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Breaking Down Homeowner’s Insurance Coverage

By Erik Folgate

When buying homeowner’s insurance, you are buying a package. You cannot break this package. You either take all of it or none of it at all. There are six parts to the insurance package. Typically, they are identified as Coverages A,B,C,D,E, and F. This can be intimidating when buying homeowner’s insurance to understand what all of these coverages do and how they protect your home and possessions. I am going to break down each coverage to let you know what it covers and how it helps you. Also, I will give a tip for what it DOES NOT cover and what important endorsement I recommend. Let me remind you that I am not a professional when it comes to personal finances, however, I am a licensed practicing claims adjuster. Property insurance is my life right now, so bookmark this post and keep it as a reference for the next time you need to purchase a homeowner’s policy. Also, recognize that every insurance policy is a little different, but most of them follow a similar format and possess similar endorsements that may be filed under different names.

Coverage A

This is usually your highest and most important coverage. Coverage A covers anything involving your dwelling or the physical structure of your home. It includes the core structure of the home, flooring, roofing, doors, cabinets, appliances, light fixtures, and much more. Think of flipping your house upside down, and anything that stays in place and does not move is considerd to be part of your Coverage A. Kitchen appliances and washers/dryers are debatable, but they are generally covered under Coverage A. Make sure your have a “broad” form coverage A or “all perils” Coverage A policy. Remember, “all perils” does not mean that you are covered for everything. It means that you are covered for everything EXCEPT that which is excluded in the policy. There are numerous exclusions in a homeowner’s policy that many people do not know about. The most common exclusion is wear & tear and deterioration. The policy does not act like a home warranty. If the roof leaks due to old age or an old plumbing pipe breaks, the policy will not pay to repair the roof or fix the pipe. However, it generally will pay for the resulting water damage due to the incident. Again, there may be some policies that deny this coverage all together, but many will pay for the resulting water damage from a wear & tear incident.

Note:homeowner’s policies do not pay for mold damage by default. It is excluded, but many policies will add a limited amount of coverage back in through endorsement. The policy that I work with most allows $10,000 for coverage due to any damage that is SOLELY damaged by mold. Don’t let an adjuster tell you it’s not covered or it has a limit because there is mold. If the damage is already from water, then it will be covered under the general Coverage A limit and not under the mold limit. Also, remember that frame houses are NEVER covered by termites. There may be endorsements out there that give back coverage for insects, but I have never heard of it.

Coverage B

This is one of the less important coverages, but still carries a heavy responsibility. It is often the coverage where most people are underinsured. Coverage B covers all “other structures” other than your home that is unattached from the home. This includes sheds, fences, a separate garage, a mother-in-law suite that is not attached to the same foundation as the home, and any other structure on your property unattached from the main foundation. If you install an expensive new fence or a new work garage on your property, make sure that you increase your Coverage B on your homeowner’s insurance. While adjusting thousands of Florida hurricane claims, I have found that many people meet and exceed their Coverage B limit more often than not.

Coverage C

Coverage C covers all of your personal property. Basically, think of anything that you would pack up to take with you when you move. That is considered to be your personal property in the world of insurance. Unfortunately, this is often the coverage where many people get screwed by their policy. Large accidents such as water losses, fires, hurricanes, and other big losses cover your personal property well. However, a homeowner’s policy often limits certain categories of personal property and many times it limits certain items for the peril of theft. If you own a large amount of jewelry, you must have it appraised separately and scheduled individually on your policy. Once you do this, you will have full coverage up to the appraised amount, no deductible, and virtually anything can happen to it and you’ll be reimbursed. However, without scheduling your jewelry, you run the risk of being subject to a $1,000 limit if it is stolen. Also, a default homeowner’s policy with no extra endorsements will not extend coverage for losing an expensive piece of personal property. I have spoken with so many angry customers that lost their wedding ring, and I have to tell them that their claim is not covered. GET YOUR JEWELRY SCHEDULED!!!! Also, the homeowner’s policy will always limit paying for watercraft and trailers. It also limits the amount you receive for china, guns, and cash when stolen.

NOTE:Always pay for the personal property replacement cost endorsement. Basically, when the insurance company comes up with a value to reimburse you for your personal property, they have to pay you based on what it would cost TODAY to replace that item. Actual cash value pays you the replacement cost minus depreciation. Therefore, if you have a 10 year old computer, then they would say that the average computer to replace today would cost $1,000 minus $600 worth of depreciation, so you only receive $400 for a new computer!

Coverage D:

Coverage D is your additional living expense coverage. It helps you pay for the expenses incurred when having to temporarily live somewhere else when your home is damaged beyond normal living conditions or the repairs being made force you to live in temporarily housing while construction is going on. The main thing to remember with this coverage is that the insurance company pays YOUR REASONABLE EXPENSE for temporary housing and additional living expense. That means they will evaluate how much your home is insured for and base a rent payment on that. So, if you have a home insured for $500,000, they will try to put you up in a home of similar size with comparable amenities in the $3500 to $4500 range. If you live in a house insured for $150,000, they will try to put you up in a smaller home or townhouse and pay $1500 – $2000 for rent. Also, the policy will only pay expensed above and beyond your normal expenses. So, if you are in a hotel and spend $300 a week on food, because you do not have a kitchen to cook and you normally spend $150 a week for food, then the insurance company will reimburse you $150, not $300.

So, did that all make sense? Yeah, I didn’t think so. If you ever have any questions about homeowner’s or auto insurance, post a comment and I will answer it for you. The biggest thing to remember is that you need to READ YOUR POLICY. Even if you don’t understand the language, you’ll get a full summary of what you are covered for. The worst feeling in the world is getting a letter in the mail that your claim is being denied. Most people make claims ignorant of the fact that they claimed something that is excluded in the policy. Insurance policies are ruthless, but there are usually endorsements you can buy to customize your coverage to tailor to your needs.

Tomorrow, I will go over Coverages E and F which deal with the liability portion of the homeowner’s policy.

Erik Folgate
Erik and his wife, Lindzee, live in Orlando, Florida with a baby boy on the way. Erik works as an account manager for a marketing company, and considers counseling friends, family and the readers of Money Crashers his personal ministry to others. Erik became passionate about personal finance and helping others make wise financial decisions after racking up over $20k in credit card and student loan debt within the first two years of college.

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  • TJ

    Hello, thanks for the valuable information. I am in the process of purchasing my 1st home and need clarity on coverage– “A- dwelling is listed at about 80% of the sale price of the house with additional replacement cost at 175 % . Is it normal for insurers to quote A coverage as less than value of home? I also am seeking to increase my auto insurance from liablity to full coverage because I was told that a person could come after my assets if there isn’t sufficient coverage in my pokicy…Thanks in advance!

  • Jack T

    Eric, I found this website to very informative. I think I am in serious trouble; a week ago I found out my house had a water issue not known to myself. It appears it had been going on for some time. I think probably since the addition was done eight years ago possibly. When I found it there was mold everywhere and some structure damage to the flooring system. I was ignorant regarding homeowner’s insurance and you can imagine what I was told when I called my insurance company. Here is my deli-ma, I am having to go on disability in 2011 due to a chronic illness, my emergency reserve has been depleted due to litigation to get custody of my grand daughter. I have no money for clean up or repair and I am worried while I can accept losing my home where I grew up, I may be liable for the mess after I lose my home (????). I am a Christian and I desire and want to do what is right. Have you had contact with anyone that has found themselves in a similar situation? Is there any way to mitigate any of the issues I now face? Respectfully, Jack

  • Florie

    Hin Erik,
    My insurance agent said I should have Water back up and sump overflow coverage. $5000.00 with $1000.00 dedeductable. I do not have a sump pump. I do have a septic tank. Is this coverage necessary. Also, if my garage has a separate foundation but is attached to the house with a roof, is it considered other structure or part of the dwelling?
    Thank you,
    Florie

  • HOGBONE2

    YES I HAVE HOME ONWERS INS, I HAVE A,B,C,D I HAD DAMAGES TO MY HOME AND OUT BUILDINS AND MY FENCE WAS MESS UP ALSO ALL THIS WAS DUE TO THE APRIL 27TH 2011 STORM MY INSURANCE SAIDS THERE ONLY PAYING FOR PART OF WHAT IS DAMAGED. AND WHAT IS DAMAGED IS THE SIDEING ON THE HOUSE WICH IS NO LONGER AVEILABLE THE COMPANY NO LONGER CARRY’S IT SO THEY SAY THERE GOING TO MATCH THE BEST THAT THEY CAN AND ALSO ON MY FENCE INSTEAD OF REPLACEING IT THERE GOING TO MATCH IT ALSO THE BEST THEY CAN I DONT’ WANT MIX MATCH SIDEING OR FENCE I ‘V HAVE THIS INS, COMPANY FOR OVER TEN YEARS HOW WOULD THEY LIKE TO HAVE MIX MATCHED STUFF I THOUGHT IF IT GOT LOST OR DESTROYED YOUR INS, IS SUPPOSED TO REPLACE IT.

  • LoriKiley

    Erik, last year we were in process of a basement/family room remodel and had ordered some awesome metal racing cabinets for the bar area. We had carried them to the lower level and unpacked them and showed to contractor who wouldn’t be able to install them in bar area for few weeks. Then our town received 8 in rain and lost power for 10+ hours causing all basements with sump pumps (ours) to flood and remain flooded until power came back on. The cabinets were ruined. We had flood insurance and claimed these cabinets under personal property because they weren’t part of the structure and was glad they weren’t because we already met our building/structure damage amount. Insurance denied saying they were part of structure. We even had contractor state they weren’t installed at time of loss…..what do I do to get these cabinets paid for?? At this rate…it would be better if they were installed because I would still have the upper cabinets undamaged!!!

  • Virkus6

    I am going to mediation with our insurance company. They have paid on all categories so far, just not all of it. They have denied the rest of the claim saying there was no damage to personal property even though they have paid me some for personal property already. They have paid some of our additional living expenses too.
    How can I win at mediation? I have hundreds of pictures showing damage and written bills that say items could not be cleaned from mold and mildew.

  • Harrywalker07

    Erik, that was indeed a thorough insight on Homeowners which i never knew.
    Mentioning about coverage C, I would like to have my laptop insured under any endorsement along with a homeowners or renters insurance. Where do I get to know the losses covered for computer endorsements? It has become hectic to talk to each and every insurance agent around. Any weblinks or insights on this?

  • Dortcarlson

    If your luggage is lost by an airline, how to you claim against homeowners policy?

  • Da Breadman Macauley

    just got dumped by Allsate after over 20 years … they said it was random … now I must start from scratch … I found your web site informative …. They recommended Citizens and discovered that company stinks …. any suggestions ??

  • Freefallmsp

    Hi Erik. Very informative article. Thanks. My question; my neighbor and I are going half on a privacy fence. He’s doing the work- nice guy- do I need to get a receipt for my half to claim it on my insurance? Or do I let him take full amount; for his insurance; and possibly income tax’( if it’s deductable). What’s your advice?

  • Mrsargwilliams

    my moms garage was broken in to and some expensive lawn and garden stuff was taken taken that belonged to my brother. is my homeowners insurence supposed to cover the loss?

  • Zori2744@yahocom

    Do homeowners cover there tenant for property damage in there home doing powerstrom

    • http://joshuamonen.com/ Joshua Monen

      If you have a rental home then you should have a Dwelling Policy aka Fire Insurance to cover the structure. A Dwelling Policy is different than a Homeowners Policy and it is meant to only cover the dwelling, not the personal property. The renters should get renters insurance if they want to cover their contents (plus they get liability coverage too).

  • Gamble

    Does homeowners insurance typically cover flooring damage d/t water? Meaning, if I have laminate that has split d/t water damage, can I claim it to have the flooring replaced?

    • http://joshuamonen.com/ Joshua Monen

      Homeowners insurance doesn’t cover for wear and tear. But it does cover for water damage… like if a pipe broke or something. But if the water damage was the result of a flood that would only be covered if you had flood insurance. I’m not sure what d/t means thought… I used to be an insurance agent so let me know if you have any other questions.

  • Camille

    what about time to prevent damage to furniture while the roof is leaking badly and for cleanup after and putting house together again?

  • kristi

    We are renting a house & deal directly w/ the property management company, not the homeowner. The refridgerator just went out. Is that considered covered or not covered by the homeowner through the property management company? The company said we would have to pay to get it fixed or buy a new one & we can take it w/ us when we leave. Does it depend on the type of coverage the hom owner has?

  • Moondoggy

    Hi Erik, Your site is really helpful. I am getting quotes for homeowners insurance and the different carriers have quoted a range between $375 – $425k one the same home for dwelling coverage. I’m not sure why they have quoted different amounts and is it better to go with the one that gives the highest in their quote ($425k vs. $375k)? Thanks.

  • karen

    Hi There,I had a water overflow that was covered for $5000. I developed mold as a result. They limit me to $10,000 for the mold. Everything needs to be gutted ( kitched ) and replaced. This will cost more than what they give me…I wanted to file under dwelling for the attatched laundry room ( was affected ) as well as personal property and loss of use. They said no! Is this true? I have been told they will say no to anything to make you go away….I decided to check into attorneys because I also feel there was neglect! Water damage happened on (/26 and they didnt open a mold claim till 10/12! Any advise??? Thank You! Karen

  • Jarmijo78

    What does this mean “Deductible: All Perils:5000 theft:water:hail?
    Does that mean my deductible is $5000 for any of those things? or just for all perils because if you notice there is no amounts listed after theft water or hail? Sorry I am an insurance dummy.

  • fernando

    Ive been living in my home for about ten years now ive never had to use my insurance. Thank god. I now have a provlem with a sinking foundation due to runoff on my land my insurance says its not covered. I believed it was coverd i dont know what to do because i now have cracked sheet rock doors that wont close and etc. Id like to know your opinion

  • nono

    Hi,

    Why are all insurances clubbed together (Coverage A, B,C,D,E). I understand a mortgage required Coverage A (maybe B). However why do I compulsorily buy coverage for personal property or living expenses (C, D,E,F). As a consumer I need to have a choice to deny coverage or add as required. Insurance companies are fine with additions (more revenue) but not the other way around. As long as it is NOT legally required, it should not be obligatory in my opinion. Any thoughts/comments. Thanks

    • yoyo

      Insurance companies do not write the policies the state does that…all insurance compnies do is sell them….if you want the ability to buy your insurance alcarte call your director of insurance in your state or maybe you congressman

  • worried

    Worried I may have a small, gradual leak from the upstairs washing machine…noticing what appears to be a weak ceiling on the floor below. Of course, I never thought to check my policy until now – can I increase my coverage NOW, then have it looked at – or am I out of luck, stuck with my current policy/premiums/deductible, etc.?

  • concerned

    Do homeowner insurances cover ants shorting out an A/C unit causing the unit to need replacement?

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