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Consumer Connection: Homeownership and Insurance

By Sonya Sellmeyer, Consumer Advocacy Officer for the Iowa Insurance Division

June is national homeownership month and a reminder to review your homeowners insurance for adequate protection.  Most policies have four types of coverage - for the structure, personal belongings, liability protection, and additional living expenses.

The dwelling or structure protection covers repairs or rebuilding of your home when damaged by a named peril or hazard such as fire, theft, hail, lightning, windstorm, and others listed in your policy.  A homeowners policy should have enough coverage to rebuild your home at the current market value for materials.  If you have made upgrades to your dwelling, let your licensed insurance agent know as you may need to increase the coverage.  Other structures such as free-standing garage and fences are generally insured at 10% of the dwelling coverage limit. 

Personal property such as furniture, electronics, and clothing are generally covered for 50% of your dwelling coverage limit.  Protection of your personal property may also apply when items are not present on your property such as with a child at college.  If you have collectibles, guns, jewelry, and other high value items, you may want to consider purchasing a scheduled personal property endorsement.  Having a home inventory will assist if you need to file a claim with your insurer regarding personal property.

Coverage for loss of use may apply if you need additional living expenses while the dwelling is being repaired from a covered peril.  This coverage may be generally limited to 20% of your dwelling coverage, the actual cost incurred up to a specific limit, and may have time limits.  

A homeowners policy also has personal liability coverage from property damage and personal injury to others when an insured is liable or injured by a homeowner’s pet.  Medical payment protection may apply if someone is injured on your property.  Both of these standard coverage amounts may be increased by the insured. 

Flood is not a covered peril, but coverage may be purchased for flood-prone areas such as Iowa.  Water backup involving drains, sewers, and sump pumps is also not a covered peril and needs a special endorsement.  Read the policy and declaration page to ensure coverage for perils common in your area.  Prepare for potential disasters by reviewing the Disaster Claims Guide.  

An insured has the option to cover the dwelling and its contents at an actual cash value or replacement cost.  Replacement cost pays for the full replacement of the dwelling and items up to the policy limits, while actual cash value pays the depreciated amount.  Speak to a licensed insurance agent regarding these options, as well as any of the four coverage limits that may need to be increased.   

If you have a townhouse, condo, farm, or mobile home there are policies for these types of properties.  If you rent, look into renter’s insurance to protect your personal property, and if you have a business in your home, advise your agent to ensure adequate protection. 

Understanding your homeowners policy and having adequate coverage before a loss will protect your largest asset.