain types of personal property are subject to specified limits of protection.

Coverage D – Additional Living Expense
Any extra reasonable and necessary costs incurred (up to your policy’s specified limit) is covered if you’re forced to live in temporary quarters due to the loss or repair of your home following a covered loss to your property. This coverage is for additional expenses above and beyond your normal household expenses. The increase in living expenses applies to such expenses as rental of temporary quarters, meals in restaurants, and laundry service.

Coverage E – Personal Liability
Personal liability coverage protects you against covered losses caused to others while on your property and elsewhere. It also safeguards you against accidental damage to someone else’s property.

Coverage F – Medical Payments
This coverage provides for the necessary medical expenses (subject to policy limits) for non-residents injured on your property, regardless of fault. Medical payments will be paid if expenses are incurred within three years from the date of accident.

Make sure you are not just getting a great rate, but also getting the protection you need. Having an insurance agent that understands these risks is more important than ever. Your home is one of the biggest investments you will ever make. Making sure you have the right home insurance policy is essential to protecting that investment long term. Also keep in mind that home insurance policies in each state are different. For example, an Arizona home insurance policy is going to be different from other states in the nation.

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