A Consumer's Guide to Homeowners Insurance

A home is likely one of the most significant investments you will make, and understanding homeowners' insurance is essential for anyone looking to purchase a home.

Homeowners' insurance protects that investment from unexpected events that could cause significant financial loss. Think of it as a safety net, providing financial protection when things go wrong. It's about protecting the building itself, your belongings, and your financial well-being.

It's suggested to start looking at policies early in the property search. You can ask a Realtor® to connect you with a licensed insurance agent for assistance. Locally, a Realtor® is a licensed real estate broker who is a member of the National Association of REALTORS® (NAR) and the Vail Board of REALTORS® (VBR).

The VBR has numerous affiliate members who are professionals in real estate-related fields, like Nick Budor, president of Wall Street Insurance in Edwards. Budor has helpful advice for new and experienced homebuyers. 

First and foremost, he suggests ensuring you have enough coverage and the correct coverage for your home.

A checklist of coverages.

"Have a good dialogue with your agent regarding your coverage," says Budor. "You should start by making sure you are covered in these three major policy areas: Dwelling coverage, personal property, other structures and personal liability."

Dwelling coverage protects the physical structure of your home, including the roof, walls, attached garages, and other structures permanently affixed to the property. Detached structures like sheds or fences fall under "other structures coverage."

Dwelling coverage is crucial for homeowners as it ensures they can rebuild or repair their homes after a covered event. Budor also suggests keeping the dialogue open with your agent to ensure your policy keeps up with inflation and increased costs of building materials.

"Look at the example of the 2021 Marshall Fire around Louisville, Colorado," says Budor. "There are estimates that approximately 70 percent of the homes destroyed or damaged in the fire can't be rebuilt at current cost levels. You should check in regularly with your agent, not only when first establishing the policy."

The next area of coverage, personal property, covers your personal belongings inside and outside your home. This includes furniture, electronics, clothing, and other household possessions not physically attached to the home. However, says Budor, make sure you consider exactly what's covered. 

"There are 'extras and inclusions' policies to consider for valuables like artwork, jewelry, or a wine cellar," adds Budor. "The consumer doesn't realize that basic policies usually have relatively low limits for specific valuable items, and the valuables coverage may not automatically be included in your policy. It's another question to ask your agent."

The third area, personal liability, protects you if someone is injured by you or as a result of your negligence on your property (and in some cases even off property). It covers medical bills, legal defense costs, and court awards up to the policy's limits.

For example, if a visitor slips and falls on your property and sustains an injury, personal liability coverage would help cover medical expenses and potential legal fees if they file a lawsuit.

Most policies cover up to $250,000 or even $500,000 in liability, but umbrella policies can also be purchased to provide additional liability coverage beyond the limits of your standard homeowner's policy.

Additional coverages to consider.

Budor strongly suggests discussing a few additional homeowners’ policy coverages with your agent. One is coverage for additional living expenses, which is beneficial if your home is damaged and you must temporarily live off-site. For example, a homeowner displaced by a fire may need to stay in a hotel or a rental property. This coverage can help offset those costs.

A recently enacted law in Colorado directs insurance carriers to provide insureds with wildfire mitigation steps for their properties - a proactive measure that insurance companies like to see. Mitigation techniques, such as landscaping modifications and fire-resistant materials installation, have been shown to reduce home losses during a wildfire event.

Programs like Firewise USA and locally, REALFire®, educate homeowners and communities on protecting properties from wildfire destruction. REALFire® provides free property assessments to educate residents on how their homes and landscaping may be susceptible to wildfire and gives them specific ways to reduce the threat.

While wildfire is the most discussed potential threat in our mountain community, flooding is another potential issue often overlooked.

"A flood can potentially strike anywhere," says Budor. "Several years ago, properties were damaged in Avon when a heavy rainstorm caused localized flooding. You don't need to be near a river for flooding to happen. The debris and water from the heavy rains damaged properties, not rising floodwaters from the river."

Budor mentions the National Flood Insurance Program (NFIP), which provides flood insurance to property owners, renters, and businesses. The NFIP enables policyholders to purchase flood insurance policies while also encouraging communities to adopt and enforce floodplain management regulations to mitigate flood risks.

Consumers can visit the NFIP website for more information and can get a quote on flood insurance from their agent. Realtors® and NAR support the NFIP program.

"You can procure insurance through NFIP, or talk with your agent about the right additional coverage," says Budor. "Not all insurance plans are the same, and not all carriers are equal. Different carriers may focus on different risks. Always check your coverages."

"Your insurance agent is here to be an advisor," adds Budor. "It's a trusted relationship that we want to provide, and you should take advantage of it as a consumer."  

Visit vbr.net to find a REALTOR® or Affiliate who can guide you through the local market and property insurance.