When you review your homeowner’s home structure coverage for “Other Structures” (Coverage B). This may make you ponder what “Other Structures” coverage is, do I need it or am I paying extra for this coverage?
“Other Structures” are part of your homeowner’s policy coverage that covers structures on your residence property separated from your home by a clear space or connected to your home by a fence, utility line, or constructed connection. The limit of insurance for all “Other Structures” combined is 10% of the dwelling limit (Coverage A.) Home construction in the United States changed during the 1970s in that during this period many contractor’s due to price or lack of space chose to build garages or man “Other Structures” directly attached to the home. Many insureds began to think that the charge for “Other Structures” coverage in their homeowner’s insurance policy was a charge for unneeded – and unusable – coverage. However, almost all property-owners need “Other Structures” coverage, for it covers many items on your property.
“Other Structures” coverage can include depending on what company your home is insured with:
- Detached garages
- Storage sheds
- Guest houses
- Pool houses
- Swimming pools
- Retaining walls
Having said that your homeowner’s policy covers these “Other Structures” at 10% of Coverage A value, this coverage has its pros and cons. The automatic coverage, which doesn’t cost you anything, might not be enough to replace the “Other Structure” but on the pro side at least you had some coverage to fix or replace your structure. For example: if your home was insured for $200,000, you would automatically have $20,000 in “Other Structure” coverage. This may be enough coverage to fix a fence, storage shed or sidewalk but would it be enough to repair or rebuild a detached garage or a barn?
Additional coverage can be obtained for these larger “Other Structures” for an additional charge. Usually it is about $4 per $1000 of coverage. It is important to note that this additional coverage can be on a Replacement Cost or Actual Cash Value basis. Detached buildings are usually covered on a Replacement Cost method. Replacement Cost will pay to rebuild or repair your building without a deduction for depreciation. “Other Structures” that are not buildings, such as sidewalks, patios or driveways are covered at an Actual Cash Value basis. Actual Cash Value provides coverage that depreciates the “Other Structure” by age and condition of the structure prior to the loss. This might mean that you will not get the entire structure replaced or repaired by your insurance.
Another consideration that you should understand is that the standard homeowner’s insurance policy only covers personal use but does not cover business use. An example: you had a storage shed on your property that contained your gardening tools. This shed would be covered if the shed and those tools (covered by your contents “Coverage C” coverage) were used only for your personal use, not if you were a professional landscaper. If you were a professional landscaper, you would need to insure the shed and the tools on a business policy.
Most homeowner’s policies require that you cover your “Other Structures” at least 80% of their value or you could receive a coinsurance penalty at the time of the loss. Basically, this means that they take the value of the building before the loss divided by the amount the building should’ve been covered for at the time of the loss. Example: you have $20,000 in “Other Structures” coverage but the insurance company states that you should have had $40,000 in this coverage due to the size of your structure. Then you had a $30,000 loss due to fire, you probably would only get $15,000 to repair or rebuild your structure. It is extremely important to have your “Other Structures” insured properly in order to get enough funds to replace or repair your structure.
So pullout your homeowner’s policy! Look at what you have for “Other Structures” coverage and take an inventory of what you have on your property. Do you have enough coverage? We at Brownell Insurance would love to discuss this with you to ensure that at the time of loss, you are properly insured. It takes only a few minutes to provide you with this peace of mind.
Information used for this blog came from websites of Travelers, Safeco, MetLife and IRMI (International Risk Management Institute, Inc.)