What's Covered by My Policy?

Event Details

“Reading your insurance policy is as much fun as getting your boobs smashed in a mammogram machine.” --Carla Deno

i.e. It’s not fun. But it is useful to know where you stand before and after an event. This session will cover the basics of coverage, optional coverage, endorsements, terms & conditions, oh my… in simple terms so you can understand how to maximize your benefits when you need it. Topics will include:

• Dwelling and Dwelling Extension Coverage - What is Covered?

• Replacement Cost vs. Actual Cash Value - What is the difference?

• Optional Coverage - Increased Cost of Construction

• Optional Coverage - Ordinance & Law

An informative and interactive session lead by Founders Devin McRae and Peter Scott.

Key Points

• The meeting will focus on discussing ordinance and law coverages, ICC optional coverages, and option ID, with a particular emphasis on the language and potential time required to parse through these topics.

• The Dwelling Coverage includes the main house but excludes structures like sheds, pools, and pool houses, which are covered under dwelling extension.

• Ordinance and law coverage often involves disputes with insurance carriers over the necessity of building upgrades and code enforcements, requiring official documentation from city code enforcement.

• Personal property coverage includes items within the dwelling such as clothes, furniture, and electronics, with notable exceptions like jewelry and artwork requiring separate endorsements.

• Extended Coverage or option ID provides additional percentage coverage above standard policy limits if a loss exceeds those limits, requiring notification to the Insurer beforehand.

• If replacement value coverage repairs are not completed within the required time period, the Insured may still be entitled to coverage if they have commenced repairs in good faith.

• Pools, fences, and pool houses are covered under dwelling extension, which is a subcategory of dwelling coverage, often with separate coverage limits.

• Homeowners policies often include additional coverage for trees, shrubs, and landscaping, though there are limits and exclusions, such as soil contamination not being covered.

• Business uses of a home, such as running an e-commerce operation from a garage, are typically excluded from Homeowners Insurance policies, though some coverage might be available under certain conditions.

• Automobiles stored in a garage are not covered under a homeowner's policy but would be covered under a separate auto policy if Comprehensive Coverage is included.

Summary

Coverage Types for Dwelling and Personal Property

• The discussion focused on the main types of coverage for dwellings and personal property in homeowners insurance policies.

• The California Standard Form insurance policy provides Actual Cash Value (ACV) coverage for dwellings, which pays the depreciated value of the property at the time of loss.

• However, ACV policies are becoming less common.

• More prevalent now are repair or replacement cost value (RCV) policies, which pay to repair or replace damaged property to like-new condition.

• With RCV policies, insurers typically pay the ACV amount initially, then pay the remaining Depreciation once repairs are commenced or completed, depending on policy language.

• There are often deadlines for completing repairs to receive full RCV payment, but extensions may be granted.

• A recent court ruling suggests repairs only need to be commenced, not completed, to trigger RCV coverage.

Dwelling Coverage Details

• Dwelling coverage applies to the main house structure and built-in components like HVAC, plumbing, and electrical systems.

• Other structures on the property like sheds, pools, and driveways are typically covered under a 'dwelling extension' or 'other structures' provision, which is a subcategory of dwelling coverage with its own sublimit.

• Landscaping, trees, and shrubs often have separate, limited coverage.

• The policy will pay to restore landscaping to its pre-loss condition, but it may have per-tree limits.

• Soil contamination from debris is typically not covered under landscaping provisions.

Personal Property Coverage

• Personal property coverage includes items like furniture, clothing, and electronics within the home.

• High-value items like jewelry, artwork, and antiques often require separate endorsements or riders to establish their value.

• Standard policies typically exclude coverage for money, securities, and similar items unless specifically named.

Ordinance and Law Coverage

• Ordinance and Law (O&L) coverage is an important Endorsement that covers increased costs from having to comply with current building codes when repairing or rebuilding after a loss.

• This coverage is crucial for older homes, as building codes may have changed significantly.

• O&L coverage is typically a percentage (often 25%) of the dwelling coverage limit and applies on top of the standard dwelling limit.

• Insurers may require documentation from architects or building officials to confirm code requirements.

• O&L coverage can apply to both damaged and undamaged portions of the home if upgrades are required due to the covered loss.

Extended Coverage / Option ID

• Some policies offer extended coverage (sometimes called Option ID) that provides an additional percentage of coverage above the standard dwelling limits if a loss exceeds those limits.

• This requires paying an additional Premium and notifying the insurer of property value increases.

Business Use Considerations

• Standard homeowners policies typically exclude coverage for business use of the home.

• If part of the home is leased to a business (even if owned by the homeowner), loss of rental income might be covered under Additional Living Expense (ALE) provisions.

• Separate business insurance policies may also provide coverage for business losses due to home damage.

Automobiles and Collections

• Automobiles stored in a home's garage are not covered by homeowners insurance, but rather by auto policies with comprehensive coverage.

• If a homeowner needs to rent storage space for vehicles or collections due to home damage, those rental costs may be covered under ALE provisions.

Policy Review and Updates

• The discussion emphasized the importance of homeowners reviewing their policies regularly and notifying insurers of significant home improvements or value increases.

• This ensures adequate coverage and allows the insurer to adjust premiums accordingly.

• Failure to update coverage after major renovations could result in being underinsured.