You’ve managed to pay your deposit, get approval from your lender, and find someone ready to sell you a home. And you’re effectively navigating the signup process for homeowners insurance.. but that doesn’t mean that you immediately become a professional about what your plans involve.
Homeowners insurance is an agreement between you and your insurance company that covers you in many different situations. Your plan also includes short-term additional living expenses if your premises become uninhabitable due to the loss of the covered.
But after those basic facts, insurance can be confusing, and you’re not the only one with questions.
In fact, we hear many of the same things over and over again from thoughtful homeowners like you over and over. So we asked our favorite experts—the folks from the Lemonade Group—to uncover one of the most misunderstood components of homeowners insurance coverage.
This is what we learned.
If an electrical storm sends your favorite tree in your home collapsing through your bedroom window, your plans will cover the damage. But if you bought the pack after the crash, hope it helps? No dice.
It seems obvious, but remember: Your plan only protects you from losses that occur after the day the policy starts. That means you can’t buy it after something happens—you have to plan ahead, for situations like this.
There are several types of coverage options when something bad happens. When it comes to Home Coverage (Scope A) and Other Various Frameworks (Scope B), most homeowners have what is known as an ‘open hazard plan’.
This means that, unless something is clearly omitted in your plans, it is protected. Pretty beautiful, isn’t it? So if a fanatical accident causes damage to your home’s roofing system, it will be covered under Coverage A. If some other arbitrary accident rips the fence on your property—as long as whatever triggered the damage isn’t really getting rid of your home. policy—then you are covered too (under ‘Other Frameworks,’ Scope B).
An alternative to ‘open hazards’ is ‘named hazards’, which describes a list of 16 specific hazards covered by your insurance provider. These types of hazards consist of stopping, explosion, smoke, and robbery. If something isn’t specifically listed as a protected hazard, well… it’s not protected.
Under your HO3 plan, any original items you own, such as furniture or electronic devices or plastic collectibles—aka Your Personal Property (Scope C)—are protected under so-called hazards.
How does this operate in practice? If a small kitchen area spoils everything plugged into your outlet, you may be entrusted with a lot of rotten food because your fridge won’t work. Luckily you are covered, because termination is the foremost danger mentioned in your plans!
What happens if your refrigerator breaks down in an unrelated hazard? Sorry, but you come from luck. Home appliances that simply break, or break, are harmless, so they aren’t covered by your homeowner’s plan (although it may be worth checking with the manufacturer to see if you’re covered by their warranty).
When it comes to your equipment, remember that homeowners insurance is not a maintenance policy…
However, if you want additional securities, you can buy Equipment Break down Coverage (EBC). Also known as Home Appliance Coverage, this is a recommendation to supplement and upgrade your homeowner’s insurance and provide coverage for many other types of damage. So, in the event of a mechanical or electrical breakdown, EBC can provide coverage of up to $100,000 on almost any household appliance.
Similarly you get regular oil changes for your car, you should check your plumbing and fittings to make sure they are in good working order.
Homeowners insurance not only covers damage to your belongings, it also offers short-term living expenses reimbursement if the loss covered causes you to move out of your home while repairs occur. This kind of coverage is known as Loss of Use, and may also include the extra $$ you need to invest in food and laundry. Homeowners insurance, to save!
So if the kitchen area stops meaning you can’t stay in your home for some time, you’re covered. (But if you declare loss of use because your next door neighbor is partying too loudly, we can’t help you, because being ‘close to bad dance music’ is most likely not covered by any plans. Sorry.)
Sorry what? ‘Bailee’ is just an elegant word to describe the individual or company that has short-term points that you have. In other words, you still own the property, but someone else is watching to keep it safe for now.
‘No benefit to bailee’ means your insurance will not cover problems that occur when your home remains in the property of a third party, such as an airline or moving company.
So, if your iPad is damaged or taken away when your moving company loads it into their vehicle, you won’t be able to file an insurance claim with your insurance company. Fortunately, airlines and moving companies usually have their own plans that will address your home’s problems while it’s under maintenance.
Here’s a general fact about earthquake and flood insurance: It’s not included in your homeowner’s plan. In most specs, you can get it as an add-on to your plan, and buy it from a provider that focuses on that specific coverage.
Your basic homeowners insurance coverage does not cover earthquakes, landslides, or any type of damage that occurs directly due to the movement of the planet. You may not need it—it depends on where you live and what the frame of your house looks like. Also in California, where insurance regulatory authorities require insurance providers to provide additional, only 13% of residents purchase earthquake insurance.
When it comes to flood insurance, it also depends on where you live. FEMA can tell you if your specifications require flood insurance by law.
The insurance deductible is the amount you choose when purchasing a plan that will be deducted from future claim payments.
Think of insurance deductions as your involvement in the damage or loss. You say, “I dedicate X dollars to any claim for future loss or trouble, and my insurance company will cover the rest.”
When you sign up for homeowners insurance coverage, you will be asked to choose an insurance deduction. For homeowner plans, this typically ranges from $1,000 to $2,500. What you choose here is your involvement (amount deducted from the insurance claim) should something happen to your belongings.
Here’s how it works if you file an insurance claim:
- You choose an insurance deduction of $1,000 when you purchase your plan
- In the future, you file an insurance claim for the sofa taken for $4,000
- If the claim is approved, your insurance provider will pay you $3,000 ($4,000 minus the $1,000 deductible)
- Remember, this is not an annual insurance deduction that you cover—it is used for every claim you make.
A reasonable follow-up question for this insurance-deductible business would be: If you’re currently paying regular monthly premiums, why do you still need to take part in claims? Well, deductibles are there to make you a little more careful with your belongings, and keep package costs down for everyone.
So when your claim is approved but you see a “lost” $1,000, remember, that’s your payment. You cover the insurance deduction, and the insurance company covers the rest.
Still not looking like an insurance professional? Don’t worry, you don’t have to be a professional at all points of insurance when you have a group of experts you can rely on.