The most frequent questions asked by clients when they initially consult with my offices is, "Does my policy cover this loss? or Does my policy provide for__?" The answer almost exclusively is, "let’s look at your policy." It’s usually at this point that an insured may tell me that the insured has never read the policy, or attempted to read the policy after its initial receipt but gave up because it was so confusing. Although I have been reading and deciphering policies for quite a while, I cannot disagree with any insured when they tell me the language of the policy is muddled or nonsensical. However, despite being a poor read, looking at the policy is absolutely necessary to see if a loss is covered.
In California, as with other states, there are many exclusions added onto a general homeowner’s policy, and losses caused by floods, earthquakes, termites, insects, rats or mice, water seepage, mold, wear and tear, etc., may not be covered unless additional coverage is purchased by the insured.
Generally, homeowner’s policies should all read about the same. It is my intention to provide a roadmap for insureds on how to read their policy and what sections to look for to see if specifics are covered. In most instances, a general homeowner’s policy should provide coverage for property coverage and liability coverage.
When looking at a policy, Section 1 contains the specifics for property coverages (A,B,C and D) and Section 2 provides the liability coverages (E and F):
- Coverage A provides information regarding the primary dwelling’s covered losses;
- Coverage B provides coverage regarding other structures (such as detached garages, sheds, barns, etc. on the property. Coverage B is usually limited to 10% of the Coverage A limit, however additional coverage may be purchased;
- Coverage C provides coverage for the contents of your home. This includes costs to replace, or restore items in the home that are damaged by a loss. Although Coverage C for contents may replace clothing, furniture, etc., special coverage may also be purchased for specialty items which are more likely to be targets of a theft and have limited coverage such as jewelry, artwork, cash, etc. Like in Coverage B, more monetary coverage for Coverage C may be purchased at an additional premium agreed on with the insurer;
- Coverage D is specialty coverage for loss of use. This type of coverage may or may not be written into your homeowner’s policy, depending on the policy. Coverage D provides for loss of use when an insured is displaced after a loss and may cover costs for rentals, or hotels, meals and storage;
- Coverage E provides personal liability coverage when the insured may become legally responsibly for injury to others that come onto the property. Coverage E provides a legal defense and will pay for damages. Coverage E does not kick in for intentional acts by the insured and sometimes in places that are considered high risk or crime areas may be excluded from the policy altogether;
- Coverage F provides coverage for medical payments for third persons accidentally injured on the insured’s property.
If in doubt about what coverage your homeowner’s insurance policy provides, remember to ask. Knowing what type of policy purchased prevents an insured from being unprepared in the event of a loss.