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Understanding Your Home Insurance Policy

Every year, you get in the mail a declaration page of your home insurance policy. The wording can be confusing, but let us cover the basics: Dwelling, Personal Property, Other Structures, Loss of Use, Policy Deductible, Liability and Medical Payments. It may seem simple, but . . . not always!

Dwelling Coverage

Dwelling is the cost to replace your home if it was destroyed. This may seem simple, but this is frequently a confusing dollar amount. One thing is for sure, it is very rare that the dwelling cost matches the purchase price of your home. Not at all the same. Remember, purchase price has the land included and other buildings on the property. Purchase price also includes the phrase that real estate agents love – location, location, location. A home in a small town will have a completely different purchase price than the same home that is located on a lake.

All insurance companies have an estimator which reviews your home based on information in databases and information entered by your agent. It looks at the home from the bottom to the top. How many bathrooms does your home have? Is there a basement? Is it a full or half basement? Is there a slab under the house, is there an attached garage? Does it have cathedral ceilings? Is there ceramic flooring? Is the roof a simple two-sided roof or multiple sections of roofing? Is the house made with common building material or rare, custom items? Does it have a fireplace? Is there brick on the outside of the home? What type of siding is on the house? So many factors but I am sure you get the picture! Based on the information entered, the estimator provides a dollar amount that is the dwelling amount of coverage. The cost to rebuild your home from the ground up should it be destroyed in a covered peril (Fire, Wind, for more perils refer to previous blog).

Other Structures

Other structures are the coverage amount for property not attached to the house. Examples would be a shed, a swimming pool, a fence, a gazebo, a barn, a detached garage. Typically, this amount is based on a percentage of the dwelling coverage amount. It is very important that you review this coverage amount with your agent as it may not be enough if you have multiple other structures on your property. Again, this is just included with your policy.

Personal Property

Personal Property refers to the items in your possession that are not attached to your home or other structures. Clothes, televisions, furniture, appliances, games, musical instruments are just some examples. Your coverage for personal property is again usually a percentage of your dwelling coverage. The amount of coverage is unique to each person. You will want to review your items to make sure you have enough coverage. Personal property is usually covered under replacement cost. So that pair of jeans you bought on sale for $80.00, may be $120 to replace. The TV you purchased at the president’s day sale may really be worth $1,600. You get the idea.

Loss of Use

This coverage pays for you to live somewhere else while repairs are being made to your home due to a covered loss. Sometimes this coverage is a dollar amount or a period of time, depending on the insurance company.

Policy Deductible

This is the amount you must pay before the insurance company pays anything. So, if you have a $1,000 deductible on your home but the cost to repair the damage is $900.00, then you will not want to make a claim as you will be paying anyway. You can have a deductible that you choose, however the lower the deductible the higher the cost of your insurance premium.

Liability Limit

This is the amount of coverage you would have if someone not living in your home was injured and it was determined that you were responsible for their injuries. This could include medical care and other injuries assigned to you. The amount of liability coverage is determined by you, but a word to the wise, it does not take much of an injury anymore to have $200,000 in medical costs. Yes, the person injured in your home or on your property, may have medical insurance to help cover some of these costs, but that does not mean they will not have other expenses that they need help with due to the injury. For example, the person does have medical insurance, but they ended up losing 12 weeks of pay due to the injury. You may have to pay their lost wages for the time they were unable to work, including needing to pay other related injury costs.

Medical Payments

This is different from liability as it is used to pay for small injuries (less expensive) to your guests. A rule of thumb would be an amount to help offset someone’s medical insurance deductible. An example would be $10,000.


There are so many other items that can be included in an insurance policy. The ones listed here are part of a basic policy. Should you have questions about what is included in your policy, feel free to call us or your local insurance agent.