Insuring your home in the Tar Heel state
Whether homeowner’s insurance is something you reluctantly purchase at the best available price, or if you are a bit more enthusiastic about personal risk management, there are a few peculiarities to consider when purchasing homeowner’s insurance in North Carolina.
HO3 vs HE7
The standard homeowner’s policy, otherwise known as an HO3, includes standard coverages for the house, your personal property, and personal liability. The HO3 covers the dwelling on an open peril basis, which means it covers any cause of loss unless specifically excluded in the contract. Common HO3 exclusions include:
In North Carolina, homeowners can purchase an enhanced policy known as an HE7. How is an HE7 different? This type of policy includes increased coverages. An HE7 guarantees full replacement cost on the dwelling as well as the ability to increase coverage limits to higher percentages than typically written.
That is not to say that you cannot enhance a standard HO3 through additional coverage endorsements. However, having them bundled together in an HE7 allows insurance companies to offer these additional coverages as a package, often resulting in a better value when compared to individually adding each additional coverage.
Okay, but what are the typical coverages and limits? Below is a standard coverage list that Insurance agents will work off:
Keep in mind these are just base coverages and limits. It is worth noting there are many opportunities to add endorsements to your policy to increase coverage. The two most common endorsements to a homeowner’s policy are personal property replacement cost and water backup coverage.
Personal Property Replacement Cost
This covers the cost to fully replace your personal property if it is damaged or destroyed by a covered loss. In other words, if you have a sofa that costs $1,000 to replace new, your insurance company will pay $1,000 to replace your sofa if it is damaged by a covered loss. If you don’t have the replacement cost endorsement for personal property, your belongings will be covered at their actual cash value (replacement cost – depreciation). So that sofa you bought for $1,000 five years ago may only be worth $300 after depreciation, and that is all your insurer will reimburse you for.
Water Backup Coverage
Water backup is an important coverage to consider because water damage is the second most filed insurance claim in the United States. A water backup endorsement covers a wide variety of damages including the backing up of sewers or drains into your home. The reason this endorsement is so commonly added is because clogged drains are some of the most common causes of loss in a home and the average water backup claim is upwards of $10,000. Typical water back up limits range anywhere from $5,000 to $25,000.
If you’ve made it this far, thank you for taking the time to learn a little bit more about homeowner’s insurance in North Carolina! The last thing you’ll need to know about when purchasing homeowner’s insurance in the tar heel state is something called “consent to rate.” This NC specific term requires its own blog, so if you’d like to learn more about consent to rate, what it is, and what it means for you, check out our blog page! We regularly post informative, relevant material that can help you get a better understanding of insurance; there’s also some entertaining stuff over there too.