I’m helping a number of people across the Dallas / Fort Worth area review and evaluate their home insurance. Rates across north Texas have sky rocketed over the last 2 years and each family is looking for ways to reduce their expenses without sacrificing coverage. Invariably, one of the things I’ve discussed with each family is which options they want their home policy to include. Here are the 5 options I recommend they keep or add to their home insurance policy.
Replacement Cost Contents: Every home policy we assist our clients with provides replacement cost on the dwelling. Many of the policies, however, are structured with actual cash value coverage on the contents or personal property; the furniture, electronics, kitchenware, clothing, etc. you move into your home. If the policy is structured with actual cash value on the contents, I automatically add replacement cost coverage on personal property.
Replacement cost coverage values each item on the basis of what it would cost to replace that item with one of equal value. Actual cash value coverage pays a claim on the depreciated value of each item. For instance, if you purchased new furniture for your home three years ago, what would it be worth today? An actual cash value policy would reduce the value of that sofa by including 3 years of depreciation. If you had a claim, you’d be very grateful having replacement cost coverage on your contents.
Extended Replacement Cost: Less than 5% of all homeowners will ever experience a total loss such as a direct hit by a tornado, hurricane, flooding, or devastating fire. The unfortunate fact is that most people don’t know if they’re adequately insured until they have a total loss. Can you imagine how painful it would be if you didn’t have enough coverage to rebuild your home?
Extended replacement cost adds additional coverage of 25% or 50% of the home’s dwelling value to help ensure there’s enough coverage to rebuild a home after a total loss. When you consider what goes into the cost of rebuilding a home (demolition, debris removal, plans, fencing, EPA skirting, and much more, extended replacement cost is invaluable.
Sewage Backup: Most home insurance policies include coverage for a sudden and accidental water leak, however, most of those policies don’t include coverage for sewage backup. This doesn’t happen very often but when it does, it can be a huge mess, especially if it flows beyond the bathrooms and kitchen. The worst scenario I’ve heard about was a home where 6 inches of raw sewage backed up into the home. The owner had to sue the city of Dallas because her policy did not include sewage backup coverage. This type of backup is an environmental hazard that requires a special team to remove the waste and affected sheetrock and flooring, and that’s very expensive.
Slow Leak: Coverage for sudden and accidental water leaks is included in most home insurance policies but most do not include slow leak coverage. A sudden and accidental leak is one that occurs without warning and is spontaneous such as a water heater failure, a frozen pipe that bursts, or an appliance leak. Slow drip leaks occur under appliances (dish washer), under sinks, or pipe joints and often go undetected since they may be hidden from sight.
The reason many policies do not include slow leak coverage is they are usually discovered after a long period of time and they lead to mold. If you have wood flooring in the kitchen or bathrooms, this is an excellent option to add since a slow leak can cause warping or cupping of the flooring.
Foundation Coverage: The soil in most parts of Texas has a high clay content which expands when we have rain and contracts when it dries out. While damage to the foundation due to soil movement isn’t covered by any home insurance policy, damage triggered by leaks a shifting foundation can produce to water supply lines in or beneath the foundation is covered.
When I explain this coverage, I point out that it covers access (cutting through the slab to get to the leak) and egress (filling it back in and tying it into the existing slab). I recommend this coverage for anyone who has a slab foundation, as most homes built in Texas have if they were constructed after 1962 do.
What options does your home policy include? Share them with us and why you have them, along with your questions and comments in the comments section of our blog or on our Facebook and Google + pages. I’d love to hear from you!