Many people don’t fully understand how their Homeowner’s or
Renter’s policy works. This article will give a brief overview of the coverage
included in both policies, and will provide links to articles that further
explain the coverages and terms.
Homeowner’s and Renter’s insurance policies are package policies designed to cover the insurance needs of the average renter or
homeowner. There is a lot of overlap with these policies, but the Homeowner’s
policy covers the extra property exposures that they face. Each of the policies
have coverage parts, designated by different letters. Below is each coverage
part, with a description of what it does:
Coverage A, Damage to the Home:
Coverage A is exclusive to the Homeowner’s policy, as a
renter (obviously) doesn't own their residence. The coverage provided can be
widened or narrowed, depending on the provisions inside the policy. The first
provision that modifies coverage is what valuation the home is written
as—either Replacement Cost or Actual Cash Value. The abridged explanation is
that Replacement Cost valuation would provide you with a brand new home after
total loss, where Actual Cash Value would reimburse you with the market value
of the home, allowing you to go find another home of similar price to purchase.
Another provision that modifies Coverage A is what Cause of
Loss Form it is written on. These Forms define which Perils your home is
insured against. The Forms are Basic, Broad, and Special, with Basic providing the
narrowest of coverage and Special being the widest. Lastly, you are required to insure your home for approximately its exact worth due to the Coinsurance Clause.
Coverage B: Other Structures:
The Other Structure coverage is another Homeowner’s policy exclusive, as it
covers any unattached buildings or structures on your property (such as a shed
or gazebo). The amount given by the coverage is usually 15% of the Coverage A amount,
and can be adjusted to accommodate your specific needs.
Coverage C, Personal Property:
Both the Renter’s and Homeowner’s policies have Coverage C.
This section provides coverage for all of your personal items, such as your TV,
furniture, clothing, etc. Like Coverage A, it is subject to Replacement Cost or Actual Cash Value valuation and the Causes of Loss Forms. However, Coverage C
is also subject to Sublimits. Sublimits typically apply to collection items,
such as furs, guns, precious metals, etc. To properly cover all of your
personal property, you may need to increase the Sublimits, or alternatively,
you can Schedule each individual item.
Coverage D, Additional Living Expense:
Also known as Loss of Use coverage, Coverage D can be found on both the Renter’s and
Homeowner’s policies. Coverage D would reimburse the policyholder’s expenses
after a covered Peril makes their home uninhabitable. So if a fire destroys
your home, Coverage D will pay to put you in hotel while your home/apartment is
being rebuilt. It will also pay any additional expenses you have to pay, such
as increased cost for food. The amount provided for Coverage D varies, but can usually be increased. Note that this coverage typically is only available for a stated amount of time, such as coverage for up to six months after a covered loss.
Coverage E, Personal Liability:
This section covers the
renter or homeowner and their family against lawsuits (legal liability).
Situations that would be covered by your Personal Liability coverage would be
if your dog bites someone, if a guest trips and injures themselves on your
property, if you damage someone else’s property, Personal Injury, etc. The limits can typically
be set as low as $50,000 up to $500,000. (the Personal Umbrella policy provides
additional liability coverage on top of the Personal Liability coverage)
Coverage F, Medical Expense:
Also known as Medical Payments coverage, this coverage is available for
both Renter’s and Homeowner’s policies, and it is a supplementary coverage to
your personal liability. Though your Personal Liability coverage will cover any
medical expenses that you’re held liable for, the Medical Expense coverage will
pay the medical expenses of people who harm themselves on your property even though you
didn't negligently cause it. Essentially, this coverage was designed to pay their medical bills to keep
you out of court.
Note from the Author (Nov. 14, 2014): After two years of work, we've entirely redesigned our website! Using SquareSpace, we were able to import this blog and we are continuing our blog there. To find the current version of this article and our new articles, click HERE.
Note from the Author (Nov. 14, 2014): After two years of work, we've entirely redesigned our website! Using SquareSpace, we were able to import this blog and we are continuing our blog there. To find the current version of this article and our new articles, click HERE.
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