When you buy a house, you’re likely told how important it is to obtain homeowners insurance. It’s usually a requirement by your lender. What you may or may not know is that your policy might include other structures coverage.
Other structures coverage can be helpful for some home buyers. However, it can also be an unnecessary expense. It’s no secret that buying a home can be more expensive than renting in some cases. You need to pay for property taxes, repairs and maintenance, and insurance. It’s understandable that most homeowners will want to look for savings wherever they can get it.
So what is other structures coverage and do you really need it? Let’s take a look.
What does “other structures” cover?
Other structures coverage, also known as Coverage B, is often part of a homeowners insurance policy and is used to cover and replace other structures of your home that might get damaged.
The risks of not having enough insurance coverage for other structures are like those of not having enough coverage on the home itself.”
“Other structures” refers to things like a fence, detached garage, mailbox, backyard shed, in-ground swimming pool, or a gazebo. The limit of insurance for all other structures on your property is a percentage of the dwelling limit. Typically, this is around 10%.
This means, if you have $200,000 in dwelling coverage to protect your house and attached structures, you can have up to $20,000 in coverage for other structures that are not part of your home like a pool or work shed.
Insurance may not cover the complete costs to repair damage to your other structures property. However, the funds will limit what you have to pay out of your own pocket.
“Insurance coverage for other structures is important because replacing other structures can be a significant cost just like rebuilding a home after a major loss,” says Jodi Ortega from State Farm.
“The risks of not having enough insurance coverage for other structures are like those of not having enough coverage on the home itself. In case of damage, especially a total loss, there may not be enough coverage to repair or rebuild the other structures.”
Considering additional coverage
While having other structures coverage may be helpful, it may not be sufficient enough to protect the items you store inside your other structures.
If you have a work shed, detached garage, or detached guest house, you should also consider Coverage C as part of your homeowner’s insurance policy.
Coverage C helps protect your personal property by insuring all your belongings regardless of where you keep them. This will help provide peace of mind if you’re storing expensive or important items in other structures right outside of your home.
Coverage D is for loss of use. It comes into play if the damage makes it impossible for you to live in your home.
What does “loss of use” cover?
There are two main parts to Coverage D or Loss of Use coverage for homeowners.
The first is ALE insurance, which stands for Additional Living Expenses. It reimburses homeowners for additional living costs they had to cover due to living away from their home after a loss.
For example, if your home suffered a serious fire, you can use ALE insurance. This will cover the costs of the hotel stay that you had to pay for while you make repairs to your home.
Keep in mind that you will only receive compensation up to your coverage limit. This may not cover all your expenses.
The other type of coverage you’ll get with loss of use is fair rental value. It will compensate for lost income while a loss prevents you from renting your property.
Like other structures coverage, loss of use coverage bases its limit on a percentage of your dwelling coverage.
Should you get and keep other structures coverage?
This is a question you may be asking yourself right now. Fortunately, the decision has already been made for you.
According to Glenn Greenberg, a spokesperson for Liberty Mutual Insurance, you cannot forego structures coverage, but you can increase your coverage if needed.
“Some important coverage exclusions to be mindful of include, but are not limited to: utilizing other structure as a place of business, normal wear and tear, mold, wet or dry rot, and damage caused by birds, rodents, and insects,” Greenberg says.
“When the replacement cost of the other structures is higher than the amount of coverage for them that comes with the policy, you can increase the other structures coverage for an additional premium.”
Other structures coverage may not cover all damages. Yet, you don’t have to spend any extra money on the coverage, so you don’t have anything to lose.
“When you take out a homeowner policy, the coverage limit for any “other structures” you have on your property is automatically 10% of your Coverage A, but you don’t have to pay extra in your policy for the other structures coverage,” Greenberg said.
If you value the other structures on your property and the contents inside, you may want to look into extending your coverage. This will allow you to take advantage of Coverage C and Coverage D.
To explore more coverage options, check out our home insurance review page to compare companies side-by-side.