The Coverage A portion of your home insurance, also called Extended Dwelling Coverage, actually protects against indirect, or third party, damage caused to your home, which may include fireplaces, floors, toilets and any other structures attached to your home on the same property (including a garage). This protection is designed to cover expenses incurred from repairs to your home’s structure if a disaster were to occur. In many cases, an extended dwelling policy will be required by lenders to be sold as part of a real estate transaction. Unfortunately, some homeowners are not comfortable with this aspect of their insurance. In this article I will explore why it is important to have an extended dwelling policy and what some of the benefits are.
The primary benefit of an extended dwelling coverage policy is the protection it provides for the homeowner in the event of a catastrophe. The primary benefit of most insurance policies for homeowners is the guarantee that they will be paid for any claim. This is a very big deal for consumers, especially those who rely on their homeowner’s policy to pay for major catastrophes. If your homeowner’s insurance policy has a guaranteed replacement cost coverage, it can be very helpful to rely upon this coverage should a disaster strike.
Another benefit of having an extended dwelling coverage policy is the protection it offers in the event that you suffer a loss of living space due to natural disasters. I have seen many claims from homeowners who were compensated for losing their entire home to fire and water damage. In such cases the company would pay for the rebuilding costs of the home in its entirety. When thinking about your own personal needs, this can be a true example of when an insurer may want to take a risk on you and offer you coverage that in essence protects you for life. It is worth noting that there are some insurers that offer guaranteed replacement cost coverage for those homeowners that lose everything in a flood or other natural disaster. This type of plan can be expensive, but you need to ensure you fully understand all aspects of the policy before signing anything.
The next point to consider with an extended dwelling coverage limit is the total loss clause. This clause generally states that the insurer will cover the replacement cost of the dwelling. It is rare that insurers will pay for the entire cost of a property. There are often ways to alleviate the total loss clause in a commercial or business contract. Talking with an experienced insurance broker is a good place to start.
Another issue homeowners often run into when taking out insurance is the need to add on additional renters. You may be surprised at how much this factor weighs on the cost of a policy. Some policies only offer a replacement cost coverage limit. These limits will in many cases differ depending on the natural disasters the building costs incurred. Again, talking with an experienced insurance broker is the best way to find out what your company offers.
One of the most important issues to take into consideration with the need for extra extended dwelling coverage is the potential damage to personal belongings. Sometimes, insurance companies will require renters to pay a certain additional amount for items in their home that is completely covered by the policy. This can be a great help when the tenant loses his or her belongings in a fire or similar natural disaster. However, some companies have limits to this type of coverage, and you should check with your insurance company to make sure you fully understand the policy.
Finally, you should also consider how the premium will work for additional living expenses. Standard replacement cost limits do not apply to homeowners. In many cases, the cost of living increases with the inflation rate. When you purchase an apartment building or a condominium, the cost of living goes up because of real estate commissions and real estate taxes. If you are still living in the rental that you purchased after the sale, you may want to consider adding on extra living expense coverage on your policy to avoid being under insured.
Hopefully, this brief article has given you some basic information on extending dwelling coverage from your home insurance policy. Be sure to get estimates from at least three different companies before you purchase anything. Insurance rates and policies vary greatly. You do not want to be surprised by the premium you wind up paying for additional dwelling coverage. Shop around, compare premiums and review your company’s policies before deciding on coverage.