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June 5, 2023

Here’s Your Home Insurance Primer

Balboa Terrace

The insurance industry in California is a little freaky these days, with large companies like State Farm and Allstate having recently hit pause on issuing new homeowner policies. So on top of the usual stress connected to selecting an insurance policy, future home buyers have to navigate the secondary stress of whether they can actually obtain insurance on their future home.

When you’re buying a house in San Francisco, there’s a lot going on. One of the first things you have to do is nail down your insurance policy and provider. So it’s important to know what you’ll be looking for in terms of coverage level and annual cost.

To ease the load a bit, I’ve put together what I believe are the main items for comparison that should be standard in your home insurance coverage. Get two or three quotes and compare these policy sections with respect to coverage levels and how much of a premium you’ll pay:

1. Dwelling Replacement: This is the amount the insurance company will cover if your home is damaged or lost due to fire or hurricane. (You need separate policies for earthquake/flood insurance). The coverage is based on square footage, location, and other factors such as attached/detached garage, fireplaces, etc. You essentially want sufficient coverage so that if you had to rebuild your house, the insurance would pay for that. Insurance companies have their own formulas for calculating replacement cost, and it’s important to note that the number is not based on the market value of the property. It does not include the value of the land. You may also want to consider bumping up the amount of coverage by adding on extended dwelling coverage. This is a less expensive way to increase the cost allowed for a rebuild, and boosts the overall amount the insurance company would pay toward replacing your home. Here’s more on extended dwelling.

2. Personal Property: This portion covers personal items and household contents due to theft, fire, vandalism or other perils outlined. It’s advisable to take an inventory of all your belongings so you have an idea regarding how much coverage you’ll need. Better yet, have receipts, photos or other proof of ownership for these items in case you need that information.

3. Loss of Use: This is coverage that provides for your living expenses in case you have to relocate due to a claim while your house is being repaired. Standard policies usually provide coverage for about 20% of the dwelling coverage.

4. Personal Liability: In the event that someone has an accident on your property, you’ll want coverage against lawsuits. A standard policy typically covers $100,000 for each liability claim occurrence. If you have anything on the property that might increase risk in some way (i.e., a pool) you might want additional coverage. Very important: Personal injury is not automatically covered under personal liability. Make sure your policy includes personal injury, as well.

5. Medical Payments: This helps cover the cost of medical payments for which you might be held responsible if someone gets hurt on the property, but doesn’t want to sue you.

Pro tip: Don’t go with the least expensive policy you can find. Because if you compare coverage side by side among the providers you survey, you may find that you’re falling short on necessary coverage when you’re trying to save a few bucks.

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