If you’re in the market for homeowners insurance, it’s important to find a company that offers a good combination of affordable rates and solid customer service. American Family meets that standard.
The insurer offers policies in 19 states and earns a financial strength rating of A (Excellent) from AM Best. This makes it one of NerdWallet’s best home insurers for 2023.
Coverage Options
Insurance companies offer a wide range of homeowners insurance policies with different coverage options. Homeowners should carefully consider their property, liability and living expenses to select the right policy for their needs.
A typical HO-3 policy includes coverage for the structure of your house, personal belongings and liability protection. It protects against 16 perils and provides the most comprehensive protection.
Dwelling coverage pays to rebuild or replace your home if it is damaged by an insured event. It’s important to buy a dwelling coverage amount equal to the cost to rebuild your home, based on labor and materials in your area.
You can also choose to pay more for a replacement value policy, which covers the actual cash value of your home and possessions without depreciation. This can be an effective way to save money on your homeowners insurance.
Your house’s style and age, location, square footage and credit score are other factors that determine your premium. Homes that are older or have a high credit score tend to be safer than those with lower scores, so insurers may offer you a better rate.
You should also consider the deductible amount you want to pay, which can significantly affect your monthly or yearly premium. Some deductibles are common, such as the standard deductible and windstorm deductible, while others are optional.
Policy Limits
When determining how much coverage to buy, you’ll want to consider your needs and budget. The policy limits you choose should be high enough to cover the costs of rebuilding your home and replacing your possessions if a major disaster hits.
Generally speaking, the best way to determine what your insurance options are is to sit down with an insurance professional and create a comprehensive list of all your possessions. This will help you determine if there are any expensive, valuable or difficult-to-replace items that may need extra protection.
For instance, if you own jewelry or silverware, make sure your policy includes a special personal property floater or endorsement. This type of policy will allow you to insure these items individually or in a collection with significantly higher limits than what you’d get from your average homeowners policy.
A more advanced form of this kind of coverage is an extended replacement cost policy that covers any amount over your policy’s limit up to a maximum of 25 percent. These are often available only from a select group of insurers and are designed to cover the costs associated with repairing or replacing your property following a major loss.
The most important thing to remember is that you should always reassess your coverage each year and review all your options. This way, you can be sure that you’re getting the right mix of protection and value for your needs.
Liability Coverage
Liability coverage under american homeowners insurance pays for the legal costs of lawsuits if you accidentally cause injury to someone or damage to their property. It also covers the legal costs of settling or defending claims made against you.
Typically, this coverage is included as standard on homeowners policies and renters or condo policies. In addition to covering liability for bodily injury and property damage, it can also cover medical payments to others who are injured on your property.
You may choose to purchase additional liability coverage through an umbrella policy. This will protect you if a claim exceeds the limits you selected in your homeowners policy.
It can help protect your personal assets if you are sued for a physical injury or other liability like defamation.
The amount of coverage you buy depends on your individual circumstances, but it is important to discuss your needs with an agent before purchasing additional liability insurance.
Homeowners policies come in different forms, with many features and options available to meet your individual needs. For example, most policies include a dwelling or other structures coverage that pays for the repair or replacement of your house structure and attached structures.
They may also include personal property coverage that covers your belongings inside your home. This can include your furniture, clothing and other items.
In most states, your credit-based insurance score is used to determine your insurance rate, so a good score can reduce your premium. You can check your score online or speak with an agent about how to improve it.
Umbrella Coverage
The umbrella coverage available under your american homeowners insurance can provide a valuable extra layer of liability protection. It can cover claims that exceed the limits of your underlying home and auto policies, like injuries suffered by a houseguest who falls down your stairs or a restaurant that sues you for making a negative review on social media.
Umbrella insurance can also protect you from legal judgments that could wipe out your savings or other assets. It can protect your retirement funds, financial holdings and the hard-earned equity in your home if you are sued for something that your underlying policies cannot.
You should consider an umbrella policy if you are a high-risk individual. This includes owning or renting out a property, employing household staff, owning a pool, trampoline or hot tub, being a public figure, hosting parties or serving on nonprofit boards.
In addition, if you are traveling abroad or have significant wealth and are worried about liability claims against you, an umbrella policy can help protect you from potentially devastating losses. It can also cover the costs of lawsuits involving your home or other properties outside the United States.
To obtain umbrella coverage, you must have a homeowners or auto policy from an insurer that meets the policy’s minimum requirements for liability coverage. You will usually need at least $300,000 of liability insurance to qualify for an umbrella policy.
Coverage for Unattached Structures
Most homeowners policies provide coverage for your house and its attached structures, like a porch, but they also cover other parts of your property that aren’t attached to your home. These include detached sheds, gazebos and fences.
These structures are covered on an “open perils” basis, meaning that they’re generally covered if they’re damaged by a natural disaster. These include fire, wind, ice and snow.
HO-3 and HO-5 policyholders can also buy a separate earthquake policy to protect their detached structures from the damaging effects of an earthquake.
You can also add floaters or endorsements to cover certain personal items in your detached garage or shed. This could be useful if you have expensive tools or other valuables inside the structure.
If you have a detached garage that’s not part of your house, it’s important to know the limits on this type of coverage so that you can properly protect the value of your structure.
Some policies limit the amount that they’ll pay for a single claim to the replacement cost value of your structure. That means if your detached garage is worth $30,000, you’ll get that much if you make a claim.
You can also increase your other structure limit through an endorsement, if you’re concerned that the amount of your current coverage won’t be enough to replace your entire property in the event of a covered loss. You’ll need to talk to your insurer about the options available.
Coverage for Personal Belongings
American homeowners insurance offers coverage for personal belongings, including clothing, furniture, electronics and jewelry. Coverage also includes items you keep in your car or travel with you while traveling abroad.
There are two main ways to get reimbursed for your personal property: replacement cost value and actual cash value. With replacement cost value, you’ll get a check for the amount it costs to replace your item, minus depreciation.
With actual cash value, you’ll receive a check for the item’s current value minus depreciation. This type of policy may be more expensive, but it’s worth it if you want to be fully protected.
Some standard home policies have sub-limits on high-value items such as jewelry, art, silverware and furs. To get full insurance for these items, you’ll need to pay extra to put them on a schedule or purchase a rider.
Another option is to get a guaranteed replacement cost (RCV) policy, which will reimburse you for the current market price of your item. This can be a good choice if you have valuable or rare items that are difficult to replace.
If your property is damaged or destroyed by a covered peril, you’ll usually be reimbursed by the insurance company up to your deductible. Your insurance company also might help you pay for living expenses while your property is being repaired. This coverage is sometimes called Additional Living Expenses, or ALE.
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