A homeowner’s policy will, no doubt, help you sleep better at night. It’s a new year after all – everyone should read their insurance policy. But if you have not read your policy lately, or ever, then you may have a rude awaking when a sudden loss is not covered and leaves you financially devasted. Below are some of the more typical endorsements you may need or want.
A typical out-of-the-box standard homeowner’s policy covers losses against fire, storm damage, and other named perils. It will pay for repairs, loss of use, liability claims, and medical payments. Depending on the policy you have, the losses will be covered either by actual cash value or by replacement cost. Actual Cash value means that the policy will replace or repair the damages to your home and personal property minus depreciation of the item. Replacement cost value is a better option because it will repair or replace your damaged home and personal property at today’s market price.
If you read your policy, you will notice a section for what is excluded from coverage in the policy. A typical homeowner’s policy, will exclude, flood ( must obtain a separate FEMA flood policy from the federal government which hires private insurance carriers to sell flood policies); business equipment, construction defects, very valuable personal property (jewelry, rare collections of almost anything, art, and guns to name a few), pollution, frozen pipes, vandalism, pets and other animal on your property, damage from war, or nuclear accident, and every insurer’s favorite exclusion “wear and tear.” This is not a complete list, but these are some of the most common exclusions.
If you desire protection from any of these exclusions, you can get an endorsement or policy rider.
It is not surprising, these additional endorsements come with an additional premium. Besides an endorsement, there are also separate specialty policies one can purchase such as for FEMA flood insurance, boat insurance, earthquake insurance, or for a small airplane.
Examples of the typical endorsements that you may need or want include, but are not limited to:
- Inflation Guard: An inflation guard endorsement will help you keep up (as the name implies) with raising, yearly inflation because if you insure your home for the price you paid for it, inflation increases may not allow you to have enough coverage to replace your entire home it there is a total loss down the road. The coverage amount for inflation guard is automatically increased every year to keep up with the inflation.
- Sewer Backup: A fairly inexpensive endorsement to cover a problem of sewer backup which can cause extensive water damage and a potential health problem. Better to be safe than sorry on this one.
- Home Business: This endorsement has become more popular in the last 10 years with the rise of businesses using home computers and this endorsement will cover not only the home equipment but legal liability as well. Some policies appear to limit coverage to 50% of your main home policy.
- Boat or Watercraft: This endorsement will cover damages to a boat or watercraft that you own or use and protects you against damages that occur during boating, or while docked, and there is liability protection with medical expenses/fees covered.
- Earthquakes: Will cover earthquake damages for home and additional structures, such as garages, fences or small utility buildings. The nice thing about this endorsement is that most policies also include costs to bring your property up to current building codes.
- Theft: Provides against theft of your personal assets. The insurance companies all seen to have slightly different language and coverage on this type of endorsement. For jewelry for example, most insurers will require an appraisal for coverage while others have a limit amount regardless of the appraised coverage.
- Vacation Home: If you have a vacation home, this endorsement can be added to your existing homeowner’s policy and in most cases is cheaper than purchasing an entirely new policy just for the vacation home.
- Golf Cart: Interestingly, most policies only cover golf cart damage while one is using the golf cart on the golf course. If you are just driving around the neighborhood and have an accident or event you are not covered.
There is no guarantee that endorsements will help you get a better night’s sleep and they will cost you more in the short run, but they may be worth it in the long run. One thing for sure is that you will never know what coverage you have and don’t have and may need or want until you read your policy, which, by the way, may just put you to sleep.