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.

  • David Thompson, CPCU

    Your suggestion to “read the policy” is the single most important thing that a consumer can do, and they should do that when the policy arrives…not after the loss. I’m an “Insurance Nerd” with 33 years in the industry come February 1st. “Nerds” like me refer to “RTFP.” For this reply, that means “Read The Full Policy.” (You can change the “F” to whatever you want to!) All too often consumers buy on price alone; very bad move. All policies differ so it’s critical to read it.

    A few comments about your coverage analysis, again with the caveat that all policies differ…

    Flood insurance is readily available today from sources other than FEMA. Some statistics show that private insurance companies now provide about 15% of the flood insurance. In general, the coverage is broader than the FEMA policy and less expensive. It’s not always the best choice so seek a qualified insurance agent for advice.

    Business equipment is generally covered, but subject to a limit such as $2,500. Many times the limit can be increased or commercial coverage purchased. A lot of people need this coverage.

    Jewelry is typically not excluded, but subject to a theft limit of around $1,500. (Again, RTFP as they differ.) Losses such as misplacing jewelry are typically not covered. As was pointed out, other policies are available and quite inexpensive…typically $10 to $15 per $1,000 value. My daughter’s $10,000 wedding ring set is scheduled and the premium is $120.00.

    Damage from frozen pipes is not totally excluded, but is subject to conditions such as leaving the heat on or turning off the waiter and draining the appliances.

    Vandalism is excluded only if the house has been vacant for 60 or more days. Again, RTPF…they differ.

    Pollution damage is covered many times.

    Golf carts themselves are not covered at all; injury/damage to others is covered in a few instances. As was pointed out, a separate policy is needed. I always say, “If you can afford the golf cart, you can afford the policy.” My daughter and son-in-law pay under $250 a year for such coverage.

    I commend you for suggesting that consumers read their policy. I promised Chip Merlin I’d write an article about “Insurance is not a commodity, don’t buy on price alone.” That’s still on my “to do list.”

    David Thompson, CPCU

  • Here is an article with multiple examples of seemingly minor differences in policy language that result in huge differences in coverage:

    https://www.iamagazine.com/magazine/read/2014/07/01/price-check

    Here are 3 more examples:

    https://insurancecommentary.com/insurance-is-not-a-commodityreal-life-example-12473-street-racing/

    https://insurancecommentary.com/insurance-is-not-a-commodityreal-life-example-12474-an-ho3-that-is-not-an-ho3/

    https://insurancecommentary.com/insurance-is-not-a-commodityreal-life-example-12472-personal-auto-insurance-flood-claim/

    If that’s not enough, here are dozens of articles supporting the premise that insurance is not a commodity differentiated solely by price:

    https://www.independentagent.com/Education/VU/Pages/featured-resources/Commodity/default.aspx

    Don’t listen to “Flo” or reptiles. Don’t listen to McKinsey or Warren Buffet. Insurance is NOT a commodity.
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    “There is hardly anything in the world that some man cannot make a little worse and sell a little cheaper, and the people who consider price only are this man’s lawful prey.” – John Ruskin