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Bruce Sackrison

Bruce Sackrison is a Napa Valley Register columnist who will write about property and casualty insurance matters.

Home insurance policies look like Greek and geek to many of you. But I can make it simple.

As we talked about two weeks ago, homeowners insurance policies are standardized. That’s to help make sure you can compare apples to apples.

To make it even easier, the coverage is broken down by sections, and these sections are like alphabet soup... A, B, C and so on.

As I explain them, remember the necessary disclaimers: I’m not a lawyer, policy language is the final word, and I can’t guarantee benefits.

So, let’s learn our ABCs. Trust me, it’ll be easier than you think.

We’ll start with the letter A.

Coverage A: dwelling

The primary living structure on the property listed on the declaration page is usually the “dwelling,” along with permanently attached fixtures such as cabinets and an attached garage.

In short, Coverage A covers your house, and just your house... not your stuff, and not unattached structures.

You select a limit of coverage, say $250,000, and then pay a premium. But there’s more to know.

Watch for: policy forms

How and when you are covered depends upon which “policy form” you chose; there are several: HO-1, HO-2, and HO-3 polices, as well as other types too.

They’re also known as Basic Form, Broad Form, and Special Form, in addition to other names.

Why does that matter?

It matters because a Basic Form policy (HO-1), the cheapest policy, covers only 10 or 11 specifically “named perils.”

A couple of the named perils are fire and lightning. But if the specific cause of your claim isn’t named... you aren’t covered.

Likewise, an HO-2 policy (Broad Form), limits coverage unless it’s for one of the 16 or so “named perils.”

Most policies are now HO-3 type policies, covering “all perils” unless specifically excluded.

That’s good, but don’t assume you have the “all-perils” type of coverage. Ask your agent.

Watch for: actual cash value versus replacement cost

You think that the coverage amount is the coverage amount, right? Well, yes and no.

There are many factors at play in the settlement... too many to go into in this brief article.

However, there are three terms you should be aware of and discuss with your agent. They will affect your premium and how your claim is handled after a loss. So, they are very important.

Actual Cash Value (ACV)

The least expensive policy. It also pays out the least at claim time. Depreciation is considered, and that’s usually going to leave you with less at claim time than you wished.

Replacement Cost Coverage (RCV)

The most common coverage. It’s more likely to get your home rebuilt “as it was” up to certain policy limits. You usually need to rebuild in order to get full replacement value.

Guaranteed or Extended Replacement Cost

It’s the best coverage, if you can get it, but it’s also the most expensive. Depending on your needs, you may or may not want this coverage.

My advice:

The joy of a low premium today can be ruined by the shock of inadequate coverage at claim time. Consider making a phone call to a trusted local agent to talk about your homeowners insurance.

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Bruce Sackrison is an insurance property and casualty broker affiliated with Professional Insurance Associates. He is at 707-931-0186 or bruces@sackifs.com.

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