Do You Need Supplemental Homeowners Insurance?
Homeowners insurance is a necessity for new homeowners who want to protect their new investments from damage. A homeowners insurance policy can be life saving in the event of a fire, theft, or financial loss due to basic bad weather events. Most homeowner's policies, however, do not protect against events that are non-standard. After all, Texas hasn't had an earthquake since 1931. Houston, however, has had several catastrophic flooding events in the last decades, which is something most standard policies do not cover. If you want additional coverage for these items, you may need to pay additional premiums or contact additional companies, but it's up to you to decide if it's worth it to add the supplemental policy.
If you have homeowner's insurance, your standard policy will protect your personal property up to a certain dollar amount. However, if you have a priceless collection, expensive jewelry, fine art, or other such objects, and you're interested in insuring the full value of these items, you may need a supplemental policy to cover them. For example, your policy may only cover up to $2,000 for jewelry, but you may own $15,000 worth. Your standard policy will not cover the full value of what you've lost. A personal property supplemental policy can cover the full value of items that are lost from theft, vandalism, damage, or disappearance.
Because of the nature of earthquakes, coverage for earthquake damage is not typically standard in all homeowners insurance policies. If you want coverage for earthquake damage, you need to add this coverage as a supplemental policy. Almost all major insurance companies offer earthquake coverage, especially in states where earthquakes are prevalent like California. In California, there are agencies such as the California Earthquake Authority (CEA) that will help with obtaining coverage. In Texas, there are very few noticeable earthquakes, lowering the need for this type of coverage in the state. Deductibles for earthquake coverage are usually around 10% of the total policy. The cost of an earthquake policy is very high in the state of Texas due to the fact that not many companies offer this type of coverage.
Most homeowners policies do not come with flood insurance, or offer very limited coverage for flood and water damage. If you are in an area that is known for flooding, or want to be protected regardless, you should purchase a supplemental flood insurance policy. If you live in a designated flood zone, many private insurers and the National Flood Insurance Program will offer supplemental flood insurance policies to homeowners. If you're not sure if you live in a designated flood zone, you should check with FEMA (The Federal Emergency Management Agency). Their website has an easy tool that helps you identify if you live in a flood zone by entering your address. These supplemental policies offered by the National Flood Insurance Program can help rebuild a flood damaged home for up to $250,000. In some cases, this isn't enough to cover the cost of the home, and many people in designated flood areas purchase private insurance for additional coverage. In cities like Houston, where major flooding has happened several times in the last decade, supplemental flooding insurance may be worth the extra cost.
You can imagine how terrible this scenario could turn out. Most standard homeowners policies do provide coverage for water damage that results from broken pipes but the standard policy does not usually cover sewer and drainage back up. There are many reasons why a sewer might back up. A home's sewer could back up when the home's sump pump cannot handle the excess runoff water after a very heavy rain. Tree roots and shrubs that are looking for water can make their way into the sewer line and cause damage to the pipes. A blockage can happen in the city sanitary main, which can cause sewage to back up into your home. Damage can go beyond simply destroying your valuables, carpets, and hardwood floors. It can lead to disease, electrical malfunctions, mold, and can even cause harm to your family and pets.
Umbrella / Excess Liability
Most insurance policies do have standard liability which protects you against lawsuits for bodily injury or property damage that might be caused to other people while in your home. Liability insurance should be enough to protect your assets. You can purchase umbrella or excess liability policies that will cover beyond your standard policy and offer more or excess liability. The term "umbrella" refers to the policy covering a more broad area than standard policies. The cost of an umbrella policy widely depends on how much insurance you already have and what your level of risk is to the insurance company. To add an umbrella or additional excess liability policy, most insurance companies are going to require that you already have a minimum of $300,000 worth of insurance on your standard policy.
It is a good idea to read your policy and understand what your policy covers and what it doesn't. Look into supplemental policies if you think you need additional coverage that your standard policy doesn't include. In most cases, it is better to be safe than sorry!