Home Insurance 101

by Kristin Smith

You purchased your home insurance to protect …well, your home. But do you really know what that means? I didn’t, so I went to a pro. Representative Matt Potts took some time to help me understand the ins and outs of my home policy.

Can I rebuild my house if it’s hit by a tornado or destroyed by fire?

Matt: Your basic home policy should cover things like wind or minimal fire damage.  However; it’s important to check if you have any type of replacement coverage in case your home is completely destroyed. These coverages are often available to you at an additional cost. Two examples are:

Additional replacement cost coverage

A good option for newer homes (due to age requirements¹), this has no maximum and provides coverage regardless of the limits on the home policy. That means, if you have a home worth $250,000 originally, but the cost to rebuild it at the time it was destroyed is $350,000, you will be able to rebuild at no additional cost to you. If you live in AL, GA, or TN, this coverage is capped at 125%.

Extended replacement cost coverage

This coverage is not dependent on how old your home is and pays up to 120% of the limit of liability amount that is identified on your policy. That means if your home is destroyed, you will be able to rebuild your home as long as the cost is between 100% and 120% of the dollar amount identified on your policy. If you have this type of coverage, you should review your policy annually with your representative regularly to assure that 100% - 120% range will provide the necessary money to keep up with rebuilding costs in your area.

Do I need extra insurance to cover jewelry, antiques, or other valuable property?

Matt: A home policy can cover personal property up to a certain amount, but that usually only covers “average” home contents. If you have expensive personal items, like jewelry, artwork, coin collections, etc., work with your agent to list these items on your policy. You’ll likely pay a little extra, but if a diamond falls out of a wedding ring or, worse, the ring gets lost, you’ll probably consider the extra fee worth it.

What about flood insurance?

Matt: If you live in a community that participates in the National Flood Insurance Program, then you can buy flood insurance protection. Keep in mind that all flood insurance is provided through the federal government. While you can purchase your policy from a number of companies, they all provide coverage through the federal program. Also, you need to know that most home insurance policies do not provide coverage if your home is damaged by flood.

Not sure if you qualify? Visit the flood insurance program page at fema.gov to find out.

If my sump pump stops working because of the rain, am I covered by my home insurance?

Matt: Yes, if you have the Sump Pump Failure and/or Back-up of Sewer or Drain endorsement, some of your losses can be covered by your home policy. The name alone sounds complicated, right? But, it’s easy to understand. Basically, when your sump pump fails or water backs up through a sump pump hole or drain, you need to have a specific sump pump failure or sewer backup endorsement to be covered. Let’s say your sump pump stops working, a rock clogs your drain, or something along those lines, that’s when this coverage should kick in.

What if my business is in my home, do I need extra coverage?

Matt: Yes, you would need additional commercial coverage if you run your business out of your home, especially if that business includes expensive equipment that would need to be replaced.

What’s one thing I probably don’t know about home insurance that I should?

Matt: Ask questions. My biggest advice to people is to go review your home policy with your insurance agent because every house and situation is different.

Every state has different rules about these coverages. When you talk to your representative, make sure they thoroughly explain exactly what protection your policy provides.

So, there you have it. A home insurance guide to get you started.