If you have purchased a home and obtained a mortgage, the lender required you to obtain a homeowners insurance policy. While lenders expect to protect their investment, homeowners typically hope that any necessary repairs and renovations are covered should there be a catastrophic occurrence. The first time someone purchases this type of policy, they often obtain the minimum required coverage to get the deal done. But once things have settled down, homeowners may want to sit down with their insurance agent to discuss what their policy covers and what it does not. Here are two homeowner policy options to consider to achieve more comprehensive home insurance – extended dwelling and building ordinance coverage policies.
- Extended Dwelling Coverage:One of the primary reasons for having a home insurance policy is to guarantee the ability to rebuild the home if it is destroyed. However, reconstruction costs are determined by current materials and labor costs, and this total expense is often much different than the real estate market value. Because of this, your standard homeowner’s policy may not accurately reflect (and therefore cover) the actual costs of reconstructing the home. Extended dwelling coverage assists with rebuilding your home if construction costs rise to a level over and above your current policy limits.To illustrate how extended dwelling coverage can be a benefit, let’s assume your home is currently insured for 100% of its replacement cost. Your policy was written in 2018 when material and labor costs were lower. However, a major hurricane hits the area, severely damaging your home and hundreds of others. Due to the high demand and tight supply of materials, local construction and labor costs rise by 25%. This means your $300,000 home will now cost $375,000 to rebuild – leaving you to cover the expenses above the policy limit or build a smaller home. If you had procured 25% extended dwelling coverage, your policy would pay out the total cost of the reconstruction.
- Building Ordinance Coverage:If your home sustains damage due to a covered loss and needs to be repaired or rebuilt, the home must be rebuilt according to and following current building codes. And since regulations over the last few decades have become more stringent, rebuilding costs could be much higher than anticipated. That’s where a building ordinance policy (also known as law coverage) comes into play. This policy alone could save you a significant amount of money in the event of a disaster. Let’s once again assume your $300,000 home has been damaged. Because of updated or additional building codes, the reconstruction will cost $30,000 extra to be compliant. If you had obtained a 10% building ordinance policy, your insurance company would provide an additional $30,000 to apply to the new requirements. As mentioned above, any further costs would be out-of-pocket if you do not have the coverage.
Extended dwelling and building ordinance policies provide beneficial protection from holes in traditional coverage, covering you in case of an unforeseen insured event – and in most cases, the premiums are affordable.
Call Anderson and Associates Insurance Group in Palmetto to learn more about how these additional policies and other lesser-known coverage options can provide tangible benefits to you as a homeowner. We provide consultative, personal insurance services to home and business owners in Sarasota and Manatee County.
Stop by Anderson and Associates Insurance Group to discover why having an independent insurance agent can make all the difference.
