Home Insurance 101

Insurance Information Institute concluded in their “2016 Consumer Insurance Survey” “Homeowners Insurance: Understanding, Attitudes and Shopping Practices” (February 2017)

homeowners have gaps in their knowledge of their coverage. For example, many policyholders do not recognize that most flood damage is not covered by their basic homeowners insurance.

1,006 people were surveyed for the report.

I can certainly attest, with our headquarters in a coastal city, neighboring the city ranked 2nd behind New Orleans in terms of threat by coastal flooding, that many home buyers and home owner misunderstand flood insurance. Flood insurance is a separate policy from home insurance. Many people do not know that home insurance does not cover flood. (The same goes for earthquakes.)

The report also concluded that most home owners do have a basic understanding of their home insurance policy. That’s great! We’ve served over 2000 customers at COMPARITY. So I can also attest that everyone struggles to understand their home insurance – even if they think they understand or don’t want to admit otherwise.

There are definitely some who care about details much less than others. They figure that they don’t have much control. They don’t want to waste time thinking about insurance. They just want to that know the company issuing their policy is solid and not ripping them off. “I’m required to have this. Just make it easy.”

I get it. I also think, because home insurance is something most home buyers must have, they should gain the upper hand with a simple education.

I want to make it easy. Here’s my Home Insurance 101.


This is insurance for what is likely your most valuable financial asset. Risk is inherent for everyone involved. Again, consult a licensed insurance professional about this when you are at that point. If you don’t want to ask an agent providing a quote, you can ask us. Start with online chat on our website.


I’ll summarize a few fundamentals here, but I’m going to assume you know why insurance exists and how it works. This is the run down specifically on home insurance. A companion to the info below is our handy reference guide for insurance vocabulary on our web site.


Coverages are the things protected by your insurance. If you experience loss of all or part of your home, or items in your home, or if people are injured on or by your property, then your home insurance coverage pays or otherwise compensates for the loss.

Typical home coverages are:

  • Dwelling Amount – for rebuilding or repairing all or part of your home
  • Loss of Use – for not being able to live in your home while it is rebuilt or repaired (Not for remodeling!)
  • Medical Payments – for paying some medical expenses when others are injured
  • Other Structures – for rebuilding other man-made structures on your property, ex., shed, separate garage, stone wall
  • Personal Property – for the items you own in your home, ex., wardrobe, furniture
  • Personal Liability – for protecting your estate against major loss due to your liability

There are also common, optional coverages called “Endorsements”. I think it’s probably simplest to think of them as coverages. Typical home endorsements are:

  • Ordinance & Law – for when a loss requires an update due to new building codes
  • Water-Sewer Backup – for when the connector line between your house and the main utility line causes water or sewage to back up into your home


Deductibles are the amount subtracted from the insurance company’s compensation as your responsibility. Deductibles offset insurance carriers’ risk of excessive claims for minor losses.

Rule of Thumb: If a loss recovery costs less than, equal to, or only slightly more than your deductible then you should not claim the loss and should pay for the repair yourself.

Typical home deductibles are:

  • All Peril – general damage to your home
  • Wind & Hail – damage caused by any type of wind and/or hail
  • Named Storm – damage caused during periods of government-issued storm warnings

What’s the difference between “wind and hail”, “hurricane”, “tropical cyclone”, and “named storm”?

This one is tricky because weather is tricky. To complicate matters, news media are beginning to name winter storms. However, the National Weather Service does not name winter storms.

“Named storm” in the context of home insurance refers to a non-winter, wind-related weather event as named by the National Weather Service. Named storm deductible is “activated” when the National Weather Service issues a storm warning. Named storm deductible applies until some period after NWS lifts final storm warning. All damage that occurs during the activation period is subject to the named storm deductible and not the all peril deductible. In most cases there is no difference between “named storm”, “hurricane”, and “tropical cyclone” as these are geographic distinctions.

“Wind and hail” is a broader distinction than “named storm”. “Wind and hail” typically covers all wind-related weather events, including named storms. If your policy or quote has a named storm deductible and no wind and hail deductible then all wind and hail events that are not named storms are treated as all peril.

Lowering Premiums

Yes, you can lower premiums by reducing coverage and/or increasing deductibles. Consider it carefully.

Will you be able to make up a difference in higher deductible if you are suddenly faced with it?

I just saw a comparison for one of our customers that compared a 1% and 2% hurricane deductible for a dwelling valued at $375,000. That’s a difference between a $3,750 and a $7,500 deductible. If a hurricane causes $7,400 in damage that home owner will pay 100% out of pocket for the repair.

Words to the Wise

There are few things with insurance that seem to trip up most everyone.

Percentage-based Deductibles

When you have a percentage based deductible the percentage applies to the amount of your dwelling, not the amount of your loss. So, if you have a 200,000 home and a 1% deductible then your deductible is 2,000.

Percentage-based Coverages

When you have percentage based coverage, the percentage also applies to the amount of your dwelling, not the amount of your loss.


Always call or write your agent before making a claim. Your agent will help you determine if a loss is covered and if it makes financial sense to report the loss. Don’t make small claims, especially if you can afford the recovery yourself.

Only claim losses when you need the insurance to help you recover. It’s not worth adding a small claim to the Claims Loss Underwriting Exchange (CLUE) Report on your property and personal housing record.

I’ll write more in the future about the CLUE report and how it affects you. (UPDATE)

We make it easy for you understand an insurance applicationAll of this information is embedded in our online application, which you can browse entirely without entering any information. We want it to be easy for you to understand an insurance application before you submit it. Check it out.

Is this information helpful? I want to know. If you have more questions about anything here, please ask. Hit me up in the comments. I’ll be happy to discuss more.

Scott Hunter



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