Homeowners Insurance: Protecting Your House, Your Stuff, & More

hey there and welcome to the home owners policy video as a part of the make insurance simple this is the fourth video the second kind of substance video in the middle of our six video series and we’re going to hit on home owners policy coverage and how that works today so what you’ll learn well we’re ready for the second of the two main courses like I said we’re going to hit the home owners policy coverage how coverage works for your home protecting your home and your stuff let’s go back though a quick review we started off with the basic parts of an insurance policy and we talked a little bit about what coverage limits were that’s way back when we knew so little about our insurance coverage if you think back on that it’s kind of amazing how far we’ve come to this point isn’t it and then after that we set the foundation we talked a little bit about property versus liability coverage and since then we’ve been talking about property coverage and liability coverage for the most part and then the last videos we did you your auto insurance policy and we actually broke that one in up into three different parts it started with at fault versus no-fault states and then depending on what you wanted to study you went into either the at-fault video or the no-fault video and now we’re ready to move on to the next part of course I strongly suggest that you dig up your actual home and auto policies and have them in front of you right now obviously we’re talking about homeowners coverage in this video and so if you have your homeowners policy in front of you specifically the deck pages it’s really going to help you out as you hear all these different coverages and try and figure out what you have what you don’t have what you might want to talk about adding or maybe subtracting from your insurance policy so have that policy out in front of you tiny quick a quick disclaimer got to say it again this course is meant to provide a very general very general advice I’m in no way confirming details about your specific insurance policy those conversations should happen between you and your insurance advisor don’t already know that I’m just going to into this video as well all right let’s get going now super fun fact I’ve experienced this one myself and and in the 1800’s homeowners insurance it kind of got going during that time in America and at that point was only four fires so if you didn’t have fire a fire insurance policy the fire department wouldn’t help if you had a fire and and so I was in Washington DC a couple years ago and we went to Alexandria Virginia and if you’ve never been there just the cutest little quaint cobblestone street in town and these little brownstone houses all one next to the other and if you look they still have this kind of metal symbol on the frame of the door and some have it and some don’t have it and well I was going up and looking at it trying to figure out what this was and realized that this was the plaque that said whether you had insurance for your home or not and so when a fire happened the the fire department would look and see or you know the people would look and see that plaque and if the plaque was there the department would show up they’d get their hoses out they’d try and put the fire out as quickly as they could if the plaque wasn’t there then it was up to the homeowner and neighbors and all that kind of stuff to put the fire out themselves so homeowners insurance was really started at the very beginning of having fire departments and in those kinds of groups of people to help you solve problems in your home and fire departments were based on weather insurance you had insurance for your home or not so that’s a pretty cool fun fact that I enjoyed exploring in Alexandria Virginia a couple years ago today let’s get right into it so home property coverage starts with your dwelling coverage and your dwelling coverage is simply coverage for your house itself it’s covered for the structure of your house itself and people get confused about how this number is set up all the time so if you’re looking at your homeowners declarations pages right now the first thing you see is dwelling and then you’re going to see a number there and that value looks like maybe about how much you bought your house for and so people are think okay this is the appraised value of my house or the cost the market value of my house and this coverage has nothing to do with the market value of your home what it does have to do with it’s all about what the insurance company feels it would cost to completely rebuild your house so it doesn’t have to do with what you could sell it for it has to do with what the brick and mortar is going to be hiring a contractor putting in the frame the wood the drywall you know the kitchen all that kind of stuff and and we figure that out by using a replacement cost estimator and that’s why it’s called replacement cost because it’s the cost of replacing your entire home and your dwelling coverage should reflect the cost of replacing your entire home now we obviously don’t know exactly what it would cost to replace your entire home so we’re going to create an estimate like I said a replacement cost estimators what we use to create an estimate for what it would cost replace your home so that is where your dwelling coverage comes from dwelling coverage coverage to replace the actual structure of your home the second coverage that you have of the four different kinds of coverage that are the basic coverage on your home property coverage our other structures and so this is the coverage limit for other things this that aren’t attached to your house other structures on your property that aren’t attached to your house are covered under other structures and you know so this could be subpool it could be a barn or barn small sheds a detached garage your landscaping is often covered under other structures because evos would be covered under other structures if you have a workshop very similar to a detached garage there carports any of those kinds of things would be considered other structures and would be covered under your other structures coverage limit this coverage limit is generally figured by just taking the dwelling coverage and you know 10% of the dwelling coverage so if you’re dwelling coverage was 210 thousand dollars then your other structures coverage is probably twenty-one thousand dollars if you only have a little shed or something like that you know twenty-one thousand dollars is more than enough but if you start getting a pool a detached garage those kinds of things your other structures coverage could be low if your insurance agent hasn’t raised the other structures coverage above the 10% that’s commonly included in a homeowner’s policy so think about that if you have significant other structures okay the third of the four coverages the for property coverages on your homeowners policy is personal property this is this is your stuff the coverage limit limit for your belongings and your stuff so this is your dishes your tables your Barbies your piano your art stuff your couch your bed your chairs your bookshelves your Vampire Diaries videos and the whole book series that you have in the office your iPad – fridge hockey pucks that you have in the garage your stuffed animals your lamps your TV your secretary your clothes your stuff all the things you have inside your house if something was to happen to your house you know that all needs to be replaced that’s your personal property and the coverage for that is right there on your deck pages and it’s generally between 50% and 75% of your dwelling coverage so there’s a number in there and we go back to that two hundred and ten thousand dollar dwelling coverage house so your personal property coverage would be set at if it was 50% a hundred and five thousand dollars and you know somewhere in between that and 75% is generally where it’s set at now you should definitely think about your stuff and most of the time homeowners policies you know if it’s between 50 and 75 percent will probably cover your belongings but if you have a lot of nice things or a lot of expensive things then talking to your insurance agent about raising your personal property coverage is def a good idea and something you should think about the other thing you should think about when you’re talking about personal property is what you know about your personal property if you do nothing else to document what you have walk through your house with a video camera and then save that video on the cloud or take pictures of each room because if something happens something bad happens an adjuster from the company is going to come and say what did you have and the better you can answer that question the more money they’re going to give you to replace your stuff insurance companies realize that you don’t have a picture of every single thing that you have and they’re not going to say well if you don’t remember you have it we’re not going to give you any money for it I mean there’s some general things that they will pay out for but the more you know about your stuff some more money you will get in a claim all the way up to that coverage limit so definitely document the things you have as best you can so that you can have a better claim experience speaking of claim experiences your policy should have replacement cost coverage not a CV so this is the first coverage thing that I’m talking about here replacement and it’s real simple here’s how it works if you have at a if your house burns down and we want to replace a table your dining room table that was lost in the fire if you have replacement cost coverage and that dining room room table is going to cost us a thousand dollars to replace the insurance company is going to give you a thousand dollars if you don’t have replacement cost coverage then you probably have a coverage called a CV a CV is the lesser of the coverages in that same example your thousand-dollar dining room table they’ll say well but you had that dining room table for fifteen years so we’re going to depreciate for the period of time that you had it and that’s going to take that thousand dollars down to six hundred dollars and you’ll have to figure out how to replace it with the six hundred dollars we give you so a CV depreciates the value of your personal property and that means you don’t get as much money as you need to replace it so definitely check out your policy see if it says replacement cost on it replacement cost personal property is usually the line you’ll see on your deck pages and that’s an important thing to have okay and finally the force of the homeowners property coverages the standard property coverage that’s simply called loss of youth or additional living expenses is another term that sometimes you’ll see on declarations pages and this is simply the coverage for the cost of living somewhere else while your home is repaired I’ve got a claim going on right now the hot water heater kind of exploded I mean it wasn’t a huge major deal but it’s certainly like flooded out the whole main floor of these folks house and so they had to move out of the house and live somewhere else for about two weeks while contractors were in pulling out all the water damage stuff and putting in new flooring to replace what was damaged they live in a hotel they had to that you know they have two kids and they’re living there right now and we’re paying for that the insurance company pays for that as part of the loss of use or additional living expenses coverage and that can be paid for if you have a total loss up to like you know a year or whatever amount of time is a reasonable amount of time for it to take for the damage to be fixed is the amount of time that most companies will pay for your living expenses to live somewhere else so that’s loss of use coverage and so those were the four basics of the homeowner’s property coverage the dwelling coverage coverage for your house itself other structures coverage structures besides your house includes pool detached garages all that kind of stuff personal property which is your stuff and loss of use which is your home away from home land making sure you have somewhere to stay and we’re going to take care of the cost of that let’s talk about what is covered what’s covered you know this is maybe one of the most interesting parts of this video and one of the things you may not you know have a real graspop on and I’m going to make it real easy for you we’ll give you two terms right now that will carry us through this conversation the first one is perils the perils are bad things that can happen to your home and property something bad that happens so a tornado is an example of a pair peril of fire is an example of a peril and then occurrence which is a period of time during which a peril happens so if a tornado came through and was to damage your home on October 13th between the time of 12 10 and 12:15 then that would be the occurrence and the peril would be tornado so you have those two things and when insurance companies look if something bad that happens and whether it is covered on your insurance policy they’re going to use those two things as how they figure it out what was the peril what bad thing happened that caused the damage and when did it occur when did it happen so those two things there are three different kinds of policies that cover your home and they all have different structures of what perils are covered the first one is called basic the second one is called broad and the third the best and the one you always want to try and have is called special so the special one is the one you want let’s talk about the coverage options that are in those the basic covers 11 named perils I’m not going to go through those 11 things right now you can you know look them up on the web or look at our boat bonus section and I have a great little PDF for you that describes the different perils that are on each of these kinds of policies but 11 named perils fire is on their tornado is on their lightning is on their some of the most common perils are on their but if it’s not one of those 11 things when something bad happens it is not covered by your policy broad expands that a little bit 216 named perils and again you can check that PDF out to see exactly what those are the biggest difference between the basic and the broad is coverage for burst pipes so if you have a basic policy you live somewhere that freezes during the winters and your pipes freeze and then when they thaw they pour water into your home basic polity policy doesn’t cover that broad policy does cover that so one of those added five perils is burst pipes and then finally like I said special coverage is the best one and this flips the description of how the policy responds it says simply if it’s not excluded it’s covered so we don’t have named perils there’s no named perils in a special coverage policy what it says is if it’s an occurrence if it’s a bad thing that happened and it is not excluded and there are plenty of exclusions in homeowners policies but if it is not excluded then it’s covered and this is great because of course it covers the 16 named perils that are on broad I can tell you they’re definitely not excluded there but it covers if an elephant sits on your chair you know or or you know the wireless things you can come up with it is covered as long as it is not excluded the other nice thing that special coverage does is it puts the onus in a court case it puts the proof on the insurance company instead of on you so you’re in a claim situation the insurance company you know hopefully insurance companies do what they’re supposed to do but in in a case where an insurance company and you disagree and it ends up in court the insurance company’s going to have to prove that it wasn’t covered whereas with basic and broad you’re going to have to prove that it was covered so the onus the the burden of proof changes in a court case with special coverage as well so that’s just one more reason why having special coverage is super important so those are the three different kinds of things that are covered and how they’re set up does your policy basic is it broad is it special can you not tell it’s very hard to tell on a lot of declarations pages and if you can’t tell then I would you know make a note of it and make sure you talk to your insurance agent about what kind of policy you have okay now let’s talk about homeowners liability coverage whereas with auto liability there were a lot of kind of details to it homeowners liability is pretty straightforward there are two different kinds of coverage for homeowners liability on the first line is just liability coverage just the basic liability coverage that you have on your policy generally the current coverage limits are between 100 thousand and a million dollars I usually suggest $500,000 as a place to start with your homeowners liability coverage and again this is coverage for if bad things happen to other people because of you your home or you know your animals any of that kind of stuff bad things happening to other people you end up in a lawsuit or major medical costs whatever coverage limit you choose is what you’ll have available from the insurance company to pay for that situation now homeowners policies have another kind of coverage that is also liability and strangely it has the same name as a coverage on uh well I guess add more you’re covered covers bad things that happen to people because of you your family or your animals that I said that both on and off your property it’s important to know you know that golf-ball example you’re out golfing it’s in somebody’s car causes damage your homeowners policy is going to pay out for that loss so it extends out from your home for bad things that happen to other people because of you okay now we’re getting into the second kind of liability coverage that I was talking about a second ago unfortunately it has the same name medical payments as one of the auto policy coverages that I talked about in the at fault policy video and and it’s totally different though so please ignore the fact that these words are the same it’s kind of frustrating in that way medical payments in a home policy is a smaller amount of liability coverage often times five thousand or ten thousand dollars and it’s much easier to access than the full liability coverage so an example just happened recently where you know kids were playing in one of my insurance back yard and a kid jumped off the top of a playground broke a bone serious you know some some medical costs they are not super major but definitely traumatic for the family we hit the medical payments piece of their homeowner’s policy and we’re able to pay that out very quickly pay for the the cost of what happened and not have to get into any big litigation or lawsuit situations any light anything like that medical payments are quick easy they avoid bigger stuff that’s Messier so medical payments is nice to have in there and you know it’s a lower coverage limit for injuries to other people all right let’s talk about endorsements you know that was the basics there’s you know four different property coverage coverages on your home policy and those two different liability coverages so that’s pretty simple but there’s a whole bunch of endorsements I’m not going to talk about all of them I’m going to talk about three that I feel are the most important and you know if you want to get more details about that you can obviously are about two other types of endorsements you can talk with your insurance agent or you know look it up online there’s lots of endorsements here’s a few that I think are important we start with water and sewer backup depending on where you live and the way your home is structured water and sewer backup may be more important for you if you have a basement and that basement is furnished so you’ve got your nice couch down there and carpet and a big old screen for you know watching sports or whatever you absolutely should have water and sewer backup coverage and you want to have probably at least ten thousand dollars of coverage the coverage limit for water sewer backup is different than the rest of the policy and this covers specifically for some failure but also for sewer and septic backup so if the sewers were to backup you know it’s messy nasty disgusting situation and your water sewer backup coverage is going to cover for that if you don’t have water sewer backup then you have problems with coverage you don’t have coverage in those types of situations so I would suggest talking about water sewer backup with your agent especially if you have a basement that’s furnished the next one is earthquakes natural floods and brush fires now depending on where you live one of these three things is probably a factor in your your world you know certainly if you live in California you’ve got you know brush fire issues and earthquake issues if you live in Florida hurricanes can bring along natural floods very easily so those are the types of things that are excluded on norm homeowners policies and often then are able to be added back as endorsements it really depends on where you live in the places that have the highest occurrence of for example earthquakes you often times have to buy a completely separate earthquake policy so it’s not going to be added on as endorsement to your homeowners policy you would have to buy a completely different earthquake policy usually from FEMA or something like that the same goes for natural flood anywhere around the United States you cannot buy natural flood insurance on your homeowners policy you have to purchase that from FEMA and brushfire can be the same way so those are three big things that are you know the natural disasters that happen a lot in your areas will be excluded from your homeowners policy and maybe they can be added back or maybe they have to be purchased completely separately it already said that so let’s go to now special personal property we’re going to go back to where I broke down those three different kinds of coverage we had basic broad and special right and for your dwelling your house the structure itself your policy is going to say you know basic would be what’s called an h o1 broad is ho2 and special is h o 3 so if you CH o 3 on your policy that means that your dwelling the structure itself is have special coverage or anything any perils that happen that are not excluded are covered but most the time even in a chose 3 your personal property is not that high of coverage your personal property is often broad coverage in that situation you can endorse the policy to make sure that you have special personal property as well I think it’s incredibly important because of what I already described in how the coverage works so special personal personal property is a great way to make sure when something bad happens your stuff is protected as well as the structure of your house itself alright rookie mistake you know the rookie mistake here and I see these packages is on all different companies have their different homeowners packages and they’re all different and they all have all these nerdy details in them but the fact is that most of those packages are worth what you pay for them and so you know they can be an extra hundred bucks or something like that a year and it’s easy for you to say oh I you know I don’t even get what’s in there I don’t understand any of it I’m just going to have them take that off and save myself 100 bucks you know I think that’s a rookie mistake I think that you you want to add the the package in there usually your agent can supply what actual coverages are in there and if you really want to dig into it you can a a lot of times it has water backup a lot of times I have special personal property so you want to level up that package so I would suggest just you know doing that and knowing that you’ve got better coverage and it’s worth the cost so the rookie mistake not purchasing a policy with the level of package and every company has some different name for what that packages all right I zoomed through it we broke down your homeowners policy and I hope you enjoyed the descriptions there in all the different parts of it I certainly enjoyed describing it for you we learn the four basics of homeowners property coverage your dwelling coverage which is coverage for your house itself to rebuild it if we had to your other structures which is you know all the other structures besides your house on your property your personal property which is simply your stuff and loss of use or additional living expenses which is home away from home I then talked a little bit about what coverage is using the two terms perils which is types of things that happen and an occurrence which is when a peril happens and then talked about the the three different coverage options that most homeowners policies have basic which covers 11 named perils broad 16 named perils special which is what you really want to have both on your house itself and on your personal property which says anything is covered as long as it’s an occurrence and it is not excluded so it has to be something that happens specifically not excluded on the policy it would have coverage so that’s the best type of coverage option and then we talked about the two different homeowners liability coverages which is your regular liability coverage when you your family or your aunt animals cause bad things on or off of your property to happen and then finally medical payments which is just a smaller amount for injuries to others really easy to access pays out quickly can deal with small situations a lot better than the more clunky liability coverage tends to work so medical payments is on your side they’re helping you take care of liability situations that aren’t big ones and finally we learned some common endorsements there are tons of endorsements that you can add on to your home policy I talked about three that I think are the most important water backup which is septic sewer and sump protects you from either any of those things backing up or not working flood earthquake or brush fire which may not be able to be added back on to your policy here in Indiana we can add earthquake back on to our homeowners policy but it’s excluded to start with we can’t add flood because no one can add flood because it’s a FEMA thing what can you do can you add it back do you have to purchase it separately if if you have to purchase it less separately it’s good to get a quote at least and find out how much it would be to protect yourself from those specific perils and finally special personal property I pointed out that even when policies have special coverage for your dwelling they often have the slightly lower broad coverage for your personal property this pops the coverage up to special for both your dwelling and your personal property okay what is next well the main courses are complete we finished our second here the homeowners policy of the main courses and we’re in the homestretch the final hoorah we are ready for dessert and I think you’re going to enjoy the dessert in the next video we’ll get familiar with an incredibly important coverage especially for those worst-case scenarios and that is your personal umbrella if you have one right now this will help you to understand it if you don’t have one right now this will help you to understand whether or not if thing that you want so I encourage you after you take a deep breath here maybe go get a drink or whatnot ahead into that personal umbrella video and as always the last step in this video is to head over to the make insurance simple Facebook group and get engaged engage in the process you know share what you learned here man I blew through a bunch of information what’s spinning in your head what did I miss that you were wondering about before this video and hope that I would talk about and I simply didn’t you know put that question out to the Facebook group and we’re going to get that question answered for you and other people will you know share if they have those questions as well so head on over to that make insurance simple Facebook group get engaged and you’ll be glad that you did okay hope you enjoyed this video we will see you in the personal umbrella coverage video can’t wait!

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