If you own a home, you need to make sure it’s protected if disaster strikes. This means you’ll need to buy enough homeowners insurance to rebuild the structure, replace your possessions, cover living expenses if you’re not able to live in your home, and protect your financial assets if you’re sued for injuries or property damage. The experts at Altra Insurance Services, a leading provider of home insurance San Diego residents rely on for exceptional service, offer some basic guidelines to help you determine the types of homeowners insurance and the coverage amounts you need.
The term “dwelling” refers to your home’s structure. Dwelling insurance will pay to rebuild your home if it’s destroyed or make repairs if it’s damaged. Typically, a standard homeowners policy provides dwelling coverage in case of damage caused by disasters such as lightning, fire, and hail. If you live in an area with a high risk of floods or earthquakes, you’ll need to buy separate coverage for those types of events as well. With dwelling insurance, your main concern should be having enough coverage to pay for the cost of rebuilding your home if necessary.
Your insurance provider can recommend coverage limits for the structure of your home, but you should also do your own research to make sure your home has the right amount of structural coverage. The major factors to consider with regard to rebuilding are the size of your home and the construction costs in your local area. To get a rough estimate of how much insurance you’ll need, multiply the area of your home (measured in square feet) by local building costs per square foot. You can get an idea of the typical construction costs in your area by contacting your insurance agent, a local builders association, or a real estate agent.
This coverage reimburses you when the contents of your home are damaged or destroyed. This includes items such as appliances, electronics, furniture, and clothes. The standard amount of contents coverage with most homeowners insurance policies is about 50 to 70 percent of the amount of the dwelling insurance. That may not be enough in your case, so it’s a good idea to determine how much contents coverage you’ll need by creating an inventory of your possessions. In addition to helping you figure out how much insurance you need, the inventory also serves as a convenient record that will make the claim-filing process much easier if your belongings are damaged by a disaster.
You can insure your possessions for their actual cash value (which means you would typically receive less than what you paid for them) or for replacement costs (which would pay the cost of replacing the items). Replacement cost coverage typically costs about 10 percent more, but in the long run, it can definitely be a wise choice.
A standard homeowners insurance policy typically has limits on coverage for expensive items, such as fine art, jewelry, collectibles, and silverware. Some policies also limit what they’ll reimburse you for computers. Make sure to check your policy for coverage limits for any expensive items. If you have any belongings that are worth more than the limits, you can buy a special personal property floater or an endorsement with higher coverage limits that will allow you to insure your valuables for higher amounts.
Coverage for Additional Living Expenses
Additional Living Expenses (ALE) is an extremely important feature of your homeowners insurance policy. If you’re unable to live in your home because of an insured disaster, ALE coverage pays for you to live elsewhere temporarily. It covers the costs of staying in a hotel, buying groceries, eating at restaurants, and other living expenses while your home is being repaired or rebuilt. ALE coverage limits vary among insurance companies. Some provide unlimited coverage for a certain amount of time, while others set limits on the total amount of coverage.
This portion of your homeowners insurance policy covers you against lawsuits for property damage or bodily injury caused by you, your family members, or your pets. This coverage includes both court costs and damages. Most homeowners insurance policies provide at least $100,000 worth of liability coverage, but to fully protect your assets, you may want to consider buying at least $300,000 worth of this type of coverage.
Umbrella or Excess Liability Coverage
If your assets are worth more than your policy’s liability limits, you may want to purchase a separate excess liability or umbrella policy. This policy will start to pay after your underlying policy’s liability coverage has been used up. In addition to extra dollar amount coverage, umbrella or excess liability often provides broader coverage than standard policies.
The amount you’ll pay for an umbrella policy will depend on how much underlying insurance coverage you have. If you have more underlying liability coverage, the umbrella or excess liability coverage will cost less. If you want to purchase an umbrella or excess liability policy, most insurance companies will require you to have at least $300,000 of underlying liability coverage with your standard homeowners policy.
For reliable, affordable homeowners insurance, San Diego homeowners know they can trust Altra Insurance Services. We also provide renters, commercial, motorcycle, and auto insurance. San Diego residents can receive a free quote by calling one of our friendly agents today at (619) 404-6311.