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For most Californians, a home isn’t just a place to live — it’s the largest financial investment they’ll ever make. Yet many homeowners don’t fully understand how, or even if, that investment is truly protected. In a recent episode of Insurance Hour, host Karl Susman broke down what’s really covered under a standard homeowners insurance policy — and, just as importantly, what isn’t.
From occupancy rules to misunderstood coverage limits, even well-intentioned homeowners can find themselves dangerously underinsured. Here’s what every homeowner should understand before disaster strikes.
How a Standard Homeowners Insurance Policy Is Structured
Homeowners insurance is often viewed as one simple product that “covers the house.” In reality, it’s a bundle of separate protections, each designed to cover a different type of risk.
Most standard policies include:
- Coverage A – Dwelling: The main structure of the home
- Coverage B – Other Structures: Detached features like garages and fences
- Coverage C – Personal Property: Belongings inside the home
- Coverage D – Loss of Use: Temporary living expenses after a covered loss
- Coverage E – Personal Liability: Lawsuits and injury claims
- Coverage F – Medical Payments to Others: Minor injury coverage for guests
Each section serves a different purpose. Misunderstanding even one can leave major gaps after a loss.
Occupancy Rules That Can Void Your Coverage
One of the most misunderstood assumptions in homeowners insurance is occupancy.
“Homeowners insurance assumes the owner lives in the home,” Susman emphasized.
If you move out, rent the home, list it as a short-term rental, or leave it vacant for more than a short period, your risk profile changes — and so does the type of policy required. A vacant or tenant-occupied home needs a landlord or dwelling fire policy, not a standard homeowners form.
Failing to disclose a change in occupancy can result in a denied claim.
“It’s not a loophole — it’s a contract,” Susman said.
Coverage A: How Much It Really Costs to Rebuild Your Home
Coverage A protects the physical structure of your house: walls, roof, foundation, and built-in systems. The biggest mistake homeowners make is tying this limit to the home’s market value instead of its rebuilding cost.
Market value reflects supply and demand. Rebuild cost reflects:
- Labor
- Building materials
- Contractor availability
- Disaster-driven price surges
“If your home burns down during a wildfire,” Susman noted, “rebuilding costs can skyrocket overnight.”
To set proper limits:
- Use a professional rebuild cost estimator
- Provide accurate construction details to your agent
- Allow carrier inspections for customized homes
If the carrier inspects your home, that valuation becomes powerful leverage in a claim.
Why Extended Replacement Cost Is Critical
Even accurate rebuild estimates can fall short after large disasters. That’s where
Extended Replacement Cost matters. This feature typically adds 25–50% additional coverage on top of your dwelling limit.
A home insured for $500,000 with 50% extended coverage could receive up to $750,000 to rebuild.
“That cushion is worth its weight in gold,” Susman said. “You can’t predict labor shortages or post-disaster inflation.”
Without it, homeowners may be forced to downsize or take on loans after a total loss.
Coverage B: Other Structures Most Homeowners Underinsure
Coverage B applies to anything not attached to the main dwelling:
- Detached garages
- Fences and gates
- Gazebos and pergolas
- Retaining walls
- Pools and outdoor kitchens
- Sheds and specialty landscaping
Many policies automatically assign 10–20% of the dwelling limit to this category. That may sound sufficient — until you factor in six-figure pool installations or custom masonry.
“People think it just means guest houses,” Susman said. “But it often includes the most expensive outdoor features on the property.”
Coverage C: Personal Property and Its Built-In Limits
Coverage C protects everything you could “shake out” of your house: furniture, clothing, electronics, appliances, and personal belongings. Typical limits range from 50–70% of the dwelling amount.
However, most policies also include
strict sublimits on high-value items:
- Jewelry: often $1,500–$5,000
- Firearms: $2,500–$5,000
- Artwork and collectibles: $2,000–$10,000
- Cash: often only $200
“Having $100,000 in contents coverage doesn’t mean a $30,000 jewelry collection is fully protected,” Susman warned.
Expensive items require
scheduled personal property riders or separate specialty policies.
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The Simple ‘Shake Test’ for Understanding What’s Covered
Susman offered an easy way to distinguish between dwelling and personal property:
“Rip off your roof and shake the house. If it falls out, it’s personal property. If it doesn’t, it’s part of the dwelling.”
Built-in cabinets, plumbing, countertops, and permanent appliances fall under Coverage A — not Coverage C.
Why Homeowners Commonly Miss Coverage B and C Gaps
Most homeowners focus exclusively on Coverage A and ignore what surrounds and fills the home. As a result:
- Outdoor features go underinsured
- Contents values aren’t updated after upgrades
- Sub-limits quietly expose valuables
“I’ve seen people with Disneyland-level backyards assume everything is covered — and it isn’t,” Susman said.
The fix is simple: review these limits annually and adjust them for lifestyle changes.
Documenting Your Home and Belongings Before a Loss
Claims depend on proof. Without documentation, payout disputes are far more likely.
Homeowners should:
- Record video of every room, closets, and garages
- Photograph valuable items individually
- Keep receipts, appraisals, and serial numbers digitally
- Store backups in cloud or off-site locations
“Documentation wins disputes,” Susman emphasized.
Communication With Your Agent Is Not Optional
Many coverage disputes begin with silent assumptions:
- Homeowners assume coverage applies
- Insurers assume the policy was read
Bridging that gap requires proactive communication:
- Review the policy every year
- Report changes before remodeling, renting, or adding structures
- Request written confirmation when changing coverage
“Your agent’s job doesn’t end when you pay the premium,” Susman told listeners. “They should be part of your decision-making all year long.”
Earthquake Insurance Is Not Included in a Standard Policy
In California, earthquake damage is
never covered under a standard homeowners policy. Separate earthquake insurance is required through:
- The California Earthquake Authority (CEA)
- Private specialty carriers such as GeoVera
“Earthquakes will happen again,” Susman warned. “The real question is whether you’ll recover financially afterward.”
The Bottom Line on Homeowners Insurance Protection
Homeowners insurance isn’t a “set it and forget it” product. It’s a living contract that must evolve as construction costs, property features, and personal assets change.
Every California homeowner should:
- Confirm that occupancy aligns with the policy type
- Re-evaluate rebuild costs annually
- Adjust Coverage B and C as property changes
- Maintain strong documentation
- Consider extended replacement cost and earthquake coverage
“You can’t control the next fire or quake,” Susman said, “but you can control whether your coverage keeps you whole afterward.”
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