Homeowners Insurance Add-Ons You Should Consider

What Does Homeowners Insurance Cover?

Standard homeowners insurance typically covers the four types of insurance listed below.

1. Structure or dwelling coverage pays to repair or rebuild your home after damage from a covered risk, such as fire or vandalism.
2. Personal property coverage pays to replace belongings if they're destroyed, damaged or stolen.
3. Loss of use or alternative living expenses (ALE) coverage helps pay for you to live elsewhere if your home is uninhabitable during covered repairs.
4. Liability coverage helps pay medical and legal costs if a visitor is injured on your property.

Homeowners Insurance Extras You May Need

Adding to your existing home insurance or buying specialized coverage can give you extra protection. Here are some additional coverage options you may want.

Extra Dwelling Coverage

Dwelling coverage should be enough to completely rebuild your home. Rebuilding costs can vary depending on your home's square footage, the materials used and the cost of labor. These costs can rise with inflation, after natural disasters or due to supply chain issues. To ensure your home insurance offers enough coverage, consider one or more of these extras:

• Inflation coverage increases your coverage annually to keep pace with inflation.
• Ordinance or law coverage pays to rebuild your house to current building codes.
• Extended replacement coverage adds 20% or more above your dwelling coverage to handle higher costs.
• Guaranteed replacement coverage pays to rebuild your home as it was, even if that costs more than your dwelling coverage.

Learn more: How to Calculate the Replacement Cost of Your Home

Extra Personal Property Coverage

Standard personal property coverage pays the actual cash value of your belongings, which may not be enough to replace older items with comparable new ones. In addition, personal property coverage for certain items, like computers, jewelry and artwork, is usually limited to a few thousand dollars.

If you want more coverage, consider replacement cost coverage, which pays to replace your belongings with new items of the same quality. You can also buy scheduled personal property coverage to provide extra protection for your valuables.

Tip: Conducting a home inventory of your belongings can help you determine which personal property coverage option is best for you.

Extra Loss of Use Coverage

Loss of use or ALE coverage is usually limited by time or dollar amount. For instance, coverage may be capped at 20% of your dwelling coverage or limited to 12 months. What if repairing or rebuilding your home takes longer or costs more than that? Increasing your ALE coverage amount or time limit helps ensure you're protected until home repairs are completed.

Extra Liability Coverage

Personal liability coverage in a standard home insurance policy typically starts at $100,000. However, the Insurance Information Institute recommends buying at least $300,000 to $500,000 of liability coverage, or enough to protect your assets (including your home and other real estate, bank accounts and retirement accounts) from a lawsuit.

Tip: If you can't get enough liability coverage to protect your net worth, you can buy umbrella insurance. It kicks in when your homeowners liability coverage runs out.

Coverage for Older Homes

Older homes face greater risk of claims due to aging systems, such as outdated electrical wiring. When claims are filed, older homes often cost more to repair because they require specialized materials and labor or must be brought up to code. A home over 40 years old may need specialized home insurance. (If you own a designated historic home, National Trust Insurance Services sells insurance for them.)

Insurance for Natural Disasters

Standard home insurance covers tornadoes, hurricanes, wildfires and winter storms, but not floods, earthquakes, sinkholes or landslides. In regions prone to severe windstorms, home insurance may not cover wind or hail damage. If any of these risks are common where you live, special coverage for them may be available as a stand-alone policy or an add-on to your existing home insurance.

Learn more: Does Home Insurance Cover Natural Disasters?

Water Backup Coverage

Homeowners insurance typically covers water damage from burst pipes or snow on the roof. However, it usually doesn't cover damage from water backup. This includes water that backs up into your home from a sewer, drain, septic tank or sump pump. You can buy add-on water backup insurance to protect your home. It covers home repairs and replacing property such as ruined furniture or flooring.

Service or Sewer Line Coverage

If something goes wrong with the underground utility lines connected to your home, such as sewer, water or power lines, you're typically responsible for repairing the part of the line that runs from your home to the street. Standard home insurance doesn't cover this, but you can buy service line coverage (or more limited sewer line coverage) to protect yourself.

Equipment Breakdown Coverage

Equipment breakdown insurance pays to repair covered home systems or appliances if they break down due to a risk covered in the policy, such as an unexpected electrical surge. Covered items might include your HVAC system, hot tub, solar panels or kitchen appliances.

Tip: Equipment breakdown coverage differs from home warranties, which pay to repair or replace appliances and systems that fail due to wear and tear.

Business Owners Coverage

Do you run a business from home? Homeowners insurance typically offers limited, if any, coverage for business-related losses. You can usually add business insurance as an endorsement to your home insurance or buy a separate policy. A business owner's policy includes business property and liability coverage; you may want cyber insurance or professional liability insurance too.

Identity Theft Coverage

While it's not specifically related to your home, identity theft insurance is often sold as an add-on to your homeowners policy. Identity theft insurance helps you recover from identity theft and recoup related costs, such as legal expenses, lost wages and even stolen money, in some cases. The coverage typically comes with identity theft protection tools. You can also buy a stand-alone plan from identity theft protection companies, banks, credit unions, credit card companies and other companies.

How to Choose Homeowners Insurance Add-Ons

If you're thinking of increasing your home insurance coverage, here's how to choose the right balance between price and protection.

• Evaluate your risks. What unique factors affect your home? For instance, you may want earthquake insurance if you live in California or ordinance or law coverage if your home is 50 years old.
• Consider your budget and potential costs. Weigh the price of insurance add-ons against the cost of losses without the extra coverage.
• Review your existing coverage. Make sure you aren't paying extra for coverage that's already included in your policy.
• Talk to your insurance agent. Insurance agents or brokers are familiar with common home insurance claims and risks in your area. They can advise you on must-have versus nice-to-have coverage and ways to save.

Learn more: How to Switch Home Insurance

The Bottom Line

Adding home insurance extras can bump up your premiums, but maintaining good credit may help minimize the increase. Insurance companies in most states can check your credit-based insurance score when setting home insurance rates. These differ from the credit scores lenders use, but both are calculated using data from your credit report. Checking your consumer credit score could give you an idea of where your credit-based insurance score stands.

It's free to check your FICO^® Score^Θ and credit report with Experian, and doing so could show you whether your credit score needs improvement. If so, paying down debt and paying your bills on time could help boost both types of credit scores, which could save you money on home insurance.