After fully protecting my family with term life and long term disability coverage, I decided to look over my property and casualty policies to make sure I’m properly protected.

I found a much cheaper home owners policy with much higher limits but when I started looking at the policy I noticed some big issues. Most homeowners policies offer basic protection against fire and other named perils. Adding optional endorsements can really help close those gaps in coverage.

After I started comparing my two policies, I learned a lot about these optional and often recommended endorsements. For a comprehensive list of endorsements, I’d recommend doing some additional research, but these are the main ones I chose.

Water Backup

The most basic endorsement I had was water backup. This protects me from damage caused by the city sewer system backing up and pumping raw sewage into my home. This is a rather common insurance claim, is different than water damage, and wasn’t included in my new policy and I couldn’t add it. It added about $2 a month to my existing policy.

Personal Injury

The next was personal injury. My existing policy had personal liability coverage that was set at 100k, the new one gave me $1,000,000 (10x more) but it lacked the personal injury endorsement. Personal injury has a goofy name but what it does is protect me from lawsuits caused by accidents or unintentional harm.

The difference between liability coverage and liability with the personal injury endorsement is that liability only covers bodily injury while personal injury is more comprehensive and covers non-bodily injuries.

Special Personal Property

The next critical and missing endorsement was for Special Personal Property. Most policies only cover named perils for personal property. Adding this endorsement allows you to cover all but excluded perils. This coverage is pricy and increases the premium by 20-30% but does protect homeowners from things like power surges and increases the coverage limits for items like firearms and jewelry. After just having my utility company nearly destroy my electrical system I am happily going to keep this coverage in case it happens again and they destroy my solar panels system or my $18,000 air conditioner. I couldn’t add this coverage either.

Replacement Value

Both policies included the option for replacement cost on personal property. Default coverage is for the cash value of the property, so for example if your house burns down, and your electronics and furniture were a few years old, cash value will pay you for whatever life the property had left in it. For electronics especially this could be a huge hit. Replacement value makes you whole by allowing you to replace the destroyed personal property with something new and equivalent to what you had. This is recommended coverage by most insurers.

A separate endorsement is extended replacement cost on dwelling. I bumped mine to 50%. Rhis means if the carrier recommended $300,000 to rebuild your home, you can actually go up to $450,000. This is important as building costs and labor are exceptionally high in most metro areas.

Law and Ordinance

Finally, law and ordinance coverage was added and recommended by both carriers. This covers you in case of property damage that results in an upgrade of the property to bring it up to code. In California, some jurisdictions are requiring code updates to repair minor damage. A real world example given was a person who had $15,000 in damage due to a kitchen fire, but the county wouldn’t permit the repair unless the whole home was brought up to code which in CA now requires fire sprinklers, solar, and in some cases earthquake bracing. The agent told me the county requirements put the client on the hook for $250,000 in code updates that would have been covered by the Law or Ordinance endorsement which cost me $2 per month to add.

You have to read the policy

Comparing the two policies major coverages it seemed like I was getting a lot higher limits for a lot less cash, but most of the savings were from the lack of coverage, primarily the Special Personal Property coverage. Some basic coverages which are only a few dollars a month were also not included and are highly recommended by most experts. The only way to know what you’re covered for is to read the policy.

I used Perplexity AI to learn about the endorsements but you can always call your carrier. The company I purchased the newer policy from told me over the phone twice that my coverage included the optional coverages my existing policy had only to escalate the question and determine I actually wasn’t covered. For that reason, I recommend reviewing your policy with the help of someone other than an agent who works for a company selling you a product.

Adding a personal umbrella policy

I decided to bump up my liability insurance on my home and auto to 500k, and then added an umbrella policy.

An umbrella policy kicks in after the first 500k of my home or auto liability is used up. You can buy coverage up to $10,000,000. Combined with the liability coverage on a home and auto policy the person is covered up to the limit of both, for example, if I have 500k in auto liability but $2,000,000 in umbrella, they’d be covered up to $2,500,000 and if the person also had the personal injury coverage on their homeowners policy this would include non-bodily injuries.

Reviewing your insurance coverage every year should be part of your personal financial planning protocols

It’s essential to know what you’re covered for before you have an incident. Spend some time running the numbers to figure out what would happen in the event of an untimely death, disability, or accident in which you are found liable. If you don’t like the numbers, pony up and buy the right kind of insurance. Most people choose to assume that the coverage they have is sufficient but you really do need to go through the policy, and make sure.

You can be under insured and over insured, so make sure your limits are set correctly and that you look deeper than just the initial coverages.

Hopefully this introduction motivated you to get in there and take a look at what you have and that it’s what you think you’re paying for.