Hawaii Homeowners Insurance: Coverage 101

Buying a home is one of the biggest decisions you’ll ever make, and it’s probably the biggest purchase you’ll ever make. It’s a huge investment, and you need to protect that investment. That means buying homeowners insurance, which can be a complex and confusing endeavor. The first step is to understand what you’re buying.

Do you know what exactly is and is not covered by your Hawaii homeowners insurance? Here’s a brief primer on the basics to get you started.

Homeowners insurance 101

Homeowners insurance provides financial protection if your home or its contents are damaged, and liability protection if you or a family member are found liable for injury to others or for damage to their property. Most mortgage lenders require homeowner’s insurance, and policies run the gamut from basic coverage to a broad range of protections.

The standard homeowners insurance policy has four essential types of coverage:

1. Coverage for the structure of your home. This includes the repair or rebuilding of your home if it’s damaged or destroyed by fire, hail, tornado, lightning, hurricane, or other disasters listed in the policy. Most policies will also cover detached structures such as garages or tool sheds. Always buy enough coverage to rebuild your home.
2. Coverage for your personal belongings. Your furniture, clothes, and other personal items are covered if stolen or destroyed by an insured disaster. To make sure you’re getting enough coverage, conduct a thorough inventory of everything you own. Expensive items like jewelry, art, furs, and collectibles may be covered, but there are generally dollar limits if they’re stolen, so you may need a special endorsement or floater to insure them for their appraised value.
3. Liability coverage. This covers you against lawsuits for bodily injury or property damage that you or family members cause to other people. It will pay to defend you in court and for any court awards (up to your policy limits). It also provides no-fault medical coverage, so if a friend is injured at your home, he or she can submit the medical bills directly to your insurance company, with no need for a liability claim against you. If you have significant assets and want more coverage, consider an umbrella or excess liability policy for broader coverage and higher limits.
4. Additional living expense (ALE) coverage. If you’re temporarily displaced from your home while it’s being repaired after a disaster, ALE coverage will take care of hotel bills, restaurant meals, and other costs over and above your usual living expenses. ALE coverage has limits, including a time limit in some policies. If you rent out part of your home, ALE will also cover the rent you would have collected from a tenant if your home had not been destroyed.

What’s not covered?

Damage caused by flood, earthquake, or routine wear and tear is generally not covered by a standard homeowner’s policy. For many perils not covered, you can purchase supplemental insurance such as earthquake or flood insurance.

You have the option to insure for either replacement cost or actual cash value. Replacement cost is the amount it would take to replace or rebuild your home or repair damages with materials of similar kind and quality, with no deduction for depreciation. You should insure your home for at least 80 percent of its replacement value. Actual cash value is the amount it would take to repair or replace your home after depreciation.

Finally, be smart. Shop around, ask about discounts, and understand exactly what you’re getting before you sign on the dotted line. Want to know the best way to understand your Hawaii homeowners insurance? Get in touch with your independent insurance agent.