Enhanced Homeowner’s Insurance Policy
Did you know that North Carolina has a separate Enhanced Homeowner’s Insurance Policy? And that is very different from a Standard Homeowner’s Insurance Policy?
If you didn’t know that this existed, it’s unlikely you have one. But you might be eligible for it.
I assume the majority of folks who buy homeowner’s insurance have a sense that they are buying a policy that will cover most everything that could go wrong.
In a perfect world that is exactly the way it should be. But unfortunately that is not at all how it works.
The North Carolina Enhanced Homeowner’s Insurance Policy does come pretty close though.
That being said the following companies in North Carolina DO NOT have an Enhanced Homeowner’s policy as of February of 2018:
- State Farm
- Farm Bureau
Typically, the Enhanced Homeowner’s Insurance policy is only offered by companies who work with Independent Insurance Agencies.
What is a Homeowner’s Insurance Policy, Anyway?
Before I explain why the Enhanced Homeowner’s Insurance Policy so good, I should explain what a homeowner’s insurance policy is.
Essentially a homeowner’s insurance policy is just a legal contract between YOU and an INSURANCE COMPANY.
They can get pretty long and confusing, but from a high level view just know this. An insurance policy is just a list of things that an insurance company will and will not pay for.
Phrasing it that way may be extremely simplistic but that’s really all it is. With that in mind, it would help to define a few key components.
Definitions (yep, this is the definition of an insurance definition is): The contractual explanations of the WHO, WHAT, and WHEN that is covered by the homeowner’s insurance policy.
Coverages: The meat and potatoes of a homeowner’s insurance policy. They are limits or “buckets of money” dedicated to covering your stuff, yourself, or other folks.
Endorsements: Changes that add or takeaway Coverages or Exclusions to the original insurance contract that you have.
Exclusions: The contract terms that explain what will NOT be covered by the homeowner’s insurance policy
Duties: This section of the policy explains what your duties are in order to fulfill your end of the contract, if something happens.
So that is a quick view of pretty much what you’ll find in a homeowner’s insurance policy.
Things tend to get confusing when the insurance company explains all of that over the course of about 40 or more pages, all the while meandering through a maze of legal jargon.
What Makes Enhanced Homeowner’s Policy So Good?
So now that you have a halfway decent understanding of what a homeowner’s insurance policy is, it’s time to explain why the coverages and endorsements on Enhanced Homeowner’s Policy are superior.
Similarly to the Standard Homeowner’s Insurance policy, the Enhanced Homeowner’s Insurance policy has these six primary coverages:
- Dwelling (Coverage A)
- Other Structures (Coverage B)
- Personal Property (Coverage C)
- Loss of Use (Coverage D)
- Personal Liability (Coverage E)
- Medical Payments to Others (Coverage F)
Unlike the Standard Homeowner’s Insurance policy however, with the Enhanced, the limits provided and approved causes of a claim that are more favorable for you.
(Disclaimer: It’s important to point out here that the Enhanced Homeowner’s Insurance Policy should always come with a key Endorsement, the HE-21.
So I have included it in my description of the policy’s coverages.)
The Dwelling (Coverage A)
This covers the house itself. It should always been insured to 100% of the Replacement Value. But just in case that amount is not enough at the time of a claim, the Enhanced Homeowner’s Insurance Policy offers:
- Guaranteed Replacement Cost – Meaning whatever it takes to rebuild your house is what they will pay. The Standard Policy doesn’t come with any additional, but you can add up to a max of 125% over the Replacement Value.
Sometimes there are events that inflate the cost of building materials and labor. With Guaranteed Replacement Cost you wouldn’t need to worry about running out of money to rebuild.
Other Structures (Coverage B)
This covers everything on your property, not attached to your house. Things like a detached garage, shed or barn, swimming pool, pool house, and even any fencing.
- 20% of the Dwelling – The Standard Policy only offers a max of 10% of the Dwelling amount
If that 10% is not enough for what’s on your property, having that little bit extra can help. On any homeowners insurance policy you add more coverage for other structures, but it comes at an additional cost.
Personal Property (Coverage C)
This coverage is for your stuff. All of your belongings. If you would put it on a moving truck, it falls under this coverage.
- Open Perils or All Risk Coverage – Basically, unless the policy specifically excludes something, IT IS COVERED.
- Replacement Cost Included
This can be a pretty big deal. The Standard Homeowner’s insurance policy only offers Named Perils, which is a list of perils (fire, theft, vehicles, volcanic eruption) and it only pays when one of those things happens.
Also, the Enhanced policy comes with Replacement Cost for your personal property. The Standard policy comes with Actual Cash Value (Depreciated Value), but the Replacement Cost can be added for an addition cost.
Loss of Use (Coverage D)
If you can’t stay in your home because of a claim, this coverage pays for you to live elsewhere until you can move back in. Both types of policies pay up to 20% of the Dwelling.
- Mortgage Expenses – Not only will the Enhanced pay up to 20% of the dwelling for you to live elsewhere, but it will also help you make your mortgage payments for up to 12 months.
That’s a nice feature to have your mortgage paid for if you can’t stay in your home. The Standard policy doesn’t offer this at all.
Personal Liability (Coverage E)
This coverage pays out to others if they are injured on your property as a result of your negligence.
- Personal Injury – While this sounds like the same thing as Personal Liability, it actually covers you if you are sued for Libel, Slander, or Defamation.
You’re normally covered if someone is injured on your property as a part of your negligence. But if you or one of your children slander a neighbor or even someone online, you can have coverage to help cover the defense costs and any resulting settlement.
Medical Payments (Coverage F)
Nothing really to note here. Coverage is the same on both policies and pays out to anyone injured at your property. Think of it as a goodwill coverage to anyone who gets hurt.
It’s worth pointing out here that both Coverage’s E & F should be maxed out whenever possible. They are among the cheapest coverages on the policy. $5,000 is the max for Medical Payments and it probably adds $5/year from the minimum of $1,000.
The base Enhanced Homeowner’s insurance policy is not great by itself. So in order to get all the benefits it has to offer several endorsements are needed.
Extended Enhancement Endorsement (HE-21)
This is the single endorsement that gives the Enhanced Homeowner’s Insurance policy its greatest value. Regardless of any other endorsements available, this should always been on your HE-7.
- $50,000 for Water and Sewer Backup – This is a big deal for homeowners. The Standard Homeowner’s policy doesn’t come with this coverage, but it’s optional up to $25,000.
- Dwelling Guaranteed Replacement Cost
- Other Structures Coverage up to 20%
- Loss of Use – Primary Mortgage Expense up to 12 months
- Personal Injury Liability
- Land Stabilization and Rebuilding up to $10,000 (not optional on the Standard Policy)
- Other increased limits on personal property (Increased for theft of jewelry, furs, firearms, etc.)
The next few endorsements are all important, but technically optional on the Standard Homeowner’s insurance policy as well.
Identity Theft Coverage
This endorsement pays up to $15,000 to $25,000, depending on the insurance company, to help reimburse you for any expenses incurred as a result of having your identity stolen. It pays you back for all of the following:
- Incurred costs obtaining affidavits from law enforcement agencies, financial institutions, credit agencies, etc.
- Loss of earnings from taking time off work to repair your credit.
- Fee’s associated with re-applying to loans.
- Costs of any telephone calls made to aw enforcement agencies, financial institutions, credit agencies, etc.
- Premiums on bonds required as a result of a lawsuit resulting from identity theft.
- Reasonable attorney’s fee’s with approval from the insurance company.
Pretty self-explanatory here!
Earthquakes are always excluded from Homeowners Insurance policies, but can be added back to the policy.
A quick caveat though, most insurance companies exclude damage to “masonry veneer” siding aka a brick exterior.
Also in North Carolina, the minimum deductible for Earthquakes is 5% of the Dwelling. So that can be pretty steep!
Equipment Breakdown Coverage
This is a great new coverage that very few insurance companies are offering in North Carolina. In fact we only have ONE insurance company who offers Equipment Breakdown Coverage, Auto-Owners Insurance Company.
The coverages pays to repair or replace and mechanical systems in your house with a $500 deductible. It covers:
- Air-conditioning systems • Computers and other home electronics (e.g., televisions, audio systems) • Electrical systems • Furnaces • Generators • Home appliances • Hot-water heaters • Motors, fans, vacuum systems • Refrigerators and freezers • Security systems • “Smart home” automation systems • Swimming pool heating and filtration systems • Lawn mowers
Exclusions and your Duties after a Loss
Every insurance policy on the planet has a list of exclusions as well as a list of things you must do following a claim. The Enhanced Homeowners Insurance policy is no different.
Here are some examples common exclusions, but you should always read your actual policy because these aren’t all of them.
Ordinance or Law
Earth Movement (Earthquake Coverage is Available)
Water (Not all Water, but definitely Flood, SEE POLICY FOR DETAILS)
Your Duties after a Loss
After a claim there are certain steps you have to take to help the insurance company out. Same with the exclusions above, these are just a few examples and your policy made have different and additional requirements.
- Give prompt notice of the Loss.
- Notify the Police if a loss by theft occured.
- Protect your property from further damage or loss, including making necessary repairs to stop further damage from occurring.
- Cooperate with the insurance companies investigation of the claim.
- Prepare and have ready an inventory of damaged or lost items. Including invoices, receipts, or any other evidence to help prove you owned the items you are claiming is HUGELY helpful.
In regard to that last bullet point, we recommend that client’s take a regular inventory of their belongings. Taking room by room video is a great and easy idea to show your insurance company what you had and what it’s value was.
Likewise photos of brand names and any evidence you can give upfront will help ensure you have a fast and fair claim.
How much does the Enhanced Homeowner’s Insurance policy Cost?
The above information is great and all, but if the Enhanced policy costs too much, then why bother?
Great news here! In my experience, when available, the Enhanced Homeowner’s Policy is very affordable in comparison to the Standard Homeowner’s Policy.
This chart helps breakdown the cost differences that I’ve seen over the last few years:
|Enhanced Homeowner's Annual Cost||Standard Homeowner's Annual Cost|
|Age of Home: 0-5 Years|
Replacement Value: $200,000
|Age of Home: 5-10 Years|
Replacement Value: $320,000
|Example 1: |
Age of Home: 5-10 Years
Replacement Value: $500,000
|Age of Home: 25+ Years|
Replacement Value: $350,000
What really has shocked me about this Enhanced Policy is its affordability. For newer homes I often see that the Enhanced Policy is the same cost if not even a little less than the Standard Policy!
The Wrap Up
Other than digging down into the heavy details, that is the tall and short of it. Insurance companies have recently changed their eligibility guidelines to allow more homes into the program. At our Independent Insurance Agency we offer the Enhanced Homeowner’s Insurance Policy through the following insurance companies:
If you’d like see if your home is eligible for the Enhanced Homeowner’s Insurance Policy we would love to help. You can fill out this form below to get started.