Coverage guide · homeowners

Homeowners cover, read as six lettered promises

A homeowners policy looks like one product and behaves like six. The California Department of Insurance describes the form as two sections: Section I provides property coverages A, B, C and D, while Section II provides liability coverages E and F. Knowing which letter is meant to answer a given loss, and how much sits behind that letter, is what reading a Roseville policy consists of.

The four property letters, and what each is pointed at

Coverage A is the dwelling: the Department describes it as the major property coverage protecting your house and attached structures when a covered peril damages them. Coverage B extends to other structures on the residence premises that are not attached to the dwelling — detached garages and tool sheds are the Department’s own examples. Coverage C is personal property, meaning the contents of your home and other personal belongings owned by you and other family members who live with you. Coverage D is loss of use, which helps with additional living expenses when damage from an insured peril makes the house unliveable; the Department lists housing, meals and warehouse storage among those expenses and advises keeping every receipt to submit for reimbursement consideration.

Sub-limits that are already inside the number you bought

Two of those letters are quietly proportional rather than independent. Coverage B is normally limited to 10% of the Coverage A limit, though the Department notes you may purchase more for an additional premium. Coverage D is normally limited to 20 percent of Coverage A. A household that raises its dwelling limit moves those two along with it, and a household that never checks them can be carrying a detached workshop against a percentage nobody chose on purpose.

Coverage C carries a different kind of internal ceiling. The Department warns that coverage is limited on certain types of property especially susceptible to loss, and names jewelry, antiques, furs, collectibles, fine arts, firearms, silverware and money. Those special amounts are not extra money sitting beside the contents limit; the Department is explicit that they are included within the overall contents limit and represent the maximum paid out for that type. The fix it describes is an endorsement, sometimes called a rider or a floater, that schedules the item specifically.

Setting the dwelling limit from building costs, not sale prices

Start with what the headline number is for. It should be, in the Department’s words, the amount it would cost to replace your home. Three other numbers sit close to it, and none of them is the one the Department describes. The purchase price does not, nor does the current market value, since the Department says the dwelling limit may have nothing to do with either. Neither does the land value, because homeowners insurance does not generally cover the value of the land under the dwelling. What is left is an estimate a builder would recognize: labor and materials. The contents limit, the Department adds, is generally around 50% of the dwelling amount, and it calls even that a guideline only, because the most reliable source on what your possessions would cost to replace is you.

Perils the standard form leaves outside

The Department publishes a list of perils generally not covered, and the list includes flood, earthquake, earth movement, mold, termites, insects, rats or mice, water damage caused by seepage or leaks, losses to a house left vacant for sixty days or more, wear and tear, and neglect. Summarising its own list, it says earthquake, flood, mold, earth movement and “wear and tear” are some of the perils that are usually excluded. Two of those have their own answer in California. When an insurer writes your homeowners coverage, that insurer is legally obligated to offer you earthquake coverage for an additional premium, which may be written by the same insurer, by a separate one, or through the California Earthquake Authority. Flood is the other, and the Department points not to the homeowners form but to the National Flood Insurance Program, a federal program created by Congress and administered by FEMA, which is why it has a page of its own here.

Notice periods, and the reason that must be given

Once a residential policy has been in force sixty days, the Department states that the company can cancel only for reasons specified by law — nonpayment of premium, fraud, material misrepresentation, or physical changes in the insured property that increase a hazard insured against. A cancellation notice must be mailed or delivered at least 20 days before the effective date, and 10 days where the ground is nonpayment or fraud. A written nonrenewal notice must be sent at least 75 days before the expiration date, and if the company fails to give proper notice the existing policy stays in effect, unchanged, for 75 days from the date the notice is sent. Both kinds of notice must contain the reason.