Ever wonder which of the extra home insurance coverages you should purchase, if any? These additional coverages are often available on an a-la-carte basis and are offered because the standard policy either limits the coverage or excludes it altogether. Below we explain the most common “extra” home insurance coverages so you can make an informed decision.
Flood Insurance vs. Water Backup
Flood insurance and water backup insurance are not the same, but rather protect against two separate risks which are commonly excluded or limited on home insurance policies.
Flood insurance protects against an inundation of water on normally dry ground. This can occur from an overflow from larger bodies of water or by a sudden accumulation of rain. Flood insurance is typically a separate policy from home insurance. You do not need to be in a flood plain to have flood damage. Many flood insurance claims occur each year from areas never previously affected by flood.
Water backup insurance protects against common issues that occur with sewer lines. Should the lines backup due to clogging or other issues, this protection pays for repairs to the lines and the home. Issues occur when sewer lines fail, tree roots encroach into the lines and cause clogging, or municipal lines have issues which cause backups and damage to the home.
Like flood insurance, earthquake is also not included by default in home insurance policies. If you live in an earthquake-prone area, having this additional coverage is indispensable. Further, the Piedmont earthquake of 2011 that affected many states on the East Coast reminded us that even areas not prone to earthquakes can still be affected. Earthquake insurance coverage can be added to many home insurance policies or be purchased separately. This coverage can also include protection for contents as well as loss of use of the premises.
Service Line Coverage
Homeowners are responsible for damage to utility service lines running on their property, such as water, sewer, electrical, natural gas, fiber, cable, and internet. Although the utility provider is responsible for off-property utility lines, on-property lines are the responsibility of the homeowner. If these should become damaged by wear and tear, freezing, rust, breakdown, tree roots, vermin, or the like, they are repaired at the homeowner’s expense. Instead of purchasing a service protection plan with each utility provider, service line coverage on your home insurance policy can protect against damages for all of them. $10,000 in coverage is a common limit and can cost around $30 per year but differs depending upon location, insurance company, and other variables. Higher limits are available.
Identity Theft Expense
Identity theft is an ever-growing menace. Having your identity stolen is a serious financial threat. Identity thieves take out loans and credit cards in your name. This causes damage as banks look to you for payments on items you never purchased, ruining your credit. Ruined credit can have ripple effects, such as denial for mortgages or loans. Identity theft expense coverage can be added to a home insurance policy and reimburses you for costs to repair your identity such as notarizing affidavits, certified mail, lost income from time taken off work to complete paperwork and meet with law enforcement, and loan application fees.
Personal Cyber Insurance
However, identity theft is only the beginning of a much larger issue. Today, thieves not only steal identity, but also gain access to bank accounts to steal directly from you, or scammers trick you into sending money to a wrong account, or hackers lock out your computer until you pay a ransom. As an example, one of our clients sent a down payment on a new home to a fake account because a hacker had gained access to their email and, pretending to be their realtor, sent them fraudulent payment instructions. Although more expensive than identity theft expense coverage, homeowners should seriously consider personal cyber insurance. Costs vary, but average around $65 per year for $50,000 in coverage if added to an existing policy. Separate policies with higher limits are available as well. Ensure your coverage includes ransomware and funds transfer fraud.
Equipment Breakdown and Home Systems Protections
Each of our homes contain major appliances and equipment which, if a breakdown occurs, can be a financial hardship to repair. If these are damaged due to an event such as a house fire, they are covered under homeowners insurance. However, if they breakdown due to mechanical or electrical issues, they are not. Equipment breakdown protection can help and is much simpler than purchasing warranties on equipment individually. The coverage is triggered when the equipment breaks down due to internal mechanical or electrical issues. Power surge is a common reason for equipment breakdown claims. Normal wear and tear is not protected.
Common Equipment Covered
- Refrigerator and freezer. Food spoilage can also be included.
- Hot water heater
- Heating and air conditioning
- Home security systems
Ordinance or Law Coverage
When a home is damaged, insurance is designed to pay to repair or replace the home as it was. However, sometimes local laws and ordinances require the home be built back in accordance with newer, updated specifications and building codes which cost more than the original building methods. Ordinance or law coverage pays to rebuild or replace your home according to these modern codes and methods. Standard homeowners insurance policies allow 10% of the coverage to be spent on these expenses, but that can be increased as needed.
If you own collectibles, fine arts, antiques, or other costly collections, ensure they are properly covered. Standard home insurance policies include limited coverage for such items. This topic is addressed in detail in our previous article Common Home Insurance Riders so we won’t repeat everything here, but key takeaways include:
- Protect collectibles by adding a schedule or rider to your home insurance policy.
- Take a home inventory regularly and include photos.
- Store photos and videos securely to be accessed in the event of a claim, such as in the cloud.
Questions on extra home insurance coverages? Contact your Bankers Insurance agent. We will help determine your risks and advise how to best cover them. Not a client of ours? Let us earn your business! Each of our clients is assigned a personal insurance agent and provided their email address as well as a phone number that rings right on their desk.