What Is a Homeowners Insurance Rider?
The median home value in the United States has grown more than twice, by $119,900, from 1999 to 2019. Back then, the midpoint value was only $111,100, and it then grew to $231,000 in 2019.
In Massachusetts, the growth has been more significant. In 2019, Bay State homes had a median worth of $408,100 and an average outstanding mortgage balance of only $156,178.
These values are already high, but they don’t even include the worth of the homes’ contents. Especially not the high-value ones.
This is where an insurance rider comes into play. It provides coverage for items that a typical homeowners’ policy won’t.
How exactly does this type of insurance product work, though? What does it cover, and why should you think about purchasing it?
We’ll answer all these questions (and more) below, so please be sure to stay and read on!
What Is a Homeowners Insurance Rider?
An insurance rider, also known as an “endorsement” or a “floater,” is optional coverage. You can add it to your basic homeowners’ insurance policy to amend its coverage limits.
As an “add-on,” a home insurance rider raises the coverage of a basic policy. It does so by adding more covered perils, or increasing coverage for specific assets.
How the Addition of an Insurance Rider Policy Can Protect Your High-Value Items
The latest reports show that the average net worth of US households is $692,100, while the median is $97,300. Net worth, in this case, refers to the total value of a household’s assets, minus their debt and liabilities. Median, on the other hand, refers to the middle point that depicts the upper half and the lower half.
So, if the median is $97,300, that means that half of US households have a net worth below that, while the other half have more.
As you can see, that’s a considerable difference. This is important to note, as insurers write policies based on the typical household. That’s why residential insurance coverages have restrictions on them, especially on high-value items.
These limitations allow insurers to keep the prices of their policies reasonable. In this way, even the average household can afford to have their home and its contents insured.
As such, if you have items of more significant value, it’s unlikely for a basic policy to cover them. The same goes for anything else that the general population usually doesn’t possess.
An insurance rider gives you the option to protect these valuable properties. So, in case something happens to them, the rider’s coverage kicks in, and you can still recover your losses.
The Benefits of a Home Insurance Rider
Increased coverage and improved protection are the primary benefits of an insurance rider. Note that you can also get a renters insurance rider or an auto insurance rider. All of these extras work to provide property owners with more peace of mind.
Extending Limited Coverage
Your standard homeowners insurance policy covers your house, other structures, and personal property. It also provides you personal liability coverage. All these have limitations, though, both in coverage amounts and the perils they cover.
For example, basic insurance may cover damages caused by a tree falling on a house. However, that’s only if the damage was due to a covered peril, such as a fire, lightning, or riot. If the cause isn’t part of the policy’s inclusions, the insurer may not provide coverage.
This is where an insurance rider for other disasters, such as earthquakes, can be helpful.
Another example of a restriction is on high-value items, such as jewelry or art. Even if your policy has a $100,000 personal property coverage, it still has a “sub-limit” on such assets. For instance, there may be a clause in your policy that limits coverage on jewelry to only $2,000.
Now, keep in mind that in Massachusetts, property crime occurred at a rate of 1,263.3 per 100,000 people in 2018. The majority of these were larceny-theft victims, with a rate of 966.8 per 100,000 individuals.
With that said, if a thief breaks into your house and steals your jewelry, your insurer will only pay out $2,000 for them. If your jewelry is worth around that, then that’s fine. However, a lot of people own valuables that are worth way more than that.
In this case, you may want to consider purchasing jewelry rider insurance. It’s a type of personal articles insurance that provides more coverage for jewelry.
Fills in the Gaps of a Basic Homeowners Insurance Policy
A study found that 43% of homeowners believed that their basic policy covers flood damage. 28% also thought that their standard coverage includes hurricane-caused floods. Unfortunately, neither is true when it comes to typical homeowners’ insurance policies.
Another type of exclusion is water back-up damage from ill-maintained plumbing fixtures. Basic policies also exclude specific types of natural disasters, such as earthquakes. The list is quite long, which is why it’s vital to know the ins and outs of your policy.
Fortunately, there are optional riders that can fill in these gaps of a typical policy. If you believe that you have a higher risk of losses from these exclusions, it’s best to buy these floaters.
When Do I Need a Rider?
One of the best ways to determine if you need a floater or endorsement is to create a home inventory. It’s a catalog of all the personal items and valuables that you own. With this list, you’ll find it easier to determine if your current policy’s coverage is lacking.
Next, if you haven’t reviewed your policy for a long time, now’s the best time to do so. This way, you can start figuring out if you need any extra protection in the form of an endorsement. Be sure to factor in any major life, home, or property changes that have occurred too.
Let’s say you recently got married. Your spouse may have a lot of valuables that are now in the house you share. Your engagement and wedding rings may also be extremely pricey, so it may be best to get a rider for them.
In any case, you may need a rider if you’ve recently acquired any other valuable jewelry. The same goes if you have furnished your home with expensive rugs or carpets. A basic policy won’t cover their entire value, so it’s a good idea to purchase a “mini-insurance policy” for them.
Another example of when you may need an insurance rider is if you’ve bought a new car. In this case, you may want to consider purchasing a waiver of depreciation. This is a guarantee that the insurer won’t factor in any depreciation on your new vehicle for a set period of time.
An experienced Massachusetts insurance agency can help you understand your policy’s exclusions better. The jargon used by insurers can make it challenging to determine what your policy covers. Vague policy terms may also make you incorrectly think you have coverage for some items.
Common Homeowners Insurance Riders
An insurance rider does come with an extra cost, but it can be for as little as $20 a month, say for a $5,000 ring. That makes these optional endorsements a worthy addition to your basic policy.
Do note that insurers charge varying rates for each rider, so it’s best to compare quotes first. You can also have an insurance agent help you determine if extra coverage on these items is worth it.
On that note, here are some of the common types of insurance riders that you may want to consider.
Insurance Rider for Jewelry
According to a survey, US consumers spend an average of $5,900 on an engagement ring. That’s a single piece of jewelry, the worth of which can be two to five times more than what your policy will cover. It still depends on your homeowners’ insurance, but it may only cover jewelry for $1,000 to $2,000.
Engagement rings aside, Americans also spent $82.5 billion on jewelry and watches in 2018. That averages to about $647 per home, but only if you spread it across all US households. So, it’s very likely that your other jewelry and watches cost more than that.
It’s because of this that jewelry, watch, and ring rider insurance policies exist.
The question now is, what does insurance cover on jewelry rider?
Every insurer is different, but you can expect them to cover each piece against damage and theft. A specialized rider insurance agency may even cover a lost or missing stone or gem from a ring.
Mini-Insurance Policy for Artwork and Antiques
Most artwork and antiques appreciate or increase in value over time. A basic policy, by contrast, usually provides coverage for an item’s actual cash value. If a thief steals these valuables, you may be looking at an insurance payout with a depreciated value.
An insurance rider for art and antiques is inexpensive, so it’s one thing you’d want to add to your policy.
Rugs Insurance Rider
Did you know that the most expensive Persian carpet sold for $33.7 million in 2013? While you may not have purchased such a pricey item, you may still have Oriental rugs at home that are worth a lot. A rugs insurance rider will help protect it from damages or losses.
Endorsement for Silverware
Most basic homeowners insurance policies do provide coverage for silverware. However, if you have a lot of items in this category, your insurer may not reimburse you for their full worth. Check your policy to see if there’s a special limitation on these items.
If there is, see if there’s a massive difference between the limit and the worth of your silverware. In case there is, you may want to consider getting a silverware endorsement.
Home Business Insurance
Not all basic homeowners insurance policies protect business-related property. For instance, if you have a home-based business, your policy may not cover the items you use for your business. These may include appliances, equipment, and gadgets you mainly use to generate income.
In-home business insurance can help protect these other valuables you own. In addition to protecting the property itself, you’ll also receive liability coverage.
Water Backup Coverage
Water back-ups in the US now occur more often, what with the increase in storms that bring floods. A study also found that up to 43% of sanitary sewer overflows (SSOs) occur due to blocked pipes.
If any of these occur at home, your standard homeowners insurance may not cover the damages or losses.
Unfortunately, water back-ups can result in severe and expensive water damages. Moreover, they can drench not only your home but also its content. On average, the repair cost for such damages ranges from $1,100 to over $4,700.
This makes water back-up coverage a smart addition to your homeowners insurance policy. With this add-on, your insurer may either help pay to remove the water or to replace damaged furniture.
Is Insurance Rider Worth the Extra Cost?
After you review your homeowners insurance policy, you may find that it has a lot of limitations. At the same time, you may be thinking that an insurance rider may be too expensive.
In this case, consider how much your policy’s sub-limits are. Then, compare that with the value of your uncovered or partially-covered assets. If the difference is too big (i.e., your assets are worth way more), then the extra cost of the rider is worth it.
A Little Extra Goes a Long Way
As you can see, an insurance rider comes with a lot of benefits, such as extra protection and more coverage. That makes them an excellent yet inexpensive addition to limited homeowners insurance policies. If your home contains a lot of high-valued items, then an insurance rider may give you more peace of mind.
Do you think that your current homeowners insurance comes with too many limitations? If so, then please allow our team here at the LoPriore Insurance Agency to help! Get in touch with us so we can assist you in determining if you need extra coverage.