Homeowners Insurance Policy Coverage Definitions
You just received your homeowner’s insurance policy documentation and start reading it and realize you have no idea what the listed coverages mean. Below are the different coverages included in most Texas homeowner’s insurance policies and some of the common insurance terms.
Known as “Coverage A,” this covers any damages to your dwelling (main structure). Most insurance carriers will insure your home at replacement cost value and not market value.
What is the difference between the replacement cost value and the market value of my home?
Replacement cost coverage refers to the cost it would take to rebuild your entire house. It is usually never the same value as market value – which is the value your home would sell today in your local real estate market. Depending on where the real estate cycle is at the time, your market value can be a lot more or less than your replacement cost value. This is especially true in very expensive areas where the land is sometimes worth more than the home. Replacement cost never includes land value.
Your All Other Peril (AOP) deductible is the part of the covered loss amount you pay in the event of a claim that is not a result of a wind/hail, tornado, hurricane or named storm event. It is typically 1-2% of your dwelling coverage amount. If your dwelling coverage amount is $400,000 then our AOP deductible is $4,000 (1%) or $8,000 (2%).
Wind/Hail deductible is the part of the covered loss amount you pay in the event of a claim resulting from a wind/hail, tornado, hurricane or named storm event. It is typically 1-2% of your dwelling coverage amount. If your dwelling coverage amount is $400,000 then our wind deductible is $4,000 (1%) or $8,000 (2%).
Known as “Coverage B,” this covers structures on your property that are not attached to the main dwelling. Some examples include an in-ground swimming pool, storage shed, fence, detached garage or guest house.
Known as “Coverage C,” this covers loss to all your personal property which includes items such as furniture, appliances, clothing, paintings, etc. Generally, it covers any personal item not attached to the main dwelling.
Living Expenses / Loss of Use
Known as “Coverage D,” this covers your expenses of temporary housing at another location in the event your home becomes damaged and you are not able to live there while your home is getting repaired, etc.
Known as “Coverage E,” this covers you in case someone makes a claim or lawsuit against you for damages due to bodily injury or property damage. Court costs will be covered by the insurance carrier.
Known as “Coverage F,” this covers medical expenses to others not living at your home in case they get injured where you are not legally liable for their injuries.
Water Back-up / Sump Discharge Coverage
This covers damage to your home caused by water backup from a blocked drainpipe or failure of a sump pump.
Scheduled Personal Property
This provides additional coverage for loss or damage to certain types of the personal property beyond the dollar limits of your policy’s basic personal property damage. Most homeowner’s insurance policies have a limit of coverage on certain items such as jewelry, computer equipment, firearms, watches, furs, precious metals, silver, gold, etc. It is important you review your policy and determine if you have enough coverage for your highly valuable items. For example, if you need to insure your wedding ring that is worth $10,000 it is a good idea you schedule this item on your policy so that your item will get replaced at full value in case of loss or theft.
Texas homeowner policies DO NOT include flood insurance coverage. Some carriers will be adding this coverage for an additional premium in the year 2020. You want to make sure you have coverage for any flood damage even if you are not considered to be in a high-risk flood zone. In addition, if your home is located in a high-risk flood zone, your mortgage company may require you to obtain flood insurance. Flood insurance is usually backed by FEMA with fixed coverage amounts, however, there are private carriers that can provide additional coverage if needed.