The Four Essentials of Homeowners Insurance

    Published: 06-16-2009
    Views: 12,251
    Wells Fargo Financial expert Emma Gutierrez discusses the four essentials of homeowners insurance so you know what coverage is right for you.

    Emma Gutierrez: Hello! I am Emma Gutierrez with Wells Fargo & Company. Today we are learning about the four essential types of coverage that should be included in any Homeowners Insurance policy. The first covers the structure of your home and in most cases detach structures, such as a garage or shed. This coverage pays to rebuild your home if it's damaged or destroyed by fire, windstorm, hail, or other disasters listed in your policy. Keep in mind that it most likely does not cover damage caused by flood, earthquake, or routine wear and tear. When purchasing this coverage it is important to buy enough to cover the cost to rebuild your home. Depending on current construction cost, the price of your building may be more or less than what you paid for your home. The alternative to replacement cost is called actual cash value coverage, which pays only what the home is worth today. Premiums are higher for replacement cost coverage, but it is highly recommended with the rise in cost of construction. You will also need coverage for the contents of your home. This covers your personal property such as your furniture, kitchen cabinets, electronics, clothes, sports equipment, and artwork, if they are stolen or destroyed by a covered disaster. Expensive items like jewelry, fur, and silver wear are also covered, but these usually have dollar limits if stolen or destroyed. Most policies consider the value of your personal property to be approximately 50-70% of the amount of insurance you have in the house itself. If you think your personal items are worth more than this, you might want to complete a property inventory of your possessions and photograph all the items you want covered. Additional living expenses should also be a key part of your homeowners coverage. This pays the additional cost of living away from home if you can't stay there due to damage from a fire, storm, or other covered disaster. It covers rent or hotel bills, restaurant meals, and other living expenses incurred while your home is being rebuilt or repaired. The final essential coverage, liability protection, covers you against lawsuits for bodily injury or property damage that you, your family members, or your pets cause to other people. For example, if your tree falls on your neighbor's garage. It also covers you if someone is injured in your home or on your property. Basic liability limits generally start at about $100,000, although many homeowners opt for at least $300,000. Experts recommend additional liability coverage by purchasing an umbrella or excess liability policy. This protects your assets in cases when your underlying policy's liability coverage is not adequate and helps make sure that a catastrophic claim will not put your assets at risk. Homeowners Insurance helps protect your most valuable assets, your home, and its contents. It's important to make sure you have everything fully protected.