Homeowners Insurance: Your Detached Structures May Be Underinsured

Your homeowner’s insurance policy protects you from having to pay on your own for damage to your home caused by fire, wind, smoke, and other causes. However, your home might not be all you have to worry about. Does your property have a gazebo? A deck? A pool? An outside kitchen? A shed? A fence? If you answered “yes” to any of these, the good news is that your policy covers those structures, too. The real question then becomes whether it’s providing enough insurance to cover the cost of rebuilding or repairing them.

The standard Insurance Services Office (ISO) Homeowners 3 – Special Form, which many insurance companies include in their policies, covers “other structures” on the grounds where the home sits. The insurance company will consider a structure to be an “other structure” and not part of the house if it is separated by clear space from the house. They will also consider it to be separate if it is connected to the house only by a fence, utility line or something similar.

It is common for a policy to insure all of these structures for an amount equal to 10% of the amount of insurance on the house. For example, if the policy provides $300,000 coverage on the house, it will provide $30,000 for other structures. Whether that will be enough depends on how much it will cost to repair or replace them, and how many there are.

If a home has a stockade fence, a large deck, and a shed, the cost of replacing all of them after a fire may wipe out the amount of insurance. Actual cash value is typically the cost of replacing an item minus an amount for depreciation. If a 10-year-old fence would cost $10,000 to erect today, and it has a useful life of 15 years, the insurer can deduct two-thirds of that amount from the $10,000. The result is approximately $3,333. The company would compare that to the cost of repair. If repairing it would cost more, the insurer would pay the lower amount.

Other Structure Coverage Specifics

• The ISO form does not cover damage to a fence, patio, pavement, swimming pool, pier, wharf or dock that results when water or ice freezes, thaws, puts pressure on or puts too much weight on them.
• Just like the house and the contents inside it, these structures are almost never covered for losses caused by earth movement, floods, power failure, neglect, or extra costs from the enforcement of updated building codes.
• The ISO form permits the insurance company, when one of these structures that is not a building is damaged, to pay the lower of:
  • The cost to repair or replace it.
  • The structure’s “actual cash value.”

What you can do

Find out what the cost would be to replace the structures on your property that are not attached to the house. Compare that figure to the amount of other structures insurance your policy provides. Your current policy may provide enough, but find out whether the insurance company will depreciate the value of a deck or similar property.
We can offer you coverage options, so give us a call. The ISO form is the standard, but it is seldom sold unchanged. Also, all insurance companies are different and their products are not identical. It pays to compare alternatives. Some carriers might offer larger amounts of coverage on other structures, and some policies might not permit the company to depreciate the property.

Your homeowner’s insurance should provide you with as much protection as possible for the price you can afford. Find out before something happens how well it protects the valuable structures on your property besides your house.