Coverage You Absolutely Need in Your Homeowners Insurance Policy

< Back to Articles
After damage to your home, it’s probably time to revisit your homeowner’s insurance policy. It’s always best to know you policy BEFORE a disaster but any time is better than never.

As a general rule, homeowner’s insurance should be used to cover the damage to the home itself and any lost possessions. The land won’t go anywhere in a disaster (at least not usually) so the bulk of your coverage should focus on repairing any damage to your home or replacing any lost possessions.

There are a few coverage items that you must have (depending on where you live) in order to provide comprehensive protection for your home. Some homeowner’s may choose to forgo some of these coverage areas due to perceived low risk. Every home is different and every homeowner should make the best decision for securing their financial future.

Flood Insurance Protection Policies

This is the big one. Many homeowners don’t even realize their home is uninsured against flooding until it’s too late. Most people don’t realize that 1 in 5 homeowner’s insurance claims for flooding actually come from areas of perceived low risk. Fortunately, the National Flood Insurance Program is willing to offer coverage to any homeowner that requests it. Premiums vary but low risk coverage can start as low as $129 for a whole year.

Who Is This Best For?
For pretty much everybody, however, homes near large bodies of water should definitely be covered against floods. You might also want to get an analysis of your home and area flood plains to get a better understanding of your risk.

Home Business Insurance Policies

As the Internet makes starting your own business easier, many people are starting to work for themselves at home. Unfortunately, most things associated with your business will not be covered by your homeowner’s insurance policy. This might not be an issue for a consultant or a graphic designer but some professions, like mechanics or carpenters, can work store expensive equipment in their homes. In the case of common disasters, none of this equipment will be insured. It’s best for those running home businesses to obtain a separate insurance policy covering these potential losses.

Who Is This Best For?
Obviously people with home businesses! Businesses that aren’t equipment intensive, like writers or consultants, might want to consider forgoing this type of coverage. However, anyone that has made a substantial investment in equipment for their home business should probably get coverage.

Earthquake Insurance Policies

Earthquake coverage is not going to be a big issue for EVERY homeowner. However, those in earthquake prone areas, primarily California, should be prepared by securing a policy that covers earthquakes. Coverage against earthquake damage can be offered through government programs (usually run by state governments) and private insurers.

One thing about earthquake insurance that should be common knowledge is that the deductible is based on the percentage of your overall policy limit. If you have a $250,000 house with a typical 15 percent deductible, you’ll be on the hook for $37,500 to replace the home.

Who Is This Best For?
Homes in California, Washington, and Oregon should be insured against earthquakes. In fact, many banks refuse to finance homes in the region without such coverage. Homeowners in other areas might want to consider earthquake coverage but this might be an unnecessary expense if your area has never actually experienced an earthquake.